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If Medicare Becomes Too Aggressive at Cost Control, Physicians Will Leave. Then What?

Posted Nov 30 2010 2:16pm

Centers for Medicare and Medicaid Services (Me...
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Here’s a real ringer to throw into the public policy debate. Joseph Hacker, PhD, a Professor of Political Science, U.C. Berkeley and Co-Director, Center for Health, Economic & Family Security, has written a policy brief saying that

… public insurance has a better track record than private insurance when it comes to reining in costs while preserving access. By way of illustration, between 1997 and 2006, health spending per enrollee (for comparable benefits) grew at 4.6 percent a year under Medicare , compared with 7.3 percent a year under private health insurance. At the same time, Medicare has maintained high levels of provider participation and patient access to care.

Medicare has proven superior at cost control not just to health plans in the private sector, but also to private plans that contract with the federal government, such as those offered through the Federal Employees Health Benefits Program (FEHBP)—suggesting that public insurance can outperform private plans even in the context of insurance reforms.

Second, over the last generation, public insurance has pioneered new payment and quality-improvement methods that have frequently set the standard for private plans.

Indeed, Medicare was first in electronic claims processing, and forced it on the private insurance industry. It was also early into electronic health records. Medicare, unlike a lot of government, is efficient.

What does this mean? It could mean that public plans will drive private plans out of the market, as some Republicans feared when the public option was discussed. And then we will  be under “Medicare for all” health insurance.

But more than likely, the private plans will not go gentle into that good night, and will start paying doctors and hospitals more than Medicare and Medicaid do. In this way, they will lure more physicians to turn away from Medicare and Medicaid patients.  The physicians will be forced to do so by economic imperatives.

For many years, it has been a delicate balance between physician payments from Medicare and lack of access. The Centers for Medicare and Medicaid Services (CMS) has had to walk a fine line between lowering those payments too much, and raising them too much, which would really be competitive with the private sector and probably not economically sustainable for the culture. CMS measures this and reports on it regularly.

Medicare/Medicaid have kept their positions in the marketplace until now  by being the only source of physician revenue guaranteed to pay within 30 days. That means a lot to physician offices that have to meet a payroll, and also to hospitals. The providers put up with Medicare, because they know it will pay predictably, and –let’s not forget this — and because older people are big users of specialty services.

But the latest kick of the can by Congress, which delayed  20% Medicare pay cuts to doctors for ONLY 30 DAYS,  means they will be right back on the table as the new Congress comes into session,  and might mean that the deficit hawks will get their way on the back of health care.

And what will that mean?

Well, the poor don’t vote or riot in America. If doctors refuse to take Medicaid, they will not get medical attention, and they will send their sick kids to our schools, clog up our emergency rooms, and generally lower the public heal of America.

The seniors, the biggest users of health services, do vote. And while they don’t riot, they don’t have to. The Baby Boomers are just coming into Medicare, they feel they have worked for and paid for it (they have) over the years, and they are the entitlement generation anyway.

I predict a huge shift in the political climate once seniors have difficulty getting medical attention.

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