Patient Care & Reimbursements

Russell Saunders has a post up about the Medicare reimbursement cuts that we are going to see with the new deal coming out of congress. Russell quite correctly points out that changes to providers are going to mean changes to patients, as well. Greginak points out that if we are going to make changes, it’s going to affect those that benefit from the current system. Pierre Corneille concurs.

I’m not sure if Greg is referring to providers, seniors, or most likely both. In the abstract, he’s quite right. However we cut our health care costs, it’s likely going to hurt the bottom line of the providers, either paying them less for what they do or giving them less to do.

It’s worth asking a couple of questions of whether these cuts will ultimately be beneficial.

1) Will they work?

2) What will the secondary effects be?

As to the question of whether or not they will work, the answer is “probably”, but not necessarily. There are three things that could occur, two will cut overall costs and one could raise them. First, doctors could accept the cuts with grace, which would save money by paying them less for what they do. Second, doctors could start refusing to see Medicare patients in large numbers, in which case money is saved because it will be harder for Medicare patients to find doctors will to accept their business. Third, doctors who continue to accept Medicare could do so because they can ramp up billing and provide every imaginable service allowed by the program. That last would raise costs.

Medicare reimbursement rates have failed to keep up with inflation, raising less than 10% between 2000 and 2009. However, overall costs-per-beneficiary have exploded, going up 60% over the same time period. The problem with Medicare cost growth does not appear to be aging, nor per-procedure reimbursements, but rather volume of services provided. That gives me at least some doubt that this will indeed cut overall costs if we’re trying to spare the patients of denied services. Or maybe not. It’s really hard to say for sure. Maybe going forward, they’re already providing all of the services they can and providing any more would be an ethics violation. Or maybe they will start ducking Medicare patients in larger numbers.

The second question remains, what would the second order effects be? I’ve already explored the possibility that doctors will stop seeing Medicare patients. I’m going to elaborate on that a bit to shoot down the objection that they won’t be able to since Medicare accounts for so much of the health care dollars spent. Though this is true, it overlooks the significant shortage in some of the areas that seniors most need. A lot of doctors can choose their patients because there is such a backlog. We already see it. A lot of doctors see Medicare patients out of good will, because they’re patients they’ve seen since they were insured. This courtesy could come to an abrupt halt.

More to the point, though, doctors can choose their specialty. Right now, we already have a problem getting doctors to do internal medicine or family practice. This would likely exacerbate that problem. When we talk about overpaid doctors, we’re talking less about primary care physicians than specialists. Internal medicine and family practice doctors are not necessarily paid more, and maybe paid less, than their Canadian counterparts. My wife commands a good salary by any measure. Although if you look at her hourly rate, I almost make as much as she does. She works 70 hours a week.

I am hoping that the concessions the Democrats got here is focusing on the specialists. There’s reason to believe it so, since Obama has had the back of primary care docs since the start. But this is something that they will need to keep an eye on. And even if there is a focus on specialists, there is concern that specialists will likewise be able to get by without Medicare patients. Dermatologists, for instance, might focus more on cosmetic surgery and benign mole removal for insured or cash-paying patients. We’ll see.

Any which way you look at it, it’s important to recognize that we don’t have a monopsony, as Canada does, where there is one main buyer of health care. Any Medicare (and Medicaid) reimbursements will not be distributed to all providers. It will be aimed at those who dedicate their careers taking care of the elderly (and poor). If we had single payer, there would be more latitude to cut reimbursements (though we will still have to worry about service volume). But Medicare focuses only on some doctors, and some treatments. Doctors presumably providing services that we want them to provide (the point is that the elderly have access to health care, after all). Cutting reimbursements will ultimately make providing for government recipients a far less attractive proposition.

None of this should be taken as a criticism of this aspect of the deal struck in congress. I really don’t know the details. Maybe they really did find a way to address all of these issues. I’d be curious as to how they handled something so complex involving second and third order effects, but it does involve an area where I trust the administration (somewhat). Rather, I am looking at the larger issue of reimbursement cuts and the expectation of some (I’m not necessarily including Greg and Pierre here, who were speaking more abstractly) that shrug off the notion that providers will do anything but accept it with grace.

Disclosure: my wife is a primary care physician. Medicare patients are a not-insignificant part of her practice. Money is not the driving factor in her decision to become a doctor and the kind of doctor that she chose to be. However, the incentives do matter and she could accept a job at a suburban clinic somewhere that focuses on insured patients. Right now, she’s serving in an area where there is a shortage. Cutting Medicare and Medicaid reimbursements (which our state was looking at, but thought better of) would push her away from a place we need to be (and have difficulty) encouraging doctors to move to.