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Forbes.com

 

How Obamacare's $716 Billion in Cuts Will Drive Doctors Out of Medicare

August 20, 2012

By Avik Roy

There are 600,000 physicians in America who care for the 48 million seniors on Medicare. Of the $716 billion that the Affordable Care Act cuts from the program over the next ten years, the largest chunk—$415 billion—comes from slashing Medicare’s reimbursement rates to doctors, hospitals, and nursing homes. This significant reduction in fees is driving many doctors to stop accepting new Medicare patients, making it harder for seniors to gain access to needed care. Here are a few of their stories.

Paul Wertsch is a primary physician in Madison, Wisconsin. In 1977, he and his two partners invested $500,000 of their own money and opened their own practice, the Wildwood Family Clinic, on the east side of town. Wertsch’s clinic is popular with the seniors who go there, but over time, Medicare’s fee schedule has made it harder and harder on the practice.

Wertsch billed Medicare $217 to care for a Medicare patient with a sinus infection whose appointment ran late, because the patient required more time. Medicare reimbursed the clinic for $54.38. Later in the day, a younger patient with the same sinus infection, requiring half the time, was charged the same $217. But his private insurer reimbursed the clinic for twice the amount of Medicare: $108.04.

"I love taking care of Medicare patients," Wertsch told the Capital Times, a progressive paper in Madison. "But every time we treat them we have to dig into our wallets. What kind of business model is that?" Today, Medicare patients represent one-quarter of Wildwood’s practice overall, and as much as 70 percent for some of the clinic’s veterans, like Wertsch. In 2011, Wildwood decided to stop accepting new patients from the Medicare program.

Wildwood was the first clinic in the Madison area to stop taking new Medicare patients. But, nationally, doctors like Wertsch are increasingly common.

’Well, honey, it’s just going to get worse’

Joseph Shanahan is a rheumatologist in Raleigh, North Carolina. Shanahan told his local ABC affiliate, WTVD, that he was one of the few rheumatologists left in the Research Triangle area who accepted Medicare patients. "The reimbursement is so low [with Medicare]—in some cases 60, 80 dollars—it costs you more to get a plumber to come to your house than to get a rheumatologist to come to the hospital," he said.

This spring, Shanahan decided to stop taking new Medicare patients. "Not by choice," said Shanahan, "but I’ve got to pay off the business loan I got, and I got to pay my staff, and I got to pay my malpractice insurance." Shanahan reiterated what you hear from a lot of doctors: that they don’t want to stop taking new patients, but the government has left them no choice. "I don’t do medicine for the money," he explained. "I never got into it to get rich. The real reward in medicine is taking care of patients and making them feel better."

Steve Daniels, a reporter with WTVD, led an investigation into problems with Medicare access in North Carolina. A team of volunteers used the "mystery shopper" method, posing as Medicare beneficiaries looking for a new doctor. Of the 200 family physicians they called, nearly half said that they were no longer accepting new Medicare patients.

"I have had many friends who have moved down here to retire and they cannot find a physician to take them," said one of WTVD’s volunteers. "It’s very sad because they are coming down here to start a new life, a lot coming to be closer to families, and they have medical problems. Unfortunately, they’re finding that no one wants to take them."

Beverly Frake was one of those people. Frake moved to North Carolina in 2010 from upstate New York, to escape the northern winters, and to be closer to her daughter, who lived in the area. "I moved into this nice apartment complex, big medical complex across the street, I thought, ’How lucky am I?’" she told Daniels. "And I went there and was told in the waiting room, well they just don’t take Medicare patients. One of the receptionists said to me, ’Well honey, it’s just going to get worse.’"

Medicare’s problems have been building for decades

These problems with the Medicare program predate the passage of Obamacare. For decades, politicians have been wrestling with Medicare’s runaway costs. Conventional fixes, like raising the retirement age, reducing benefits, or raising premiums were considered politically toxic. So instead, Congress sought the path of least resistance: paying doctors and hospitals less to provide the same level of service.

In 1988, Congress instituted a new system of price controls, called the Resource-Based Relative Value Scale, or RBRVS. Designed by an acclaimed Harvard health economist, William Hsiao, experts thought that the RBRVS system would succeed in controlling Medicare spending. It didn’t. Doctors, especially specialists, compensated for being paid less per-service by performing more services.

In 1997, Congress tried to fix the RBVRS using a new system called the Sustainable Growth Rate, tying growth in physician fees to growth in the size of the nation’s economy, as measured by GDP. That didn’t work either. As Medicare spending continued to grow at a faster pace than the economy, the SGR law required Congress to reduce Medicare fees accordingly. But both parties in Congress, at the behest of the American Medical Association, routinely overrode the SGR provision with costly "doc fix" legislation.

Obamacare significantly worsens the Medicare access problem

The AMA supported Obamacare, on the promise that the law would include a permanent "doc fix." But Democrats reneged on that promise, owing to the cost of a permanent SGR adjustment: something on the order of $200 billion over ten years, depending on the prescribed growth rate of the fees.

Instead, the Affordable Care Act further reduced fees to health care providers, by $415 billion over the 2013-2022 time frame. As these reductions go into effect, more and more physicians are certain to stop taking new Medicare patients. We already see this problem with the Medicaid program for low-income Americans, where doctors don’t accept Medicaid patients, leading to poor health outcomes.

The Obama campaign offers several lame defenses of these cuts. "The President’s plan doesn’t cut [benefits] by one dime," insists deputy campaign manager Stephanie Cutter. "He ends taxpayer subsidies to insurance companies, and weeds out waste, fraud, and abuse, which saves the Medicare system $716 billion."

But Cutter’s assertion the law doesn’t cut benefits only makes sense if you don’t count getting a doctor’s appointment as a "benefit." And her argument that the provider cuts merely amount to eliminating "waste, fraud and abuse" displays a callous disregard for how the law’s blunt, across-the-board payment reductions affect doctors like Joseph Shanahan, and seniors like Beverly Frake.

In 2011, the Department of Health and Human Services attempted to conduct an investigation into the problem of physicians opting out of Medicare. But they had to shutter the inquiry, because the government doesn’t "maintain sufficient data regarding physicians who opt out of Medicare."

A memorandum sent by the lead investigator to acting Medicare chief Marilyn Tavenner concluded that the problem is getting worse. "Based on the limited data that we received, the number of opted-out physicians appears to have increased each year from 2006 to 2010," wrote the inspector. "More physicians may opt out in the near future."

If you want to reduce waste, increase choice and competition

The Romney and Wyden-Ryan plans for Medicare reform do far more to get at the problem of waste, by using the tried-and-true methods of choice and competition. The plans use competitive bidding to challenge insurers, and traditional Medicare, to pay doctors whatever they want to pay, while providing a Medicare benefit package at the best possible price.

A similar method is already used in the Medicare prescription-drug program, or Part D, which has, remarkably, come in more than 30 percent under Congressional Budget Office projections for its fiscal cost. This year, the program actually reduced premiums, relative to 2011: something that almost never happens in government health-care programs.

Instead of a politically-motivated, one-size-fits-all, across-the-board fee cut, the Romney approach allows competing insurers to negotiate with hospitals and doctors to gain the optimal combination of access and price. Under a competitive bidding system, insurers are likely to pay primary care physicians more, while bearing more scrutiny upon the wasteful, costly procedures that drive Medicare spending higher.

The key to putting Medicare on a fiscally sustainable path isn’t to take a sledgehammer to the program, as Obamacare does, and ration care from above, but to make structural improvements that give seniors and their doctors the bottom-up incentive to avoid wasteful spending.

So far, many media reports have displayed confusion about these concepts. But if we have an honest debate between who should control Medicare’s health dollars—bureaucrats or seniors—I have a feeling as to which side will win.

Original Source: http://www.forbes.com/sites/aroy/2012/08/20/how-obamacares-716-billion-in-cuts-will-drive-doctors-out-of-medicare/

 

 
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