Doctors face difficult choices to save Medicare

So, here we are, between a Medicare rock and budget hard place.

Costs are clearly a problem. Our healthcare system is the most expensive in the world. Take a look at the 2003 figures from the Kaiser Family Foundation. Per capita costs, in 2003, in the US were $3,394 above those of the UK.

Doctors face difficult choices to save Medicare

We need to work on the costs. That’s clear.

But how do we do keep things moving in the mean time? The policy wonks love the airplane analogy: trying to fix healthcare is like trying to work on a jet engine while in flight.

Julie Rovner, reporting for NPR, highlights the challenges doctors are up against as the result of the budget and potential Medicare cuts:

Doctors face an even bigger problem. They’re already looking at a 29.5 percent pay cut next Jan. 1 unless Congress acts to change it … but to fix the doctor pay problem will cost more than $300 billion. Industry consultant Laszewski says that just digs the hole deeper for the supercommittee working on the deficit issue.

The question then becomes, where is the $300 billion in excess costs? Without doubt there is waste in our system. Although not all costs are bad. With the high cost of also comes some decent quality. The Commonwealth Fund reports:

Compared with [five other major] countries, the U.S. fares best on provision and receipt of preventive care, a dimension of “right care.” However, its low scores on chronic care management and safe, coordinated, and patient-centered care pull its overall quality score down.

Important to note, the Commonwealth Fund report implicates the challenges of access to care as a key contributor to the chronic scores. With nearly 90 million uninsured in the US, its hard to manage acute conditions before they become chronic. There is a lot of that $300 billion in cost right there.

Let’s say this pans out as NPR (and many others) predict. Doctors will have a few choices, among them:

1. Take a pay cut. Yeah, its a little more complex than that – they have to downsize practices, maybe lay off staff, its not pretty, but it’s an option. The Association of American Medical Colleges says the average debt for medical school graduates is between $150,000 and $180,000. Right out of the gate, many physicians are in the hole. We have this image of doctors as highly paid – largely accurate relative to US median salaries – and very affluent. Some specialties do facilitate affluence, perhaps justifiably (I want my surgeon well paid!). In many cases the take home pay of primary care, internal medicine and family physicians is not quite as high as one might think. For example, the median before tax take home pay for family physicians in the Mid-Atlantic region is $140,000; take out taxes, school loans and cost of living .. see what I mean?

2. Stop seeing Medicare patients. Right now, in 2011, Medicare covers 47.6 Million Americans. The average annual spend per enrollee is$303,000. So when some fraction of those 47.6 Million are unable to see a primary care physician or specialist who no longer accepts Medicare, what happens? Do they end up in the hospital where the cost of treatment is considerably higher? Does that drive the per enrollee spend up and in turn push medicare deeper into insolvency? There is a healthy amount of speculation baked into that scenario, but it is well worth consideration. By the way, the vast majority of hospitals in this country cannot cover costs on Medicare reimbursement and Medicare makes up around 50-60% of business for hospitals.

If the same is true of physicians – I don’t have the figures for physicians, but they cannot cover costs, ceasing to see Medicare patients may actually be advantageous to them financially.

3. Doctors can cut some costs – what are these costs? The limited understanding I do have is indirect costs of care are considerably larger than the direct costs of care. Costs to Medicare, in particular have many drivers. According to Kaiser, the largest costs come from hospital care – a seriously complex system in its right. How can doctors, constrained by budgets, reduce those costs? They can help reduce medical errors and length of stay – we are seeing those tends now, thankfully. They can use less expensive supplies (i.e. put the squeeze on suppliers who are making record profits). They have some recourse, to be sure. Still, these are things that have a long time playing out.

I’m not sure what the answer is. The budget crisis is real and Medicare cannot afford to keep spending at the current rate; no arguments there. But, it takes a while to squeeze costs out. Remember the jet engine in flight? What happens when the budget puts the squeeze on the physicians? What will their first reaction be? Is it to cut direct costs and downsize a practice, or take a personal pay cut? The hope is reducing costs will help entice physicians to become more cost conscious. Hey, it may work, but not before a last ditch effort is made to save the jet engine from flaming out first.

Nick Dawson is a health care administrator and bridges the gap between healthcare operations and social media.  He blogs at

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  • Michael Heck

    The real question is WHY are costs so high?  Is it because of our bad health?  End of life care?  Abuse of the system?  All of the above?

    The answer is that physician salaries are a relatively small portion of Medicare’s budget, and cutting them isn’t going to help.  All that will serve to do is to drive doctors away from Medicare, or make them abuse the system more trying to find more money (the money they deserve for saving peoples’ lives, btw).  

  • Paul Weiss

    Typo: “The average annual spend per enrollee is $303,000.” A more accurate figure is $6068. (If we spent 303K for each of 47.6 million enrolled, the total cost would be $14,422,800,000,000. We are not spending 14 trillion per year on Medicare.)

    Medicare expenditures per enrollee vary greatly by state. It ranges from $356 per person in Alaska to $31,865 in California. Are Alaskan’s that much healthier than people in the Golden State?!? Probably not. We need an assessment of outcomes across the states. We need to figure out why there is this disparity. We need to have the more expensive states to model what the less expensive states are doing and bring down those costs.

    Here is an example discussing rates of (expensive) lumbar fusion rates across various locales.

    This is the related map. (Click on the back surgery header.)

    Surgery rates vary from less than 2 to more than 10 per 1000 enrollees. Outcomes are similar in across these regions.

    Also, with all of this, we have to look at Medicare Part D costs. (As well as prescription medication costs across the board.) Americans are being hijacked by the pharmaceutical companies into paying more for the same drugs than people in other countries do. That is just plain wrong.

  • Anonymous

    This is really a broken system … everything!  I characterize it (not medicare specifically) as ‘a profit driven sick care system with lazy patients that lack personal responsibility for a healthy lifestyle’.  Vast majority of cost driven by preventable conditions … our society has become a ‘something for little or no effort’ … pills for everything, short term cheap not long term consequences … and the profit driven system thrives on this dumbed down mentality. I really don’t know where you start to fix this mess … kids are already obese by the time they start school. It’s no wonder that medicare is (and will continue to be) in trouble when you look at what’s coming down the road.

  • David E. Albert, M.D

    If physicians are protected as I suspect they will be, vendors of products and services (including hospitals) will get massive cuts. 

  • Anonymous

    The system is so broken and these attempts to fix it hurt those who need it and those who help. It doesn’t seem right.  Doctors are to provide the best care to whomever walks through the door, insurance or ability to pay are NOT suppose to be a factor in how physicians treat. Best practices help lessen the need for any different type of diversion from testing.

    In my opinion, as an employee in an ER I can tell you that what is more broken than Medicare is Medicaid.  People on Medicaid are unable to get a primary doctor’s, so every thing that they feel is wrong big or small they come to the Emergency Department. No fault to them some aren’t educated enough in how to take care of some basic issues at home, like fevers in kids.  Primary physicians decline Medicaid because they are not a good payor thus the pcp’s won’t see but a small percentage. Medicare patients will soon face the same problems and will need to come to the ER as well. With the aging of the baby boomers we are in trouble.

  • Hugo

    Is is my understanding that the number of uninsured in the US is 51 million and not 90 million as mentioned in the article.  Furthermore, I would be interested in the source of this quote “Compared with [five other major] countries, the U.S. fares best on provision and receipt of preventive care, a dimension of “right care.” However, its low scores on chronic care management and safe, coordinated, and patient-centered care pull its overall quality score down.”
    Which are the five other major countries?  The reason, is that it is my understanding that the US fares very had in preventive care compared to countries like the UK and Germany.  Other major countries have about 50 percent or more primary care physicians, while in the us we have only around 30% (the rest are specialists).  That is one of the reasons of the healthcare costs.  We have too many specialists that are more costly and are doing more expensive procedures (overuse) and not enough primary care physicians to take care of preventive measures and having a good overview of a patients health. 

  • Anonymous

    of course, there’s another relevant aviation analogy.  it involves a rules-based, structured system that demands certain things be done routinely and expels those who fail to do so.  in a world where more than 90% of physicians take Medicare and walk-in clinics are opening daily, it is hard to see evidence of people who seek access to needed care and are denied it.  also would be interesting to contrast opening graphic with per physician income in the countries being compared.

  • Anonymous

    When did the cost of Medicare go so high? When the government decided to cover the cost of medications. With that added, Medicare cost have doubled. Doctors and hospitals are capped in their reimbursement at 1980 – 1990 reimbursement levels but not the drug companies. Why not? Anyone can get the same drugs in Canada etc. for half or less than what is paid in the U.S. On top of this there are more requirements by the government, paperwork, staffing etc. that run the cost to health care providers. Why do we no longer see private practitioners? It is impossible to survive by yourself but a clinic or hospital can only cut so much. Mayo clinic lost $875 million 2 years ago due to reimbursement level from Medicare and no longer provides care for Medicare patients in several locations.

    Solution: regulate the cost of reimbursement for drugs at the same level that these drugs can be purchased outside
    of the U.S. I am sure that will easily cover the 300 billion deficit.

  • Anonymous

    The Common Wealth Fund statement regarding poor scores for medicine for chronic care management and safe coordinated care is right on the mark. There is an alternative to medicine that has been proven by multiple studies and years of results…utilize chiropractic care for many chronic pain conditions. Chiropractic care for chronic neck, back and extremity pain has been shown to be cheaper for overall cost per diagnosis, with quicker results and patient satisfaction level of 9.8 out of 10. The latest was a 2 year study by Medicare that provided this information. A 2001 federal study on acute low back pain revealed that the only recommended care for this is manipulation and NSAIDS. Also, once the pain is corrected there is no longer a need for medications and patients become more active and less dependent. Medication for chronic pain only creates doctor dependency with more doctor/specialist visits and more medication with adverse effects. Many chiropractors utilize acupuncture and therapy also. This provides excellent pain relief and allows for increased activity. We are also well versed in referral to other  providers for coordinated care.
    It isn’t that there isn’t safe and cost effective options it is just that the government ignores many of its own studies on cost saving and effective care.

    • Anonymous

      Perhaps there is high quality care out there provided my non-MD’s.  The government doesn’t ignore such options, it’s under the influence of lobbyists who protect the turf of MD’s.

  • Anonymous

    Paul Weiss’s comment was sort of on the right track, we do not spend 14 trillion dollars on Medicare. He is totally off the mark when he states that the range spent per Medicare recipient ranges between $356 in Alaska and $31,865 in California. Go the page
    and read the title, “Medicare Spending Estimates by State of Residence (in millions)”. The $356 dollars is millions of dollars spent on all the Medicare recipients who reside in the state of Alaska. Likewise, 31+ billions of dollars was spent on all the Medicare recipients who reside in California. Funny how the amount spent coincides pretty well with the state population. How can you have a meaningful discussion of the issue if you can’t understand the numbers?

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