Obama Signs Law to Fix Medicare Rate Gap in California

A new federal law will change how doctors get paid in California, making it easier for patients in 14 California counties to find a doctor who accepts Medicare.

The law, signed by President Obama on Tuesday night, fixes an outdated Medicare formula that set rates based on urban or rural designations established in the 1960s, with places like San Diego, Sacramento, and Santa Cruz falling into the “rural” category.

So even as rent for office space and other costs of practicing medicine rose with the local economy in those places, doctors were still paid the same rates as doctors in remote, rural areas like Humboldt or Modoc.

At those rates, doctors said they couldn't afford to treat Medicare patients.

“It was a dry spell,” said Dr. Larry DeGhetaldi, a family physician in Santa Cruz. In the mid-2000s, his medical group had to turn patients away for years because they couldn't recruit enough doctors. He watched medical school graduates set up shop in neighboring Silicon Valley instead, where they could get paid 25 percent more.

“Why not drive 40 minutes and make $30,000 or $40,000 more a year,” he said.

So Dr. DeGhetaldi went to his local Congressman, Sam Farr. He found the same problem in 13 other high-cost counties Medicare had mis-categorized as low-cost rural.

“California was losing $54 million a year in revenue,” Farr said.

After 15 years of political wrangling, Farr finally ushered in a new law that updates the payment formula in California.

“The reimbursement money that the doctors will receive will allow them to pick up more patients, allow them to stay in practice if they couldn't afford to,” he said.

Doctors will still have to wait to feel the difference. The new reimbursement rates don't kick in until 2017 and they will be phased in over six years.