• What if we didn’t make a “doc fix”?

    Someone, presumably fed up with the whole Medicare “doc fix” issue, asked by e-mail, “Why not just massively cut physician payment?” Since I went to the trouble of writing a response by e-mail, I thought I’d share it.

    First of all, it’s a political nonstarter to massively cut Medicare physician payments. But, let’s put that aside. What would happen if payments were cut, and cut substantially (15%, say)?

    If physicians are to be believed, some would stop seeing Medicare patients. The ones for whom seeing only private pay patients* would be more profitable would do so. Others would still see Medicare patients, but, perhaps, fewer of them, or spend less time with them.** At some level of payment cut, all these things would definitely happen. We see it in Medicaid. The physicians who leave the program would disproportionately be the better ones. Reducing access to good physicians is not normally a policy goal. But let’s keep going. Is not providing coverage for all, or nearly all, physicians a problem?

    It depends on what we think traditional Medicare is. Need it be an open-network plan? There is already reason to believe we don’t feel that access to all physicians is a necessary element of Medicare. After all, we permit Medicare Advantage plans to selectively contract even though they must offer at least the standard Medicare benefits. Thus, coverage for all physicians is not part of the standard benefit.

    Even still, taking a meat ax to payments is a blunt way to define a network. Medicare could be smarter, paying attention not to fees but to cost (the product of fees and utilization). It should pay attention to quality too, but let’s leave that out. We know that the real source of the cost problem in Medicare is not its payment rates but its lack of utilization controls. Cutting payment rates and ignoring utilization would shift the cost curve, but not bend it. Cut the fees by 15% and in a few years utilization shifts and growth have wiped out the savings. You haven’t left the unsustainable trajectory, which should be the point of serious, cost-conscious reform.

    I recognize that some beneficiaries really want an open network, really need an open network. They might even be willing to pay for an open network. I think they should be able to do that. I think that should be part of a competitive bidding system. Traditional Medicare could offer an open network, paying the fees that would obtain it, and charging the actuarially fair premium for it. Then it should compete against closed-network plans (one of which could also be a government option). I’ve written about this bidding system before, so won’t go into it here.

    Bottom line, is there a problem significantly reducing Medicare payments to physicians? Yes. It won’t work because it is not the real problem. Utilization is. And then there’s the politics. If I’m permitted to envision the political feasibility of cuts to physicians then by the same power I grant myself permission to imagine the feasibility of competitive bidding. But if we can implement a competitive bidding system, I think Medicare can try lots of things, including massive physician payment cuts associated with a closed network. So long as it also provides an open-network option, those who want it can buy it. I have no problem with that, though I’m sure plenty of other people–people who matter–do.

    Like I said, not gonna happen.

    * Ack! “Private pay” means “uninsured” to some readers. I should have been clearer. I meant non-public program payers, the vast majority of whom have private insurance. (In general, I divide the world in to government or private payers. If I need to subdivide “private” into insured and uninsured, I’ll do so explicitly. I’ll be more careful with this terminology in the future.)

    ** There are many responses. Physicians could also decide that Medicare fees weren’t worth the loss of leisure time and choose to play more golf. I recognize that there aren’t infinite private pay patients, but in 2014 there will be more of them. Also, using the term “patients” is incorrect. If a physician can induce demand then what one may really do is attempt to squeeze more utilization out of existing private pay patients (schedule more frequent follow-ups, for instance). There are many ways to shift utilization across payers and procedures.

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    • “The physicians who leave the program would disproportionately be the better ones.”

      Not sure this is really true. My perception, and that of my wife who is never wrong (she is a retired physician) that there is a group of marginal docs who take care of mostly Medicaid and Medicare patients since they cannot get good referrals. Other than that group, physicians choose to accept or not accept Medicaid patients primarily based upon business decisions. Competency is not a deciding factor.

      I also find it interesting that the working assumption here seems to be that private insurers would not drop their rates in response to a cut by Medicare. If this were airlines we were talking about, a drop in ticket prices would lead to competitors dropping their ticket prices.


    • Don’t private insurance companies base their pay on medicare rates? If so, then the number of doctors accepting those patients wouldn’t change. Sure, they could decide to play golf instead, but that would really be a symptom of paying them too much overall, no? I mean, when my employer freezes my pay I don’t play golf. I don’t get paid enough so that I don’t have to work. Sure, they won’t work more than they have to then so… train more doctors! We need more anyway. The average waiting time for a Neurologist is like 3mo now. In a few years when baby boomers start retiring it could be like 6mo. That’s good for patients anyway.

    • The real reform, which the PPACA just scratches the surface of, is re-structuring the fee-for-service payment scheme. The specialist loaded committees that have set up billing codes to pay dermatologists 6 to 8 times what a primary care doctor gets are out of touch with reality.

      I don’t know that ACOs are the answer, but at least they are an attempt to pay for outcomes and not procedures.

      I’m an ED doc and already see specialty coverage as a real issue where I work, so this isn’t going to be an easy change. But I don’t see any other way of finally aligning the Provider’s profit motive with cost efficient delivery of healthcare.

    • @Steve–I agree. Austin, evidence to support?

      @Balor123–Last year JAMA published study on docs, hours worked. Oddly, time went down, salaries did not. Conclusion–physicians valued time pursuing other endeavors beside practice to enrich income. This conclusion was consistent across gender, specialty, etc., if I recall.

      Austin: In terms of utilization, I am having a problem with your conclusion. E&M codes cut, perhaps you can squeeze in a few more procedures, ie, bang out a few more CPT’s, to boost income. Thats the churn aspect. CMS making some headway there–witness nuclear cards and rads. However, for cognitive specialites–and this is where RUC/SGR a problem, they cant boost volume.

      Here is the thing–you cut 15, 20%, there is only so much churn and increased utilization you can squeeze out contingent on the type of medicine you practice. To monitor, yes, that is utilization–but it appears to me that QIO’s and CMS in general beginning to watch. They do ask and deny these days.


      • (a) If Medicare cut rates, would those of private insurers drop too? Economic theory would suggest “yes.” That’s how one attracts more patients, by getting more insurers to send them to you, because your rates are lower. Notice this is the opposite of the conventional “cost shifting” argument.

        (b) Is there evidence that Medicaid-participating physicians are of lower quality? I admit I need to investigate. A lot hinges on what one means by “quality.” Dodging that for the moment, on theory alone, Medicaid-participating physicians are likely to be disproportionately less in demand by other payers. That is, they are the ones others don’t want (either directly or via referrals or insurer network inclusion). That’s, in general, not a stated policy goal. I’d rather physicians be selected more mindfully.

        (c) I’ve been guilty of confusing utilization for volume before. I was very careful here not to do so. If a physician or physician practice has any waiting list at all for their private-pay patients (in the sense of patients have trouble getting an appointment as soon as they’d like) then if Medicare patient visits drop in frequency, private patient visit frequency will increase. They’ll just fill in the holes in the schedule sooner. At the margin, instead of seeing a patient three times a year (or whatever), it’ll become four. I’m sure this is not the only way to increase revenue from private insurers. None of this need be conscious. When you’ve got the resources, you’ll deploy them if profitable (or utility-increasing) to do so. Providing more care isn’t necessarily bad (of course!).

        (d) I base my utilization-increase argument on the facts. See the figure in my prior post. Physician fee increases in Medicare have been modest. But per patient cost has gone way up. If physicians can’t find ways to accommodate increases in utilization, how else do you explain the figure? I suspect, but can’t prove for lack of fee data, that the same thing is happening on the private side.

    • b) there is a literature on this: board passage rates, foreign grads, practice in inner city, minority MD, etc. Its out there, but studies in this area nuanced and with bias and confounding.

      c) Private pay, cash only types as you alluded to, rare birds and put those aside. However, MCO private pay types have some limitations as far as visits per year (DM = every 3 mos, etc). That is not the problem.

      d) Its all procedures Austin. Fees are peanuts relative to caths, MRI, biopsies, etc. That is driving cost/patient. No time for references, but you have cited this too int he past i believe.


    • @Brad – You misunderstand me. My private pay is all private, including privately insured.

      On utilization you make my point. How does cutting or limitting Medicare physician fees help? Where is the evidence? It`s a utilizatin problem. It`s coming from somewhere. You know better than do where. Let us not get lost in the weeds.

      Do you think we should cut Medicare physician fees by 15%?

    • I am merely stating that private pay utilizes review mechanisms presently that will potentially mitigate against abuse, if (and that is the operative word), docs abandon federal programs due to cuts. Again, cognitive E&M codes can only be “gamed” to a limit if some barriers are placed on CPTs–like we are seeing now.

      I cant answer your question directly on 15% cuts, because of interdependence of system–depends on how MCO’s respond.

      Yes, of course, in the end, if it aint fees, its utilization, and there are so many moving parts, that I cant predict–only poorly prognosticate. But as you and I have spoken before, there are only so many private pay patients (and that is not where the bucks are made), and at some point, docs have to take Mcare if the universe of patients is condensed. A few tweaks here and there, and maybe yes, the fee cuts could work. A lot of bellyaching for sure, but perhaps.


      • @Brad F – I think I’m seeing where you’re coming from now. How much “utilization shifting” will there be from Medicare to the privately insured? Yes, it depends on the factors you describe. Fundamentally this is a market power issue, pertaining not just to prices but to utilization control. The direction of the effect is clear. The size is not.

    • “There is already reason to believe we don’t feel that access to all physicians is a necessary element of Medicare.”

      – Since when do Medicare patients get “access to all physicians”… or even most of them? -

      When I went on Medicare I had to change my primary doctor and half of my specialists, because they don’t accept Medicare assignments, and/or don’t contract with Medicare at all (meaning they won’t deal with Medicare).
      Medicare is essentially a nationwide PPO. If you get, say, surgery from a Medicare doc, are you sure that all the anaesthesiologists, nurses, lab techs and everyone else who bill you also do?

      Many don’t, as I’ve found. Medicare is definitely not free – I pay about as much now as I did when I paid my employee share at work – and fewer doctors accept it than accepted my private insurance plan then. Cut those government payments even more, and you simply won’t be able to find doctors to help you.