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If there were any lingering doubts that the our elected officials are too irresponsible, petty and incompetent to be allowed to run something as important as healthcare, they’re now a thing of the past. If you’ve not been following the saga of the “doc fix” in Congress recently, then you should be – even if you’re not elderly or a healthcare provider. Why? Because it’s the best available indicator of how our political Leaders are going to be managing the rest of the healthcare market under the law popularly known as Obamacare.
The story goes like this:
In 1997, Congress passed a law that says that the rate of growth in Medicare spending can grow no faster than the gross domestic product, even though there is absolutely no reason why the two should have anything to do with one another. If it does, doctors will be arbitrarily penalized by cutting the fees they get for providing healthcare services to Medicare patients.
Every year for the past 13 years, the rate of growth in Medicare spending exceeds the rate of growth in GDP. And nearly every year, Congress has said “Gosh, that was a terrible law we passed. We don’t really want doctors to have their payments cut and force them to stop seeing Medicare patients.” But rather than eliminating the law, Congress has passed a short-term band-aid that restores physician payments for a year or so. Meanwhile, the cuts became cumulative. As of this year they add up to 21.5% reduction in physician payments.
Now fast forward to 2010. In the same year that the Democratically controlled Congress and President Obama passed a law that will eventually place much of the private healthcare sector under government control – Democrats in Congress attached what has now become known as the annual “doc fix” to a large spending bill that includes extensions of unemployment benefits and various other jobs provisions. Objecting to the extra spending attached, Republicans killed the bill. As a result, the entire 21.5% reduction went into effect on June 1, 2010.
Yes, the feathers finally hit the fan. Physician practices are being undeniably harmed (more on this below), and many of them are having to stop seeing Medicare patients. This is our big opportunity to see where our Leaders’ priorities really lie.
Last Friday, Republicans and Democrats in the Senate agreed to put aside other considerations and simply pass a six-month band-aid that would keep the payment cuts from going into effect and seriously harming Medicare doctors and their patients.
“Senate Minority Leader Mitch McConnell (R-Ky.) said the bill ‘achieves a goal that both sides wanted to achieve.’
‘And we've done it,’ McConnell added, ‘without adding to the deficit.’ Added Senate Majority Leader Harry Reid (D-Nev.): ‘I'm glad we were able to work this out.’”
When a house is burning, one usually expects the occupants to rally together and put out the fire. But as reported here,
“[House Speaker Nancy] Pelosi said late Friday that the Senate-passed bill was ‘a great disappointment’ and she saw ‘no reason to pass’ it.
‘The bill Senate Republicans allowed to pass is not only inadequate with respect to physician fees, but it ignores urgent sections of the House bill to provide jobs,’ Pelosi said in a statement. ‘The House has repeatedly sent jobs—creating bills to the Senate since December—Build America Bonds, small business hiring incentives, and importantly, summer jobs—and yet Republicans continue to block approval of jobs legislation.’”
Wow. So the most powerful elected official in Congress sees “no reason” to keep medical practices serving the elderly in business, while she and a few hundred other elected representatives bicker over whether and how to pay for summer jobs?
Does Speaker Pelosi have the slightest idea what it’s like to practice medicine under Medicare these days? Or to rely on Medicare for your health insurance?
Obviously not. Ms. Pelosi, I hope you're reading this. And I really hope your elderly constiutents are.
The average doctor in private practice has an overhead rate of 50%. Let’s do some math on what a 21.5% cut in Medicare reimbursement means to them. Let’s say that you’re a doctor who normally sees a patient for an moderately complex office visit for which Medicare pays you $80. (Note - this is actually pretty typical.) Since your overhead rate is 50%, that means that you pay $40 to your staff and for rent, utilities, billing services, malpractice insurance and supplies. You receive $40 for yourself as net income before taxes. Now let’s factor in a 21.5% reduction in Medicare payments.
You still spend the same amount of time seeing the same patient, but now you’ll be paid $62.80. Your overhead is still $40, so now you receive a whopping $22.80 before taxes. This is a 43% reduction in your net income before taxes. If you were earning a total of $150,000 as a physician before taxes before June 1st, your new earnings are $85,500 before taxes.
That’s about the same amount as the average lawyer earns with a lot less education and much less benefit to the average patient. (Or, many might argue, the average healthy person for that matter. Perhaps physician-attorney wage parity was the goal all along? After all, our President, 54% of sitting U.S. Senators and 36% of House Representatives are lawyers.)
As another point of comparison, Speaker Pelosi will earn a legislative salary of $223,500. And the rent alone on her San Francisco district office will be $224,832 this year. More rent, by far, than that of any other representative, and entirely paid for with your tax dollars. Think about that. Her rent for her California office alone, (and not including the one she has in Washington, D.C.), would just about pay the salaries of two full-time Medicare doctors.
Too bad. One of them might have been yours.
Of course, our example was just for anaverage Medicare physician earning $150,000 per year in 2009. What Medicare pays doctors who care for the elderly differs dramatically from state to state. The Texas Medical Association points out that the average family practitioner in their part of the country will actually lose money on every Medicare patient they see under the new payment schedule.
Needless to say, that makes it hard to keep the office doors open. If you factor in the rising cost of running a medical practice, the new reduction in Medicare payments actually means that real physician income under Medicare has now declined by 83% since 2001.
With numbers like these, the TMA has been reduced to asking rhetorical questions:
“In 2001, a physician who received a $1,000 Medicare payment made approximately $410 after taking out operating expenses. Today, with the 21.2-percent cut, that same physician nets only $72. How can Congress expect doctors to stay in the Medicare program?”
Oh, and one more thing. The Federal government withheld Medicare payments for nine of the first 24 weeks of 2010, while the Republicans and Democrats in Congress bickered. Does anyone in Congress know what it’s like to try to run a business without cash flow?
I thought not.
But none of this is really affecting patients, is it? After all, we’ve heard almost nothing about it on the news...
Like most businesses, most medical practices can’t turn on a dime in response to tectonic changes in the business climate. In the short-term there’s not much they can do. But every single doctor that I have spoken with personally has stopped taking new Medicare patients and it the process of trying to determine the financial impact of dropping Medicare entirely. As reported by USA Today, doctors were already dropping Medicare in record numbers even before the 21.5% reduction went into effect. Most are following the example of the Mayo Clinic and Houston’s Kelsey-Seybold Clinic in dropping traditional Medicare Part B entirely. The reimbursement rate is simply too low to allow them to stay in business.
You don’t have to be a rocket scientist to realize that once doctors go to all the trouble of closing shop, retiring or dropping Medicare, it’s going to be darned difficult to get them back. For one thing, Federal law says that once your doctor has elected to leave Medicare for whatever reason, he/she may not rejoin Medicare for at least two years. The reason for this provision is something of a mystery. One would think that the government would want to make it as easy as possible for providers to care for America's elderly, but this is clearly not the case. It's just one more piece of red tape that Congress invented for reasons that those of us in healthcare simply cannot understand.
With policies and leadership like this, a progressive, adverse impact on the care available to baby boomers and the growing ranks of the elderly is inevitable. The U.S. already has fewer physicians per capita than most developed countries. Nurse practitioners and physician assistants may be great for routine visits and preventive care, but anyone who is really sick will really want to see a doctor. Heck, that's who our Congressmen and women will be seeing with their own excellent, government-funded private insurance plans.
One has to wonder. These are the same politicians who are touting the benefits of their new healthcare “reform” bill? These are the folks that we’ve placed in charge of directly or indirectly managing all healthcare for everyone in the country?
You’ve got to be kidding.
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