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More Government Control

Posted Aug 01 2013 5:14pm
Stanley Feld M.D., FACP, MACE

I have covered the discovery of the tricks Obamacare has played on hospital systems, insurance companies, union leaders and large corporations in the last three blogs.

The Obama administration needs all three groups to cooperate if Obamacare has the slightest chance of success.

Physicians are now starting to react to Obamacare and its restrictive regulations.

It is clear to me that the Obama administration has no respect for physicians, their intellectual property, their surgical skills, their honesty or their character. 

The Obama administration has labeled physicians as commodities and thieves. Obamacare devalues physicians and figures whatever reimbursement it offers physicians will accept.

Ezekiel Emanuel M.D., Obamacare policy advisor, expresses a vivid example of this disrespect in his recent article in the New York Times entitled “Don’t Give Up On Healthcare Costs.”  

Dr. Emanuel discusses S.G.R., or the Sustainable Growth Rate formula. 

The formula is seriously flawed in its attempt to contain rising healthcare costs. 

The formula is rigged to penalize physicians yearly for their reimbursement for treating Medicare patients. Every year Congress waives the penalty for that year. This waiver is commonly known as the “doc fix.”

The yearly penalty has been accumulating since 2002 so this next year it is scheduled to reduce physician payment by 24.5%.

Neither the AMA nor the traditional media has articulated the meaning of the S.G.R to the public in a comprehensible way.

The S.G.R provides no incentive for individual doctors to be more efficient since the target level applies to total nationwide physician costs.

The cuts from the formula are indiscriminate. The cuts would affect high quality, cost-effective doctors the same as it would inefficient free spending physicians. It would also affect underpaid primary care physicians.

The goal should be to incentivize all physicians to be efficient and cost effective providers in their treatment and patient recommendations.

Ezekiel Emanual’s disrespect shines through when he says,

Physicians desperately want the S.G.R. repealed and replaced so they can charge what they want without the potential of massive cuts hanging over them each year.”

Congress agrees with physicians that S.G.R. is seriously flawed. The House Energy and Commerce Committee is starting to mark up the repeal of the S.R.G formula. It is going to replace it with a 0.5% yearly increase in physician reimbursement until 2018. In 2019 the government will link Medicare payment to the quality of care each physician provides.

Ezekiel Emanual M.D. doesn’t like this formula. It does not provide incentives for physicians to accept bundle reimbursement for the treatment of their patients.

Dr. Emanual believes  

fee-for-service payment incentivizes quantity over quality. Physicians make more money by ordering more tests, seeing patients more frequently in follow-ups and providing more treatments. The payment system is a key accelerator driving up Medicare costs — and therefore the federal government’s deficit”.

Dr. Emanual does not trust physicians to do the best job possible. He also ignores the defensive medicine issue. He believes,

“In 2009, the Congressional Budget Office did a comprehensive assessment of the potential cost savings from medical malpractice reforms.

Its conclusions: A package that included a $250,000 cap on noneconomic damages, a $500,000 cap on punitive damages and a one-year statute of limitations for claims by adults would save about $11 billion a year — 40 percent from reduced malpractice premiums and the rest in the form of fewer defensive procedures like M.R.I.’s.


Dr. Emanuel concluded that $11 billion dollars a year savings is insignificant because it is a cost saving below $26 billion dollars a year. He contends tort reform is a distraction from real efforts to control healthcare costs and should be ignored. The CBO scoring information has lead Dr. Emanuel to an inaccurate opinion.

Douglas W. Elmendorf’s, head of CBO at the time, conclusion was not nearly as definitive as Dr. Emanuel’s conclusion.

The malpractice issue of defensive medicine and over testing is real. The Massachusetts Medical Society survey of defensive medicine is real. Most physicians in Massachusetts are liberal/progressive and so the sample is not biased toward conservatives.

The truth is a full accounting reveals that more than 10 percent of America's health expenditures per year are spend on tort liability and defensive medicine.

The percentage of healthcare costs is even greater when the Massachusetts Medical Society survey is taken into account. The amount spent for defensive medicine can be extrapolated to actual costs from this survey.  

I have written a series of blogs analyzing the impact Massachusetts Medical Society’s survey. The extrapolated costs turn out to be about $700 billion dollars a year. The real cost of defensive medicine is somewhere between $242 and $700 billion dollars a year.

  In 2008 damage awards alone for medical malpractice claims reached $5.9 billion dollars.   The total of medical tort costs was $16 billion for legal costs, underwriting costs and administrative expenses. From 1986 the average jury award was $100,000. In 2006 the average award increased to $637,000. No one knows what the award value is for cases settled out of court.

Each year, 25% of practicing physicians are sued. 90% of physician sued are found innocent. The average defense cost is $100,000. This cost is not included in the CBO scoring

The fear of lawsuits causes most doctors to practice "defensive medicine" as the interviews of Massachusetts physicians points out.  The result is unnecessary testing, referrals, and procedures to protect themselves from allegations of medical negligence.  

A recent survey of doctors published in the Journal of the American Medical Association found that 93% of physicians admit to practicing defensive medicine. A 2008 survey by the Massachusetts Medical Society found that about 25 % of medical procedures are defensive in nature.

This waste results in increased healthcare insurance premiums. The premium increases result in an increase of at least 3 million uninsured people per year. When these uninsured people get sick they avoid going to a physician. This results in a decrease in work productivity. It is estimated that the annual decrease in productivity is more than $40 billion dollars a year.

In states where tort reform has been instituted by placing caps on so-called non-economic damages, the malpractice costs have decreased 39%. This drop in costs is a result of decreased malpractice suits. The decrease is economically bad for the plaintiff attorneys. Annual malpractice premiums have gone down at least 13%. In fact, the medical malpractice business for plaintiff attorneys has about dried up in Texas.

Dr. Emanuel and the administration want to connect the leverage they have with the SGR formula to getting physicians to accept a bundled rate for treating a patient.

Dr. Emanuel “would tie an S.G.R. repeal to a slow reduction in fee-for-service payments to those physicians who do not switch to bundled payments and other payment models.”

In other words, accept risk for treatment that an insurance company would normally accept risk for while ignoring the malpractice implications of missing a diagnosis or not seeing a patient at appropriate intervals.

Isn’t the government going to test physician’s treatment with 88,000 codes in ICM -10 and the Enhanced Quality Reporting System?

Isn’t the government going to force the decisions of the Independent Physician Advisory Board on physicians?

Now the government wants to force physicians to accept the potential liability for not using their medical judgment.

This is not aligning physician incentives with efficient treatment cost. It is dictating medical treatment to physicians.

Physicians are getting tired of all of this. They are about to quit treating Medicare patients.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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