A Simple Way to Improve Medicare

End the "doc fix" and allow balance-billing

Medicare, the government's health plan for seniors, has observed a ritual that's as regular and anticipated as the presidential pardon of a Thanksgiving turkey. It's called the “Doc Fix” and it's been enacted and reenacted 11 times in the last eight years.

The ritual consists of waiting to the very last minute and then delaying automatic cuts in Medicare payments to health-care providers. The supposedly automatic cuts that never happen were scheduled by legislation in the 1990s as a means of stanching the hemorrhage of Medicare expenditures. The cuts are based on a formula known as the Sustainable Growth Rate (SGR), which tied payments to doctors and other health-care providers to growth rates in the larger economy. 

Each time the day of reckoning approaches, the American Medical Assocation (AMA) and others implore Congress to prevent the cuts. They argue, correctly, that cuts to physicians’ reimbursements will decrease the number of doctors participating in Medicare (participating doctors are not allowed to charge more for a procedure than Medicare pays). The lowered payments make it economically unsustainable for doctors—especially those in primary care—to continue caring for patients within the Medicare system. As more doctors leave, the argument goes, seniors will get less access to health care.

Inevitably, in the eleventh hour, Congress “fixes” the problem, hence the term "doc fix," by passing temporary legislation upping the reimbursement rates. It kicks the day of reckoning down the road a few months. Every time the problem resurfaces, the calculated pay cut grows larger to make up for the fixes. When the ritual first began, doctors were facing pay cuts in the range of 5 percent per procedure. By June 2010, it had grown to 21 percent. By December 1, 2010 (the day of reckoning just averted) it had grown to 23 percent. When January 1, 2011 comes around, the scheduled cut will be yet higher. 

This "doc fix" ritual cannot be practiced in perpetuity. No amount of temporary patches can obscure the fact that Medicare’s liability continues to mushroom as the population ages and medical technology advances. The latest estimate of that unfunded liability is $37 trillion, or more than twice the current size of the U.S. economy. 

Because the money doesn’t exist to fund Medicare’s promises, Medicare has no recourse but to reduce payments to health care providers. Yet the AMA and its allies routinely call for a permanent fix to the legislation calling for cuts in the reimbursement rates. They figure that by improving the formula by which the cuts and their timing are derived, the exodus of physicians from the Medicare system—and the resulting loss of access to health care for seniors—can be avoided. 

The AMA and its friends in Washington are in denial. No matter how many pieces of gum they hope to stick in the cracks developing in the dam, they cannot prevent the dam from bursting. 

Yet there is a simple short-term solution to the dilemma faced by Medicare, its beneficiaries, and its providers. It's no substitute for the sort of comprehensive entitlement reform that is badly needed, but it's a good first step. 

Let Medicare providers set their own fees, and end the ban on what's known as "balance billing." Prior to the institution of government price controls in the 1980s, Medicare would pay a provider based upon a predetermined fee schedule. Providers were free to bill the patients for the unpaid balance of their fees. Assume, for example, that Medicare would pay $80 for an office visit. A doctor could accept that in full or charge $100 or $120 or whatever to his patients. 

Most doctors individualized their balance billing policy. Elderly patients of modest means on fixed incomes would commonly see their balance waived or significantly reduced. Those more financially secure would not. Medicare more closely resembled traditional health insurance. Doctors had more incentive to stay in the Medicare system. Seniors took on a greater degree of responsibility for the cost of their health care. As a result, they also demanded more accountability and were more cost-effective in their utilization of health care dollars. As it stands now, doctors must accept Medicare reimbursements as full payment. To the extent that Medicare is offering below-market rates, doctors leave the system. 

If doctors were set free from Medicare price controls by ending the ban on balance billing, then the Medicare administrators would be better able to reduce Medicare’s contribution to provider reimbursement without fear of a physician exodus from the system. The entire SGR debate would become moot. The “doc fix” ritual would end, because the scheduled cuts could take effect rather than being perpetually postponed. 

As Medicare beneficiaries pay a greater proportion of the providers’ bills, market forces will ensue. More doctors will go into primary care if they can charge a fair price. And price competition will lead to better choices for senior patients. 

Let the scheduled cuts begin. And unshackle the nation’s health care providers. Let them set their own fees and, at their own discretion, bill for the balance after Medicare pays its part. 

Medicare price controls are one policy turkey that should not be pardoned. 

Jeffrey A. Singer is a surgeon in Phoenix, Arizona. He is treasurer of the US Health Freedom Coalition and was treasurer of Arizonans for Health Care Freedom, sponsors of the Arizona Health Care Freedom Act that passed in this year's elections.

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  • Fist of Etiquette||

    Jeff Singer wants to force your grandmother to choose between getting the healthcare she needs while eating catfood or dining at Red Lobster while nursing untended open sores.

    Tell Jeff Singer to keep his hands of our precious seniors' healthcare! Vote Fist of Etiquette this November!

  • SIV||

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  • SIV||

    Fuck off loser. Your blog sucks.

  • ||

    "...for you pervs!"

    thank you, than you very much.
    I really don't see the point of freedom if your not free to look at nekid women

  • Warty||

    You're trying really hard to...something. What, exactly? Stupid fucking whore.

  • Howard Dean||

    Finally, a politician who can clearly state how much life is improved by plundering the property of others. As long as others keep on having property to plunder, that is.

  • Simpler Way||

    Or, we could just euthanize the elderly. That will save us a ton of money. Of course, we should start at the top. With congress.

    Happy Thanksgiving! :D

  • Xeones||

    Actually, euthanizing Con-gress would solve a lot more problems than just Medicare.

  • C'mon man||

    Those bastards should at least be required to spend 6 months in their states, getting regular verbal lashings from constituents. They should be required to explain their bullshit to their employers.

  • Tortfeasor||

    Remember last year? They tried that for a couple of weeks and couldn't handle it. The whole criticism thing doesn't seem too pleasant for the ivory-tower set we have in Congress.

  • ||

    Euthanasia is already provided for in the Obamacare death panels.

  • prolefeed||

    The result is that Medicare's unfunded liability grows and more and more doctors leave the system because they know the day of reckoning is coming eventually.

    Well, no, the doctors who bail do so because they have more lucrative payors right now.

    If they ever "permanently" cut the doc rates 30% like they keep threatening, pretty much everyone will bail except a few docs treating long-time patients as charity cases, or docs churning through as many patients per hour as humanly possible in a race to cover their overhead and eke out a living -- you know, the illusion of health care.

  • LOL||

    "and eke out a living --"
    poor little church mice, starving children and physicians.

  • Alice Bowie||

    You are absolutely right. The Doctors that bail do have lucrative practices that don't need to take Medicare people. Here in NYC, many of my Doctor friends take NO INSURANCE. IT's CASH BABY. And, Cash only.

    The most my friends will do for you is give you a bill with the icd-9 and treatment code on it. Then, you can go and play with your insurance.

    And, the only reason they can is because of all the wealthy people living in NYC that pay a premium for the so-called premium doctor.

    However, if you leave the NYC area, doctors have no choice but to deal with Medicare, Medicaid, Insurance, and dead-beats.

  • EscapedWestOfTheBigMuddy||

    Unless of course you live in another powerhouse metropolis like, say, Newport News, Virginia where the SO and I had two cash only doctors.

    And one made house calls.

    Doctors respond to economic incentives just like everybody else, and just as with other things of value, price controls lead to shortages.

  • ||

    And supply controls lead to price rises. Rein in the doctors' labor union, the AMA.

  • Mr. FIFY||

    Your post was dripping with wealth envy, Alice.

  • ||

    Doesn't supplemental Medicare Insurance already do that?

  • Whiskey Muscles||

    Nope. It pays the 20% of the bill that Medicare doesn't pay. The total is still set by Medicare.

  • ||

    I recommend more dramatic changes. Medicare should become a catastrophic health insurance plan. Routine medical care (office visits, lab tests, outpatient procedures, drugs, physical therapy, etc.) would be paid out-of-pocket. Because of that, seniors will be more likely to negotiate fees and to shop around for more cost-effective care. Health care providers will need to become more efficient and charge less, or they will lose patients. (There is much slack within healthcare. My estimate is that non-hospital care costs are at least 50% higher than they should be due to combinations of inefficiency, lack of incentive to control costs, and greed.)

    To make up for the loss of an expected benefit, each current retiree would get a healthcare savings account (HSA) with money added (from federal taxes) each year. Unused HSA money will accumulate. When a senior dies, the HSA will transfer to next-of-kin. The taxpayer-funded HSA will be phased out over time, and people currently under 50-years-old will not receive taxpayer-derived contributions to their HSAs. Thus, in fifteen years, new retirees will get only catastrophic health insurance paid for with Medicare payroll taxes. The Medicare financing crisis will be fixed (unless pandering politicians reduce the catastrophic health insurance cutoff to an absurdly low amount such as $2,000).

  • sounds on da hearin aid like||

    "Cat food and ice floes."

  • DDavis||

    Mr. T has got the right idea. Insurance should be insurance, not a buffet plan.

    And consumers should be making choices about how money spent on their health care gets spent - not insurance companies, and not the government. If you want to subsidize people, put money in a HSA for them.

    But this doesn't address the real problem, which is regulation, not who pays.

    I take generic meds every month. $180 without insurance negotiated price, $80 insurance negotiated price, $25 out of state US pharmacy, $10 internet pharmacy, $2 in local indonesian pharmacy.

    Regulations and government distortions have changed my $2-$10 dollar meds into $25-$180 meds. We don't have a market, we have corporate regulatory handouts and market distortions.

    Right now, all the meds I take were suggested by me to a doctor. The internet provided me much more useful information about those meds than the doctor did. The docs added no value, but suck a few hundred dollars out of my insurance company every few months for prescription renewals.

    Besides bad law and bad regulations, there is no reason google couldn't have medical advisory software online; no reason we couldn't be getting online consults from offshore docs; no reason we couldn't be ordering our own blood tests.

    Medicine is cheap. Regulations are expensive.

  • ||

    agree very much with you.
    I would also note that there is just a handful of drugs that actually give more value than generics. And even in the case of these rare brandnames, most people can get by with an alternative generics.

    Finally, the value of doctors and most health care is vastly overrated. Then seldom make you actually feel better when you are old, and they seldom keep you from dying.

    The only thing that keeps the game afoot is that someone else is paying for it.

  • Tony||

    Great, we can replace a "Medicare financing crisis" with an "old people dying from lack of care" crisis.

    Yeah, let them negotiate fees. Since healthcare works just like an Asian flea market.

  • sounds on da hearin aid like||

    Eh?!?

    What? Oh...Tony agrees with me?

    Well, yeah. I already knew that, son, but what were we talkin' 'bout?

  • ||

    I've been negotiating my own med fees for years. Yes, you can do it. Plus, old people love to haggle. It's a win/win.

  • C'mon man||

    Exactly, old people need to be leaders in the price beat down caused by a conscientious consumer.

    When I'm 90, I want to be able to stop by the automated hip-replacement drive-thru before my automated personal flight machine takes me to my 18th 25 year-old girlfriend's abode for some quality time.

    It's the government cancer already existent in medical goods and services that's retarding this potential future. If gubmint quit sucking resources out of the private sector and strangling it with regulation, there's only going to be growing demand for which there's plenty of value for private capital.

  • ||

    I've been negotiating my own med fees for years. Yes, you can do it. Plus, old people love to haggle. It's a win/win.

  • ||

    Dr T, you are right on. Very good suggestions. Your plan is so logical even a politician could understand it.

    Right now, Medicare recipients are allowed to see only government-approved physicians. That means that the top of the bucket is available to those under 65 and the bottom of the bucket (with exceptions) is available to those over 65.

    If a senior does not see a government-approved doctor, NO part of the cost can be turned in for any reimbursement from that person's (laughable) insurance.

    See my plan:
    http://valswhereveritgoes.blog.....lt-on.html

  • anarch||

    Medicare should become a catastrophic health insurance plan

    Well, it is one.

  • Tony||

    But did you hear about how Judge Andrew Napolitano came out as a 9/11 truther?

  • Shills Don't Matter||

    But did you hear about how Media Matters Won't Apologize for Spreading Fake Limbaugh Slavery Quote?

    I smell a sequel: Shattered Glass Part II!

  • Dog||

    Squirrel!!

  • ||

    Repealing prescription laws would go a long ways towards reducing the cost of health care for everyone. If you are suffering from "chronic conditions" that will never get better, why do you
    have to see the doctor every six months? Only reason is so he or she can charge you another "office fee" for doing nothing more than signing his or her name on a prescription form!

  • EscapedWestOfTheBigMuddy||

    I'm more than willing to talk about scraping prescription requirements, but if that's all you're getting out of your visit to the doc you're doing in wrong.

    The doctor is your hired expert consultant. Pick his brain; grill her on the implication and prognosis; ask about new development or changes in recommended clinical targets; discuss places your coping strategies are letting you down.

    You (or more likely the insurance company) are paying a premium for their presumptive expertise. Make them earn it, and if they resist take your business elsewhere. As long as you're just getting a signature the doctor is fully commodified and easily replaced.

  • LarryA||

    I tried that. He keeps telling me to eat healthy and exercise more. ;-)

  • EscapedWestOfTheBigMuddy||

    LOL.

    Yeah, there is that.

  • G Mc||

    Conservatives blow dick. Libertarians wish they could find a dick to blow.

  • Josh||

    Wait. Doesn't 'balanced billing' just come out of the doctor's mind? If I remember correctly, the prices aren't publicized and they're ascribed after the fact. Weren't there problems with this before?

  • ||

    Yep, just like the price the plumber charges to unclog your toilet "comes out of his mind". Don't like it, find another plumber.

  • mr simple||

    Right, because doctors will give free estimates and don't charge to fix their mistakes or if multiple visits are needed.

  • Josh||

    Friend, I think the prices might be significantly different.

    The point remains that, as far as I know, these doctors don't give people estimates beforehand. Plumbers and other contractors do.

  • adam||

    Well there's no need for estimates to the patient where the price is set/negotiated by Medicare or the insurance company and the patient isn't paying or only pays a set co-pay. If the patient were responsible for the bill and different doctors charged patients different fees, they would start giving patients estimates because the patients would demand that.

  • ||

    Icebergs. Set the budget busting elderly adrift on icebergs. They're retired, contribute nothing to the economy and get in the way when I'm driving, shopping, eating out, etc.

    I have it on divine authority that

    The days of our years are threescore years and ten.

    So at age 70 the old folks pack what they can carry and it's off to a calving glacier in Greenland with them.

    Problem solved. As an added bonus, Reid, Pelosi and McCain get to share the first iceberg.

  • ||

    As Medicare beneficiaries pay a greater proportion of the providers’ bills, market forces will ensue.

    Since medicine is THE major rent-seeking profession, that's impossible.

    Jeffrey A. Singer just wants the combination of rent-seeking, government subsidies and pseudo-free-marketeering that maximizes his income.

  • Palin's Pet North Korean ||

    The hippies have destroyed America. The hand out culture is destoying my sex drive.

  • Limbaugh/Hannity/Levin/Palin ||

    The axis of stoopid.

  • Erudite crack-fiend||

    Behold! The printing press! Ben Bernanke and the Boy Scout have a solution to all entitlement programs. We are saved!

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  • Andrew||

    What Medicare is doing is no different from what every insurance company is doing, negotiating the lowest rates possible. Very few doctors are opting out Medicare, not because they are altruistic, but because it pays to accept Medicare patients. My simple proposal to reduce cost is to force every doctor set a hourly fee in advance, Fixed for one year. So consumerS can have more information to shop around.

  • ||

    In my metro area, 42% of physicians will not accept Medicare.

  • Pope Jimbo||

    Forget Spice, think whipped cream.

    Bonus points for referencing 4Loko too.


    But critics said it might not be the best idea.

    "I mean if people already get high off whipped cream bottles, you put alcohol into that mix, it's not exactly a good combination," UCF student Lisette Diaz said.
  • ||

    Doctors are expert consultants? In Pennsylvania, if a mechanic is going to inspect a car he has to go to a refresher course every five years. If a doctor is going to perform surgery on a human brain, he may have never even read a magazine article in forty years.

  • Chad||

    "To the extent that Medicare is offering below-market rates, doctors leave the system"

    Market rates...

    LOL LAUGH FUNNY FUNNY

    Why would anyone expect "market rates" to be found in a world of the AMA cartel, insurance industry cartels, and third party payments. LOL YEAH RIGHT.

  • moon boots||

    If your brain, worried model, and muscles are Moonboots operating efficiently, the execution of finite generator control motions these types of as rapid online game pictures are Ugg boots Sale very easy. On the other hand, if your brain informing your nerves, and consequently your muscle mass how to proceed is inefficient. The execution of finite continuous-duty motor influence movements, once more similar as simple online game game will be much more challenging.

  • marcy Zwelling, MD||

    Thank you Dr. Singer. Your audience should know that we should all encourage our congress persons and Senators to endorse the patient empowerment act that allows patients to voluntarily contract with their doctors. Fee schedules should be posted, of course and this would NOT apply to catastrophic care when there is no time to construct a contract.
    Medicare should adopt private contracting in the "non emergent marketplace" and limit any "mandate" to basic catastrophic coverage. This would save Medicare, save the Treasury and give our patients their rights to self determination and the opportunity to invest in their own health and their life.

  • shiroi neko||

    Nice idea.

  • ||

    No solution here. Why not take that $12,000 the government already spends on Medicare, and the $3,500 - $7,500 the recipient spends, and provide a high-deductible insurance policy and a spending account.

    If seniors are spending their own money, they will shop and spend wisely. Incentives to do so could be built into such a system.

    For this to work, prices must be transparent, and the secret deals insurance companies have with providers must end. Providers cannot discriminate between the insured vs. the uninsured. Get rid of those darn networks and allow people to be free to see any provider.

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