The Covert Rationing Blog

Throwing It To The Dogs

July 15th, 2008 by DrRich

Robert Pear reported this week in the New York Times that, in narrowly averting the scheduled 10.6% pay cut for doctors (and in the process taking the popular Medicare Advantage program away from seniors), congresspersons of both parties have come to recognize that “the formula for paying doctors is broken.” For their insight in reaching this conclusion, we all should be proud of the cleverness of those whom we persist in electing.

Doctors now have an 18-month reprieve before the next round of pay cuts are scheduled to kick in. And members of Congress, who were unable to stomach the blowback that would have occurred if they had allowed the relatively “small” pay cut this year, fully realize that they’re not going to get away with the next one either, which is scheduled to come in at 20%. This gives them 18 months to find a solution to the physician reimbursement mechanism which, DrRich reminds you, they all agree is broken.

That reimbursement mechanism, of course, is so fundamentally ridiculous that it can only be understood by recognizing that it is a fairly typical bureaucratic attempt to covertly ration healthcare. Covert rationing requires systems that maximize complexity and inefficiency. So, while regulators might have achieved the desired cost cutting by the simple expediency of declaring an arbitrary series of pay cuts for doctors, they instead saw fit to conjure up a truly Byzantine system of rules, formulas, regulations and calculations, whose machinations are somehow linked to projected changes in GDP, which themselves are the product of arcane and mystical divinations made by such prevaricators as econometricians. This sort of “system” serves covert rationing well. It allows Congress to represent the physician pay cuts as being the result of a scientifically derived and economically justified process, which is so finely calibrated as to make it nearly a crime for Congress (or anyone else) to “adjust” it .

We aren’t supposed to notice that the physician reimbursement mechanism fails to recognize even the most basic principles of economics. And if doctors point out that neither the number of sick people nor the overhead of medical practices track in any way with the projected GDP, they reveal themselves as being either unsophisticated or greedy. Either way, they can be safely ignored.

At least, that’s how the process is supposed to work. With this latest round of scheduled pay cuts, however, while Congress did its best to take the issue to the wall, in the end our elected representatives were forced to admit that the physician reimbursement system simply doesn’t work. By this admission we can only conclude that the reimbursement system at last has become politically infeasible. .

Infeasible though it might be, Congress is far from prepared to come up with a substitute. As Mr. Pear reports, “Democrats and Republicans agree that. . . fixing it would be phenomenally expensive.” For instance, if Congress were to do what at first blush seems to be the most logical thing, that is, to simply repeal the current mechanism and allow payments to doctors to grow at the rate of medical inflation, the Congressional Budget Office estimates it would cost Medicare $65 billion in the first five years and nearly $200 billion in the next five years. You go tell the voters that doctors are worth that kind of money.

The bottom line: Paying doctors in some reasonable manner is simply not an option.

The solution Congress is turning to, according to Mr. Pear, is to assign the job of figuring out physician reimbursement to the doctors themselves: “Lawmakers are pleading with physicians’ groups to come forward with a comprehensive proposal.”

We have seen, of course, the sort of thing that happens when you turn over to “physician’s groups” the honor of figuring out how the limited physician reimbursement pie is going to be divvied up. The RUC is the result of such an effort, and there, as one would expect, the powerful specialists have completely overwhelmed the voice of the relatively weak primary care physicians, much to the detriment of not only the PCPs, but also of patients, the healthcare system, and the healthcare budget itself. (While some may consider it ironic that a process initiated in an effort to covertly ration healthcare ends up increasing costs, this is actually the most common outcome of the programmed inefficiencies that invariably accompany covert rationing efforts.) In any case, Congress now proposes more of the same - that is, let the doctors figure it out.

DrRich has pointed out many times that doctors really do want to do what’s best for their patients, and that indeed, wanting to do what’s best for their patients is as high as number three on doctors’ priority list. Priority number one is maintaining their individual viability as practitioners (a priority that requires them to keep the payers happy above all else). And priority number two is protecting the integrity their professional turf, that is, maintaining the prerogatives of their specific medical specialty. (Cynics should recognize that no doctor who ignores priorities one and two will very long be in a position to exercise priority three.)

Congress is now proposing to remake the physician reimbursement system by turning it into a turf battle among physician groups. The battle will be bloody.

Congress is faced with a kennel full of starving dogs, of many various breeds, and has decided it will feed them with a single lamb shank. Rather than figuring out how to distribute the lamb shank so that smaller (yet valuable) dogs will not be torn apart in the struggle, they have elected instead to just go ahead and toss the shank over the fence, and let the dogs figure out how to divide it up. The result will not be pretty, nor will it be hard to predict.

DrRich would rather not watch. He merely (as a courtesy, no more), shouts this new warning to PCPs (the smallest dogs in the kennel). He will then hide his eyes from the carnage.

Posted in Healthcare economics, Primary Care in America

8 Responses to “Throwing It To The Dogs”

1. Peter wrote on 07/15/08 at 8:20 am :

   Do you think that removing the ban on balance-billing Medicare patients will allow market forces to correct the government-fixed prices we have now?

2. DoctorJay wrote on 07/16/08 at 9:21 am :

   If the scenario you contemplate does indeed come to pass, will not the basic principles of supply-demand economics eventually prevail? That is, if there is an exacerbation of current shortage of PCP’s due to shrinking payments, will not that eventually translate, one way or another, into higher demand (and increased revenue) for PCP’s? (Taking into account of course, the increased primary care market share of various scabs such as doctor-nurses, IMG’s, doct-pharmacists, etc.)

3. DrRich wrote on 07/16/08 at 9:38 am :

   Peter,

   I think balance-billing would make Medicare more economically viable for primary care doctors. But since it injects a small semblance of impure free-market economics into the government’s healthcare paradise, it is to be forbidden.

   Rich

4. DrRich wrote on 07/16/08 at 9:51 am :

   DoctorJay,

   You are correct, but only if PCPs extricate themselves from a system in which the law of supply and demand has been repealed. What will probably happen is that smart PCPs will remove themselves from insurance-based practices and move to models where they are paid by patients directly. When the demand for good PCPs is high enough, this model (which many doctors are afraid of today, and which many terribly misguided doctors even consider unethical) will become too attractive to pass up.

   For the “it’s unethical” crowd: there are business models for doing this that would make such services affordable to anyone who can afford cell phones, cable TV, or plumbers.

   In my view, working directly for patients is the only way PCPs can salvage the traditional doctor-patient relationship, and thus salvage medical ethics and begin to restore real medical professionalism.

   (Don’t wait for specialists to lead the way. They’re too fat and happy with things as they are, and, stupidly, have no idea of what the “system” will eventually have in store for them. Of course, if they were really smart they might have become expert diagnosticians instead of proceduralists.)

   Rich

5. jb wrote on 07/16/08 at 12:12 pm :

   DrRich, you are correct in your post, both in the identification of the problem and the reason why it will never be solved under current circumstances. There is a (relatively) easy cure, however, and you have suggested it. All doctors have to stop taking Medicare and insurance. There will be short term misery for both docs and patients, but at some point the AARP will pressure Congress to change the Medicare rules to allow both balance billing by MDs and reimbursement from MC directly to patients for services by docs who are totally out of the Medicare system (both currently illegal).
   I’m afraid that there is no way to make this omelette without breaking a few eggs- i.e., some medical practices may die, and unfortunately some patients will suffer under the transition.

6. bob wrote on 07/16/08 at 4:50 pm :

   “Of course, if they were really smart they might have become expert diagnosticians instead of proceduralists.”

   Absolutely, Rich. If there is one thing we can agree on it is that the average primary care provider is far more intelligent than the average neurosurgeon. Stupid specialists, they’re so stupid! Ha ha ha, good one.

7. DrRich wrote on 07/16/08 at 5:13 pm :

   bob,

   Glad you appreciate my incredibly subtle humor.

   You know, I have a couple of neurosurgeon friends who, being neurosurgeons, cannot say, when they are interested in minimizing the difficulty of something they are doing, “It’s not exactly neurosurgery!” (since, bob, what they are doing likely IS neurosurgery). So what do they say, you might ask? Why, they say, “It’s not exactly electrophysiology!”

   Did I mention I’m an electrophysiologist? Not only that, but I actually wrote the book. So you can believe me when I say that what electrophysiologists declare in such circumstances is: “It’s not exactly time to call in a good internist!”

   When it becomes time to call in a good internist, I lament that my brethren in the arcane specialties will have had a hand in assuring there will be none left.

   Rich

8. Dr. R wrote on 07/17/08 at 7:09 am :

   Healthcare funding should be part of the “War on terrorism” so that we can protect the civilian population from the attacks of preventable morbidity and mortality.

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