Posted on 10/23/2003 12:04:46 PM PDT by .cnI redruM
For many Russians, the most difficult part of the transition to capitalism has been abandoning the idea of a "right price." Under the Soviet Union, prices were set by the government and consistent across all legal sellers. A bottle of milk cost the same in the grocery store as in the corner mart. That is, if there was milk to be had.
Those of us more accustomed to free markets expect prices to vary for a variety of reasons, such as quality, convenience, and whether you hold a "Safeway Club" card. But not everyone understands that: in the market for medical care the federal government thinks it's found the "right price."
Each of the 7,000 or so medical procedure covered by Medicare has a price attached to it by the government. In its wisdom and benevolence, the government does actually vary this price a little bit; rural doctors and hospitals generally receive less for their services, for example. But in all cases, the price is set by the government, which knows more about what medicine should cost than doctors or their patients.
We have some idea how well this price-fixing actually works. Anecdotally, we know that rural hospitals are having a hard time keeping their doors open. These hospitals have the same equipment, staffing needs, and insurance costs as urban hospitals, but they aren't allowed to charge their fewer patients more to pay for it all. In fact, they generally have to charge less. It should be no surprise that some rural hospitals have scaled down their emergency medicine units to make ends meet. Others are putting off the purchase of new medical equipment because of insufficient Medicare reimbursements, according to an American Medical Association study.
Much as merchants leave markets in which they cannot compete profitably, physicians are pulling out of the Medicare market, and are doing so in record numbers. Nearly 22 percent of family doctors responding to a 2002 survey reported that they were unwilling to accept new Medicare patients, up from 17 percent in 2001. In some locales the situation is particularly dire. Less than 15 percent of physicians in Denver, for example, are willing to take new Medicare patients.
Asked about their plans for 2003, fully half of family doctors expect to limit their Medicare-reimbursed work; over 70 percent fear that some such limitation will be necessary in the near future.
Even more than closing a business, these are difficult decisions to make. "It's sad because these are the patients who need us the most," says Dr. Deborah Hanes, a family physician in Wichita, KS, who is refusing new Medicare patients.
Dr. Yank Coble, an endocrinologist and former president of the AMA, is also familiar with physicians' dilemma. "Physicians want to care for America's seniors and are making serious decisions about their practice so they can continue to see as many as they can," he says. "But the economic realities are bleak."
Simply setting prices higher wouldn't make things any better. If Medicare set its "right price" to adequately compensate every provider in the program, many would earn too much (that is, more than they would otherwise charge). Worse, every dollar unnecessarily spent deprives another recipient of some benefit. Fiscally and politically, we cannot afford overpayments.
The truth, to which any merchant will agree, is that it's awfully hard to come up with the right price that balances sales and profitability. Setting prices for 7,000 different products and services sold by several hundred thousand providers in different markets all across the country will be, inevitably, a disaster.
Just like Medicare.
There is a simple way to bring doctors back to Medicare without overburdening the budget and wasting money: competition. And conveniently, there's already a government health program teeming with choices that could be a great model for Medicare. It's the Federal Employee Health Benefit Program.
The FEHBP is a system that has served doctors, patients, and the taxpayer well. Those in the FEHBP have choose from over a dozen competing health plans, which offer a wide variety of services at different prices. Physicians, generally, are able to charge what the market will bear, but have a strong incentive to keep costs low, so motivated by cost-conscious plans and patients.
Right now, legislation to reform Medicare is being crafted in Congress. For now swathed in secrecy, this reform could turn out to be anything from a complete overhaul of the system to a simple tacking-on of a prescription drug benefit.
Senator Jon Kyl is right to say that the Medicare bill is "probably the most momentous decision...that many of my colleagues and I will have had the opportunity to make within the next several years." More than just being ruinously expensive, maintaining Medicare-as-it-is would be disastrous for its intended beneficiaries. Could a drug benefit salve the pain of so many seniors having to part ways from their family physicians?
If Congress is serious about improving seniors' healthcare, getting rid of Medicare's backwards "right price" policy would be a great start.
My wife and I get records of our health care all the time from our insurer. Each record shows recent procedures, office visits, etc., with two sums: what the doctor "charged," and what the insurer paid him. Regarding visits to our GP, there is always a huge difference between what he "charges," and what he gets. How, in principle, is this different than the situation with Medicare? As with the government, private insurers fix what they'll pay practitioners.
To hear this writer, you'd think the private health care market was some big bazaar, with a patient laid out on a table, the doctor on one side, and the insurer on the other. The doctor gives his price -- it's extremely high. The insurer gives his response -- extremely low. MD: A little lower. Insurer: A little higher. And so on, until they reach a compromise.
Nonsense. In reality, private and public medical care are both extremely bureaucratized. The MD treats the privately insured patient (whose insurance the MD has previously bought into as a provider), tells the insurer what he'd like to get paid, but has to accept whatever the insurer pays for the procedure. (The alternative is to drop out of that program.) And HMOs are paying less and less for the procedures they permit docs to undertake, and permitting fewer and fewer procedures. But they are still paying more than Medicare (or Medicaid).
I wonder if the reduced profitability of taking on HMO patients is exerting pressure on docs not to take on Medicare/Medicaid patients. And I wonder why the writer mentions Medicare, but not Medicaid. Medicaid doesn't pay any better than Medicare. However, there may be a geographical difference at work. Poor neighborhoods have MDs, and those docs must take Medicaid and Medicare, if they want to get paid at all. But many Medicare patients live in middle-class neighborhoods, where docs don't have to accept Medicaid or Medicare rates, in order to get paid. They can close out M/M patients, while expressing heartfelt sympathy for them, which costs them nothing.
If MDs are refusing Medicare (and Medicaid) patients, it's not because of price fixing, but because they consider the fixed price too low.
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