Free Markets, Free People

Can Doctors Afford To Stay In Medicare?

There’s a very interesting but probably little noted piece at Fox News by Dr. C.L. Gray, who is, interestingly enough, the president of Physicians For Reform. His general premise is that while reform is needed in the medical field, what Congress is chasing is not at all the answer. And he uses Medicare as the vehicle to make his point.

I’m sure you remember the story that came out not long ago about the Mayo Clinic deciding not to take anymore Medicare patients. If you’ve been staying abreast, that’s just a very well known clinic doing what a lot of lesser known clinics and doctors have been doing for quite some time. Gray claims that Mayo lost “840 million” caring for medicare patients.

He lays the physician trend away from Medicare to two overall reasons.

The first is simple—the math:

1) For the past decade Medicare consistently paid physicians 20% less than traditional insurance companies for identical service.

2) On January 1, 2010 Washington made hidden cuts to Medicare by altering its billing codes.

3) Medicare will cut physician reimbursement by another 21% on March 1. The CBO said this cut must take place if the Senate healthcare bill was to “reduced the deficit.”

4) Even more, Congress pledged to cut Medicare by yet another $500 billion. Again, the CBO said this additional cut must take place if the Senate healthcare bill was to “reduced the deficit.”

Many physicians were operating at a loss even before this series of massive cuts. In 2008, Mayo Clinic posted an $840 million loss in caring for Medicare patients. No businesses can survive when patient care expenses exceed revenue.

No business can survive operating at a loss, and that’s essentially what has been happening with Medicare prior to “reform”. With more cuts promised by “reform” it becomes a financial “no brainer”. We’re talking about a business decision. To remain a healthy business, and all practices are businesses, that which is causing a loss and overall negative drag on revenue has to be cut out to bring the revenue flow backto positive in order for the business to survive. That’s called a profit – something it would seem the government finds distasteful.  But profit is what allows you to serve your clientele with adequate and appropriate staff, treatment and equipment.  Mayo made that decision after it surveyed the impact of that particular group of patients on its bottom line and the impact of their removal. Obviously Mayo felt that continuing to serve that group, at the tremendous loss they were suffering, was effecting their overall ability to deliver the finest health care possible to the rest of their patients.

Expect to see more of that if “reform” is passed.

The second reason Gray gives is much less obvious than the first. But it provides just as powerful an incentive to ditch Medicare as does the first:

The second is more ominous—Washington’s increasingly abusive posture toward physicians.

President Obama reflected this attitude last summer. On national television, he stated as fact a surgeon is paid between $30,000 and $50,000 for amputating a patient’s foot.

In reality, a surgeon is paid between $740 and $1,140 to perform this unfortunate, but often life-saving procedure. This reimbursement must cover a pre-operative evaluation the day of surgery, the surgery, and follow-up for 90 days after surgery—not to mention malpractice insurance, salaries for clinic nurses, and clinic overhead. It is frightening to think our president is so wildly misinformed even as he stands on the cusp of overhauling American health care. But it gets worse.

Given massive federal deficits, Washington now faces increasing pressure to cut Medicare spending. One way to do this is to intimidate physicians into under-billing. To do this Washington intends to spend tax payer dollars to ramp up physician audits using Recovery Audit Contractors (RAC audits) to randomly investigate private physician’s Medicare billing.

Gray characterizes the RAC as unqualified bounty hunters and gives examples of his contention. The most egregious example is this:

For example, one patient the auditor alleged the group had “fraudulently” billed for was a man undergoing a chemical stress test. The allegation was the patient should have undergone a cheaper traditional treadmill stress test. The difficulty with this accusation was this man was a double amputee—he had no legs. This made a traditional treadmill test impossible. The auditors clearly were not trained health care professionals—they were bounty hunters. (It is worth noting the investigators are given legal immunity from a countersuit for conducting a “fraudulent investigation.”)

It is a good example because even the layman can appreciate why this particular case is so absurd. However, the doctors in question had to spend money to defend against this allegation of wrong doing. It brings up a critical point. One of the promises of “reform” is it will help remove the insurance company from between you and your physician. But as is obvious here, in a government plan such as Medicare, there is still someone between you and your physician who is no more qualified than some insurance drone.

The point, of course is that the drastically reduced Medicare payments to physicians coupled with increased meddling and second-guessing through RAC has driven doctors to a fish or cut bait point as it pertains to Medicare. They are forced into a business decision which requires them to give their practice a financial physical and cut out the portion which will cause the practice to die if not excised.

It is obviously a tough decision that I’d bet most doctors would prefer not to have to make, but as seen with the Mayo Clinic, they’re being driven to do so. This is the future of medical care if government runs it. Anyone who can’t see the rationing inherent in the “reforms” to Medicare is simply remaining willfully blind to the facts. Government must ration. And physicians must act in their own best self-interest. That means fewer physicians seeing more Medicare patients. The result is inevitable and as usual, the patients are those that will suffer.



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16 Responses to Can Doctors Afford To Stay In Medicare?

  • It’s not hard to see where this ends up.  Once government is obligated to foot the bill for medical care, it will need to come up with the cash necessary to keep hospitals and doctors in the black.  The only way to do that is by taxing us.  But tax increases are unpopular.  So it will be balanced out by cutting medical services to the bone.  Longer waits for lower-quality service delivered by overworked staff with low morale, that costs more and more.
    And to think that health care reform is as unpopular as it is, even though this sort of information is not getting the attention it deserves.

  • The basic problem is exactly the same as every other time the government gets involved in economic activity. Government begins by destroying the built-in feedback mechanism (prices in the free market) and substituting its own regulation mechanism which contains very little feedback.

    The classic leftist theory is that a disinterested and “fair” bureaucrat can just sort everything out, and everyone will be better off except for those nasty people who were “profiteering” under the old system. This is obvious balderdash, starting with the myth of a disinterested person, and ending with Hayek’s information problem, which says even Solomon couldn’t make the decisions required for a government system to run effectively. It has never worked in all of history, and it cannot be made to work.  

    What the current healthcare bill process is showing us is how threadbare the leftist justification for controlling healthcare really is. It’s really all about power and control. They don’t give a d*mn whether healthcare outcomes are better, or whether doctors leave the profession en masse. In fact, the more providers leave the system, the more healthcare resources become constrained, and the more justification the bureaucrats have for magnanimously deciding who gets what. So they are willing to pass any old bill that gives them the de facto power to destroy the remnants of the free market in healthcare, leaving the entire area in their control.

    I’ve been disgusted with government actions most of my life. I detested Richard Nixon for implementing wage and price controls. But this crew has scaled to new heights of arrogance and contempt for the American people. They are determined to jam a collectivist system down the throats of this country for their own personal benefit and legacy. They are a vile combination of stupidity, apathy about outcomes, and power lust. 

  • The medicare solution is simple.  Require doctors to take medicare patients as a part of being licensed.
    It is not as if this crowd is against coercion.

    • The problem with that, aside from the immorality, is that there will soon be a lack of physicians. Even now, qualified people are choosing not to go into medicine because it is becoming more involved with paperwork and less involved with the actual practice of medicine. Doctors are also leaving the field prematurely. The only reason we have as many doctors as we do now is because we are importing them. Being a physician, particularly a relatively lowly paid primary care physician, is becoming another of the jobs Americans won’t do. 

      Yessiree bob, it makes me proud. We are importing doctors and other medical professionals to keep our medical system working and importing the money to pay for it. I hear we are also giving expedited citizenship to foreigners who will defend us, too.

  • I agree that Medicare sucks, but I think the commentary cited is disingenuous.  If Medicare was so awful, doctors and hospitals would have stopped taking it years ago.  The simple fact is that it is just like insurance – highway robbery, but no patients would come if they had to pay the bill themselves.

    EMTALA is a great example of this.  That act effectively requires a hospital to treat every single person that walks in the door at the hospital’s cost if the patient doesn’t have insurance.  The only way to rope the hospital into doing so is to make it contingent on their Medicare agreement.  I do not know of a single hospital who opted out of Medicare because of this abusive act of Congress.  Why?  Because Medicare pays the bills.

    • They didn’t have to stop taking them years ago because there were enough privately insured who would pay the higher fees to balance out the Medicare loss. That balance is in jeopardy with the new Medicare cuts and the assault on private insurers.

      • Why would they take those patients at all, if they required a balancing of the loss?  The point of the initial post was that this is “simple math.”  If I am losing money on a certain group of patients, I am simply never going to take those patients.  It’s not like it’s a loss leader or something.  Once a Medicare patient, always a Medicare patient.  So I don’t think it holds water to just say that it balanced out at one point.  There is no businessman in this country that is going to take a loss on anything, or he won’t be in business very long.  That includes doctors.

        Plus, private insurance itself writes off a huge chunk of the bills they incur.  I am working on something right now where the patient incurred a $267,000 hospital bill, and private (very good) insurance paid $68,000 pursuant to the contractual arrangement.  The physicians are complaining about relativity – that is, they don’t make as much as they want to!  There is only a loss when the goods and services provided actually exceed the amount repaid.  Medicare is getting close to reaching that point of equillibrium, but it isn’t there quite yet.

        And anyone who thinks that hospitals would knowingly take a loss on anything has not met a hospital board member!  Those people are sharks!

        • Because they’re doctors and they feel some responsibility to treat patients if they can manage to do so without going out of business. The government has played that for years. Now it is to the point that what made it possible probably isn’t going to be there (private insurance) and even if it is, it can/will no longer be able to cover the shortfall.

    • Do you know of any hospitals who have closed their emergency departments?

      “Since 1990 70 hospital emergency rooms and trauma centers have closed in California…”

      “In the ten years from 1988 to 1998, over 1000 emergency rooms across the nation have closed down…”
      “Another problem is that of overcrowding…Because of those millions of uninsured, the patient load at emergency rooms across the nation has reached the point that quality care can not ber provided.”
      “Doctors who treat uninsured patients are not compensated for their treatment. As a resuylt, hospitals in Florida have lost surgeons and stnd to lose entire surgical departments. Some hospitals are having a hard time getting physicians to work because they are choosing to work in other areas where they will be fully compensated for the treatment they give.”

      “Because Medicare pays the bills.”

      No, medicare pays *part* of the bills. The bills for the rest of us are increased to cover the shortfall.

  • It should be noted that the Mayo Clinic has not stopped taking Medicare yet. One of the small local clinics that joined Mayo’s branch system has started this as an experiment. All of the other clinics, including Rochester, still accept Medicare. This shouldn’t be construed as an counter-argument, just a Point of Information.

  • Generally, once Congress has legislated coverage of all people, then their only incentive is to reduce costs.  Medicare is but a single example of the problem.  Congress is populated by fools.  They know what would happen if they reduced their pay and their staff’s pay by 50%.  But, somehow, doctors are different.   This is a position only a fool could take.

  • Basically they are creating a crisis situation where those on Medicare will have difficulty obtaining quality care.
    Next they’ll dangle a Public Option or Full Government take over as an alternative plan for those having difficulty on Medicare.  Mission accomplished.