Medicare to Punish Most Doctors for Not Practicing Medicine the Way It Thinks They Should
More than 80 percent of Medicare providers will face penalties for failing to meet quality thresholds if current performance trends continue, according to a new study…
The requirements encourage doctors to improve patient care by following evidence-based clinical procedures, such as administering aspirin to someone suffering a heart attack or ordering a tuberculosis screening for rheumatoid arthritis patients.
Source: The Hill.
The health care law calls for an additional 32 million uninsured residents to obtain health coverage. There are no provisions to significantly boost the physician supply to take care of them. To offset the high cost of generous subsidies for health insurance and Medicaid expansion, the fees paid to the physicians who treat Medicare patients are slated to be cut nearly 30%.
Do the math: 280 million people will have health coverage. Maybe 110 million of them will have low-paying government coverage that pays only about half what private insurers pay physicians. Only about a third of a physician’s billings represent profit. This suggests physicians are expected to treat Medicare and Medicaid patients for less than doctors’ average cost per patient. Depending on the practice, doctors may even be losing money at the margin on some patients. The certainly will find Medicare patients with their complex needs to be not worth the effort.
Increasingly, doctors will drop out of Medicaid and Medicare and form “concierge” or retainer-based medical practices where they only retain the 20% of their former patients who are willing to pay an annual retainer of $1,000 to $2,000 per year. I don’t blame them. The government sets price controls on physician fees to restrain spending. Private insurers have to pay market rates but they have no incentive to pay more than market to offset below-market fees from government insurance.
Good thing for us that the labor supply for doctors is so inelastic. Otherwise that whole losses in the margins thing might be a cause for concern.
“More than 80 percent of Medicare providers will face penalties for failing to meet quality thresholds if current performance trends continue”
– This should surprise no one.
What happened to beta blockers? They were universally believed to be the imperative first step for people with heart problems. Anyone who failed to give them was a knave. But then — oops! — maybe not so much.
On labor supply elasticity:
“Studies support the idea that labor supply is less elastic in high-paying jobs than in lower-paying ones…John Rizzo and David Blumenthal estimated the price elasticity of labor supply for young physicians (under the age of 40) to be about 0.3. This means that a 10% increase in wages leads to an increase in the quantity of labor supplied of only about 3%.”
http://www.flatworldknowledge.com/node/20902
This is because the income effect far outweighs the substitution effect at doctors’ wages.
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