Fortunately, the 27% reduction in Medicare payments to physicians that is set to take place in a matter of weeks unless congress acts is getting some press.  Fox News published a piece recently, as did the Washington Post. Writer Merrill Goozner breaks things down nicely in his article, “Is There a Doctor Fix in the House … and Senate?”

However, one thing that seems to be getting confused in all the media reports is the difference between physician payments and physician salary. A doctor’s income is what he takes in (payments) minus expenses or overhead. Physician overhead (staff, office space, electricity, malpractice, equipment,etc.) is very expensive. One of the reasons, but not the only reason, a doctor’s overhead is so high is because we need to hire extra staff just to deal with the insurance bureaucracy.  (See “Your 10 minute office visit needs 8 people and 45 minutes of work) While payments from Medicare to physicians have not really increased over time, overhead has gone up dramatically.

Physicians, patients, and policy makers need to understand that a 27% cut in physician payment will have a far greater impact on physician salary because of this overhead.

An article from the American Medical News discussing the issue of the “doc fix” has an interesting table with current payments and proposed payments.  Let’s say a family physician sees 25 Medicare patients a day, 5 days a week for 50 weeks out of the year. At the current rate of  $68.97 per visit, this generates $431,062 in revenue. At 60% overhead of $258,637, this family physician’s income would be $172,425 per year. Now any doctor reading this will tell you that 1) no physician would see exclusively Medicare patients because they just don’t pay enough (at current rates) to sustain a practice; and, 2) you can’t see 25 Medicare patients in a day because patients 65 and up have multiple medical problems and you simple couldn’t see them all in 15-20 minute visits. However, the income is very close to$168,550 which is the average salary for a family physician. Thus, the numbers are good for the purpose of discussing the impact of Medicare cuts on not just payments but salary.

Now, if the 27% Medicare costs go into effect, Medicare will only pay $51.07 for that same visit.  Using the same numbers, the revenue generated is only $319,187 (26% decrease in Medicare payments), but the $258,687 in overhead stays the same.  This leaves the primary care physicians with a $60,550 annual income. That’s a 65% cut in physician salary.  Even if my numbers are off, its clearly more than a 27% cut to salary, and much greater than 50%.  The bottom line is that if these cuts take place, primary care physicians will certainly stop seeing new Medicare patients, and many will stop taking Medicare patients altogether. Many already have.

Now, most pundits seem to think that since seniors vote, and Medicare is a big issue for them, and that the election is less than a year away; Congress will find a way (like they have for the past few years) to find the money to cover the cuts for at least another year.  However, I wouldn’t be so sure.  I would advise anyone who is on Medicare, has a loved on on Medicare, or who plans on having Medicare in the future to call their representatives and ask them to ensure that these payment cuts not go into effect.

Matthew Mintz is an internal medicine physician and blogs at Dr. Mintz’ Blog.

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