Free Markets, Free People

Medicare’s Doctor (and patient) trap

John Goodman poses a scenario for you to consider:

Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.

What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.

This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.

None of us would ever want to pay a lawyer by task, would we (not talking about a will or legal document production here, but instead some form of defense against charges which necessitates a jury trial and requiring the accomplishment of many tasks)?  We’d instead insist upon paying them for a package of services designed to do whatever is necessary to defend us to the best of their ability with the ultimate goal of us walking free.


So why is it we can’t demand the same of doctors?  Why can’t we demand a package of services designed by them to address all of our medical problems?

Well if your stuck with Medicare or Medicaid, you’re stuck with government price fixing and payment by task, that’s why.  First the price fixing:

Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.

Yet Medicare is potentially setting about 6 billion prices across the country at any one time.

OK?  Bad enough that Medicare has completely removed the price mechanism from the process. As economist Dr. Mark Perry notes:

These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.

Exactly and stultifyingly obvious, correct?  In fact, it’s something one shouldn’t have to point out.  Nor, would it seem, should it be something that we’re doing either.  But we are.  You just have to remember, our government doesn’t care about history, because, well, you know, it will get it right where all these other governments have failed.  Just watch.

If the price fixing isn’t bad enough, it has also hit upon a procedure that actually inhibits the delivery of good health care rather than incentivizing it.

Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.

Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.

So, for example, if you have diabetes, COPD, high blood pressure or any combination of a number of other chronic diseases, tough cookies, your doc can only treat one per visit – unless, of course, he or she wants to work for free on the others.

Don’t believe me?

[When Dr. Young] sees Medicare or Medicaid patients at Tarrant County’s JPS Physicians Group, he can only deal with one ailment at a time. Even if a patient has several chronic diseases — diabetes, congestive heart failure, high blood pressure — the government’s payment rules allow him to only charge for one.

“You could spend the extra time and deal with everything, but you are completely giving away your services to do that,” he said. Patients are told to schedule another appointment or see a specialist.

Young calls the payment rules “ridiculously complicated.”

That has nothing to do with being complicated.  It has to do with stupidity overruling common sense and the stupidity being enforced by an uncaring bureaucracy.  “Rulz is rulz, Doc”.   Do what is best for your patient and do it for free – that’s one way to lower costs, isn’t it?

But don’t forget – government involvement will mean better care at lower cost.  That’s the promise, right?

Instead government is now redefining “better” to mean “their way or the highway”.  It has nothing to do with what is better for the patient or the doctor.  It has to do with what is better politically.  And, of course, better for the bureaucracy.  In this case, that means squeezing the doctor for everything they can get at the expense of the patient.  Since you don’t have a choice about Medicare when you reach 65, any doctor you see doesn’t have a choice about how he or she treats you.

The only choice you have? 

Live with it … if you can.


Twitter: @McQandO

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26 Responses to Medicare’s Doctor (and patient) trap

  • As (I hope) an interesting analogy…

    The legal ethical canon in Texas forbids any ownership interest in a law firm by a non-lawyer. The rationale being that a lawyer’s judgment should never be influenced by a non-lawyer. (Of course, there is an exemption for corporate lawyers.)

    But your doctor? Well, in Texas, again I believe that ethics rules forbid non-physician ownership in a medical practice, and for the same reasoning.

    The government has, again, exempted itself from standards that rule the rest of our society.

  • Not only is this how the government reimburses legal expenses, they pay one number for an entire trial, usually without regard to the factual complexity of the case. So the lawyer working on such a case has to be very careful not to become horribly upside down into a case, and you can imagine where that ground is made up.

    I will say that insurance companies are becoming little better. The downward pressure on professional services is fairly alarming at this point.

  • Imagine if they paid campaign advisors by task.

  • Anyone has the option of paying cash for services rendered, whether they have private insurance, no insurance, or government insurance. Some who can afford it do just that. Others use whatever they have available to them, and private insurance bureacracies are no picnic. In fact, if this narrative accurately represented the view of medical providers, you would think that doctors would want to roll back Medicare, but instead, in the most comprehensive polling of doctors, a significant majority, 60% to 40% favor expanding Medicare to cover people from 55 to 65. Although doctors find fault with the prices Medicare sets, a majority find the ease of submitting medicare claims to offset the greater payout from insurance because of the pain that private insurers cause in making the claims process as difficult as they can get away with.
    While the public option failed in the healthcare reform bill, it was favored by doctors and opposed by private insurers. Which one do you really think actual considered patient outcomes?

    • @CaptinSarcastic Put up your citations. For each of your assertions. Every one.

      • From the guy who says “liar” without even citing what he thinks I am lying about and what he bases his conclusion on, LMAO. If someone interesting is interested, I’d be happy to provide a link to the studies.

        • @CaptinSarcastic Best see if you can find a health-care provider to replace that ass.

          Looks like a big job.

          Also, more stupid, unsupported BS. As per usual.

    • @CaptinSarcastic “Anyone has the option of paying cash for services rendered” … not if you’re a Medicare patient. That’s quite illegal.

      • Not exactly Neo, if a doctor opts out of Medicare and a Medicare insured wishes to see them, they can pay cash for services. It is illegal for a provider who accepts Medicare and is treating a person who is covered by Medicare, to accept or require cash payment for covered services rather than the process the Medicare claim.

        • @CaptinSarcastic If you’re already on Medicare and have a doctor, it gets plenty weird.

        • @CaptinSarcastic

          Cappy, that is a really stupid argument. You are now saying I should ditch my long term doctor in order to find one who will accept cash. That is essentially an irrational suggestion. I suggest you find a cash only mental specialist to treat your disorder.

        • @Neo_ I agree, assuming that doctor has not opted out of Medicare. Usually the people who want to pay cash have plenty of it, and have no problem using it. Do you think if George Soros or Chuck and Dave Koch use Medicare if they have a serious issue?

        • @CaptinSarcastic @Neo_ Like I’ve observed before…CmdrStupid just can’t seem to avoid putting his inner moron on display here.

          How many stupid, unsupported BS claims can one human string together?

        • @CaptinSarcastic @Neo_ Great, you’ve established that the 1% are fine with Medicare. Well done, you’ve qualified yourself to run for office.

    • @CaptinSarcastic not sure why you seem to be propping up the health bill. Every early indication as this thing begins to take hold is that it is a disaster in the making. And how could it not be? It was written by bureaucrats, with very little input from the medical profession, and NO input from the private insurers. It was furthermore not even designed to actually work. . . After all, the last thing the democrat party wants is to solve a problem. . . It was designed to put as many people as possible into a dependency upon the government and thus a dependency on organized labor and the party of government.

      • @kyle8 I am not happy with the healthcare bill, though I am happy about many elements of the bill. Overall, it was lobbyist purchased legislation. I had stupidly thought if Republicans and Democrats worked together they could arrive at reform that worked, but I realize that it didn’t matter, since they are all bought. As far as it being designed to increase government dependency, I understand that is popular meme in certain circles, but really what this bill did was to promise to put a lot of taxpayer dollars into the treasuries of a few very large private insurance companies.

    • @CaptinSarcastic Anyone who thinks that submitting claims to Medicare is easy has obviously never done it.

      As a practicing surgeon, there is definitely a trap that is set, but not quite in the way the OP asserts. While there may be a few physicians who will treat people only for what they can bill, the vast majority treat all of their patients as a complete person, not as a subset of many issues. As a surgeon, most of my billing stems from what I can charge for an operation. In contrast to the OP’s assertion, when I perform a procedure, each part of the procedure in “bundled” into a lump sum that I am eligible to be paid by their rules, provided I and my staff can navigate the labyrinthine rules and regulations. Remember, I perform the operation FIRST, then spend the next few weeks trying to actually be paid for my services. Imagine how this model would work for an auto body shop, where you try to recoup the cost of repairing someone’s transmission well after they have driven their now-functional car off of your lot.

      Yet that’s not the sole extent of bundling. That “lump sum” is a uniform amount that Medicare will pay for that procedure, REGARDLESS of how complicated the patient. So I am paid the same to remove a colon cancer from a healthy middle- aged man as I would be to remove the same type of colon cancer from a morbidly obese, diabetic female on dialysis for renal failure, with severe congestive heart failure and who has had multiple prior operations. Better still, all of the services I provide for 90 days after the operation (including the vastly different recovery times and demands) for each patient is already factored into the lump sum.

      In short, the government (and the patient) is often getting a very sweet deal, at the expense of the physician.

      • @RJSuperfreaky @CaptinSarcastic (snarkon) Oh, they have that covered, it seems you shouldn’t have gone into the profession you chose if you didn’t want to be forced to help people at a price determined by Washington DC. Silly you. You OWE people health care, don’t you see that? It’s a right and you should be made to provide it to them.

        And I wish that was all snark, but it isn’t.

    • @CaptinSarcastic “Anyone has the option of paying cash for services rendered, whether they have private insurance, no insurance, or government insurance.”

      You’re not being remotely realistic for the average person. Not even close.