Booman is slightly worried about the Medicare Doc Fix and how it impacts availability of doctors for patients:
If there are any potential problems, one might be that the slow growth of reimbursement fees will cause fewer doctors to treat Medicare patients. Yet, I think it will be harder to exclude Medicare than Medicaid patients. On this score, we’ll have to wait and see….
I’m not too worried about that as I don’t know what his model is that significantly changes provider behavior from past performance and future trends.
Let’s build a simple provider level profit maximization model and see why I am not to worried. The goal of profit maximization is to create an economic profit that is on average as good or better than the next best alternative for someone of the same skill and experience outside of medicine as inside of medicine. For simplicity sake’s let’s just focus on a single doctor’s office.
Under current law and pricing practices, providers have clear accounts receivable preferences. They want to see a commercially insured, wide network, no cost-sharing individual before they see someone with a commercial HSA plan. They’ll want to see either before they see a Medicare member, and the Medicare member is roughly equal to a low cost Platinum, Gold or Cost Sharing Reduction (CSR) subsidy Silver Exchange plan. All of those plans are preferable to Bronze or Catastrophic Exchange because of the high out of pocket makes collecting on the entire contracted rate tough, while Medicaid is usually at the bottom of of the list as Medicaid pays, at best, marginal cost of a service.
We should assume that office managers/schedulers are acutely aware of the revenue implications of the office’s patient mix and are already actively managing it to maximize profitability within certain constant constraints. For example, they could hold three afternoon appointments open for same day patients and may only release one for a Medicaid patient while telling a commercial high reimbursement caller that the doctor is available at 2:15, 3:00 and 3:30. This is current behavior.
Dropping the trend in Medicare growth rate may change relative prices and make the commercial high payers more attractive to cater to but there are three problems with that simple supply and demand model.
First, there is good evidence that commercial/private insurance pricing is closely correlated to public pricing. The Incidental Economist has been harping on this for a while:
Indeed, one recent study found that from 1995 to 2009, a 10 percent reduction in Medicare payments was associated with a nearly 8 percentreduction in private prices. Another study found that a $1 reduction in Medicare inpatient revenue was associated with an even larger reduction — $1.55 — in total revenue.
This would be impossible if hospitals were compensating for lower Medicare revenue by charging private insurers more.
Hospitals tend to be insulated from market forces than individual providers, so it is hard to see individual providers having sufficient market power to demand private rates stay constant on previous trend when public rates are growing at a slower pace than projected.
Secondly, the high paying commercial contract is a shrinking universe for two reasons. The first is that the population is getting older, so there is an increasing flow of people out of private commercial insurance and onto Medicare because they just hit 65. The late 50s and early 60s Boomers are, and will continue to be a goldmine for providers, but the demographic bulge is working its way out. Even if PPACA never passed, the proportion of people on Medicare would be increasing, so the proportion of people near but not on Medicare to Medicare eligible would continue to shift. That is basic demographics. This is a basic monosopy argument that the biggest consumer of medical services in this country (Medicare) will get a good volume discount.
Additionally, the Exchanges introduced an extraordinary array of commercial products that are tied to Medicare plus a bit pricing. Standard commercial contracts are usually Medicare plus thirty percent or Medicare plus fifty percent. In most competetive markets, the Exchanges have products that are priced at Medicare plus five, or Medicare plus seven as the second Silver benchmark plan. This has two impacts. The first is a minor shift of people from standard commercial, medically underwritten individual plans to PPACA compliant individual plans that pay out at a lower rate. More importantly, it is starting to shift the large group employer market. Employers are looking at their costs and asking why they are paying Medicare plus 44% on average while the Exchanges have Medicare plus 7% pricing. They are willing to have conversations about switching to narrower networks to drop their pricing to Medicare plus 15% or Medicare plus 20%. The cash cow of large group private insurance is slowly dying. That market segment will still have higher pricing than Medicare or Medicare linked Exchange products but the gap is on trend to close.
If the relative gap is closing between Medicare and large group commercially priced products, than accessibility to care will continue to not be a problem for Medicare benefeciaries as long as we assume that the US medical community will not see providers exit in droves. That worry is unfounded in my opinion for two reasons. The first is that the average credentials of the first year US med student has been increasing, so this is a market signal that lots of very smart people still want to get into medicine and people who are completing their fellowships today are still perfectly good docs even if they would be marginal Fall 2015 med school candidates. Secondly, US providers are massively overpaid compared to the rest of the world’s doctors. A threat to immigrate to Canada or Germany or Australia to practice medicine for economic reasons is just not credible.
Three “market based” changes I would make in the current Medicare Law. First, I would authorize beneficiaries to receive reimbursement for care received in foreign countries. “Medical Tourism” not only obtains the same treatment at lower cost, but also benefits the medical establishments of those countries providing the service. Second, both under the reimbursement rules and encouraging states to stand up to the doctor’s guild lobbying, allow more treatment by physician assistants and nurse practitioners. Third, encourage immigration of medical professionals into the the United States.
As Richard Mayhew notes, the threats of American Doctors go “go Galt” and emigrate to foreign lands means they are willing to take a far bigger pay cut (yes, go to England and provide services under the National Health Insurance and get a straight salary ( a nice one, but not high six figures) from the Crown – England/Wales/Scotland/Northern Ireland being a monarchies.
Friends who live in red states are telling me that their doctors are retiring or switching to a concierge practice rather than accept the new Medicare payment schedule. My mom’s doctor is accepting no new Medicare patients at all, and Medicare patients have to talk to a gatekeeper nurse before getting an appointment. If my mom had been willing to pay $2K in January, she would be able to bypass the gatekeeper nurse. She is shopping for a new primary care doctor and having a lot of trouble finding one.
I think there are quite a lot of physicians out there who have looked to the airlines for revenue-generating ideas.
thanks for the information.
I think you vastly overestimate the ability of an office to triage based on insurance.
Other than not accepting your insurance at all the folks scheduling appointments just look for an open slot, at least in every primary care office I’ve ever been in. Maybe in a slower paced specialists office it would be possible.
In my area I don’t know of any primary care office not accepting medicare but there are specialists who will not see any new patients.
I’m a 55 year old physician with a practice that is 75% Medicare. What you’re going to see as Medicare becomes less hospitable is a wave of early retirements of providers my age and up. There will be temporary shortages of providers but for the med students coming up, this is the new normal. We are transitioning to a different system. There will be growing pains.
As a doctor, I have no problem taking a (further) haircut, if reform is applied even handedly, but our corrupt legislature has made it literally illegal for Medicare to use its volume advantage to bargain for lower prices from insurers, drug companies, and device manufacturers.
So I guess they’re just going to squeeze the docs for everything we are worth first. You will see a lot of early retirements. I’m going to do it.
What statistics are there for availability of primary care physicians to Medicare patients ? What I hear anecdotally is that it is getting more difficult to find PCPs who will take new Medicare patients.
Right now I have to go re-read the 2 notices we received on this past late Friday and Saturday from our health insurance provider about being put in another section of our insurance and call to ask them some questions. The new coverage come into effect on April 1. Quite a bit of notice considering they came on the weekend, right? One announcement in the letters was they have to approve of our physicians. We have more than one physician that we go to every year and most recently my husband became a heart patient after having stents done. I’ll try to update after I call for more information.
That was my question with Original Lee’s anecdata above — is the shortage of primary care physicians allowing doctors to turn down Medicare patients because they can pick and choose the patient pool they want?
@Mnemosyne (tablet): More anecdata, but essentially to my circle of acquaintances, it would appear that the answer is yes. My mom’s PCP is a group practice, open 12 hours a day, 6 days a week. I would estimate that until the beginning of 2014, when the concierge billing began, about a third of the patients were likely on Medicare. The gatekeeper nurse nowadays basically makes the Medicare folks call back 3 times (unless it’s clearly an emergency) before “letting” them have an appointment. Since then, while the waiting room is still full, the patients I see there are generally younger than before. Specifically, now many of the patients I see in the waiting room appear to be in their thirties and forties, whereas before there were equal numbers of apparently geriatric patients and apparently middle-aged patients.
I’ve been hearing doctors declare they’ll leave Medicare if the pay doesn’t improve for years. In fact, there should be no doctors left. I’d like to see all states change their laws to allow nurse practitioners to practice on their own, because that noise has done been gotten old. However, physician orgs. fight that tooth-and-nail.
@Shakezula: IANAD. However,I think that the reality is that physicicans are leaving Medicare, at least in the primary care specialties, but silently. Whether it is due to refusing to take new Medicare patients, or to retiring early (I know examples of both), the anecdotal data is that it is getting increasingly difficult for the elderly to find PCPs, right at the point when the boomer generation is hitting Medicare age. Also, before you say that this can be fixed by letting NPs practice on their own, you might want to ask whether that works medically. For example, NPs are the backbone of nursing home care, but none of the ones I know in that field would feel comfortable operating without a physician backstopping them. Primary care geriatrics is a particularly complicated area of medicine, with medical treatment being provided in the context of management of multiple chronic diseases. It is time-consuming, and requires a high level of training and skills (which limits the extent to which NPs can take on the load).
As usual, Richard Mayhew is lying to you. The real example of “Let’s build a simple provider level profit maximization model” in the U.S. health care industry is medical fraud. Specifically, these 10 types of common health care provider fraud:
TEN COMMON HEALTH CARE PROVIDER FRAUD SCHEMES
1.Billing for services not rendered.
2.Billing for a non-covered service as a covered service.
3.Misrepresenting dates of service.
4.Misrepresenting locations of service.
5.Misrepresenting provider of service.
6.Waiving of deductibles and/or co-payments.
7.Incorrect reporting of diagnoses or procedures (includes unbundling).
8.Overutilization of services.
9.Corruption (kickbacks and bribery).
10.False or unnecessary issuance of prescription drugs.
Source: “10 popular health care provider fraud schemes,” ACFE website, January/February 2013.
Of course, Mayhew mentions nary a word about this kind of endemic medical fraud.
Yet another example of “build a simple provider level profit maximization model” is “Scam Alert: Hospitals All Over America Are Wildly Inflating Medical Bills,” 22 September 2014.
It’s obvious why Richard Mayhew “isn’t worried” about the prospect that fewer doctors might see Medicare patients — because America’s criminally fraudulent health care system is so deeply mired in scams and institutionalized theft and highly-organized con jobs that Mayhew knows doctors and hospitals and insurers and medical devicemakers will merely trot out yet another scam to make up for any loss in revenue.
Why haven’t you been indicted yet, Mayhew?