Obamacare Finds Its Cost Savings — Stop Paying Doctors


President Obama
White House

As Peter Suderman noted, the Obama administration is simultaneously pushing for Medicaid expansion and arguing that states should be allowed to reduce reimbursement to providers as a means of controlling costs in the bloated program. This comes even as Medicaid is already struggling to find providers willing to see patients — with low compensation cited as a major reason for the shortage.

The Obama administration's argument for reducing reimbursements for providers who see Medicaid patients was made very succinctly in a California courtroom:

"There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs."

The administration makes its argument in a case challenging California's decision to reduce Medicaid reimbursements by 10 percent. Note that if you don't reimburse sellers of goods and services for "all or substantially all of their costs" you are presumptively asking them to lose money on the deal. Unsurprisingly to everybody except government officials, providers tend to stop providing under such circumstances, if only to avoid bankruptcy, or else because they're going through it.

As it happens, California already has a shortage of willing providers, and is looking at expanding the roles of nurse practitioners, pharmacists and other medical practitioners to try to fill the gap. But there's no particular reason to think that other providers are more prone to financial martyrdom than are physicians. They have to cover their costs, too.

The problem isn't confined to California. A study published October 12 in the American Journal of Medical Quality found that the ranks of "safety-net physicians" — those willing to see Medicaid and uninsured patients — appears to be at its limit under current circumstances.

The senior author of the study, Eric G. Campbell, PhD, of the Mongan Institute, commented, "This study raises very serious concerns about the willingness and ability of primary care providers to cope with the increased demand for services that will result from the ACA."

And why are those ranks so strained? As I wrote a few weeks ago:

Last year, a Physicians Foundation survey found that 26 percent of physicians had closed their practices to Medicaid patients because of concerns over compensation and red tape. Kaiser says the number of doctors turning away Medicaid patients is closer to a third.  Pharmacists haven't been much happier. Walgreens pharmacies in Washington turned away Medicaid prescriptions because they were losing money filling them (the state relented) and pharmacies did the same in Delaware.

It's hard to see what the administration's end game is here. Even if you buy the conspiracy theory that Obamacare is meant to fail in order to pave the way for some full-blown single-payer health system, based, no doubt, on the thriving French system, there's no road there from here. An entirely government-controlled healthcare system would resemble Medicaid/Medicare writ large. And the Obama administration envisions cuts to Medicare, too, especially in terms of compensation to hospitals. That linked Washington Post article may insist that the proposed cut "does not, however, change the basket of benefits that patients have access to," but it's unclear just who will provide those benefits if they're not being paid.

Deciding not to pay for stuff is a great way to reduce your expenses — unless you actually need that stuff.