Medicare vs. Doctors

Suppose you were self employed and the government decided not only which services they would pay you for, but how much you could accept and not a penny more as full payment for services rendered. How would you like that?

Believe it or not, that is exactly how Medicare treats doctors.

They provide them with a list of roughly 7500 different services that are reimbursable and then hand them a price list as well.

The doctor does not get to decide which services are best for the patient, nor are they allowed to set a price for their time. If a doctor CHOOSES to provide additional services not on the list because it would be of benefit to the patient they do so at their own expense.

Is there any chance that Medicare can get all those prices right? Not likely.

What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.

The problem in medicine is not merely that all the prices are wrong. A lot of very important things doctors can do for patients are not even on the list of tasks that Medicare pays for. Some readers will remember our Health Alert on Dr. Jeffrey Brennan in Camden, New Jersey. He is saving millions of dollars for Medicare and Medicaid by essentially performing social work services to reduce spending on the most costly patients. Because “social work” is not on Medicare’s list of 7,500 tasks, Brennan gets nothing in return for all the money he is saving the taxpayers.

We have also seen that there are other omissions — including telephone and e-mail consultations and teaching patients how to manage their own care.

Welcome to Medicare. We trust you will enjoy the ride.

In addition, Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.

Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.

Who comes up with these rules?

Oh yeah, the government. That explains it.