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The other doc payment problem

By Suzy Khimm

Lawmakers and medical providers have made much ado about the “doc fix” that’s needed to remedy the long-standing flaw in the Medicare payment system. As Ezra and others have pointed out, this has been a problem that’s dogged Congress for over a decade, long predating the health reform debate. Hopefully, the Democrats will make good on their promise to pass a permanent fix, after year after year of temporary patches.

But Medicare’s not the only government program that has to grapple with a provider payment crisis. As the Washington Independent’s Mike Lillis points out, Medicaid also facings a looming payment problem. Payment rates for Medicaid are significantly lower than those for Medicare -- providers were paid just 72 percent of Medicare rates in 2008, and, accordingly, only 40 percent of doctors accept Medicaid patients, he notes. Democrats have tried to address this problem in the health reform law, but their fix is unfortunately just temporary. As Lillis explains:

[T]he health reconciliation bill signed by President Obama this week hikes Medicaid rates only for the years 2013 and 2014. The federal government would pay the entire tab of the increase, which the Congressional Budget Office estimates will cost $8.3 billion. From 2015 onward, it would fall to states to pick up the difference in cost -- a tough sell in a frail economy, when state budgets are already strapped.

[...] Providing some comfort to health care advocates, CBO has projected that some federal funding will go toward the Medicaid pay hike for a few years after 2014. ... By 2019, however, CBO projects that, without additional federal help, all states will have abandoned the increased payments, putting Medicaid patients in the same uncertain spot they were in prior to the reform.

State governments have already been grumbling -- some quite loudly -- about the additional costs they’ll have to take on with the health law’s massive expansion of the Medicaid program.  While the economy could pick up by the time the rate hike expires, easing the fiscal woes for state governments, it seems right to assume that they won’t be particularly eager to make up for billions of dollars in payments each year.

At that point, I imagine there will be significant pressure for the federal government to step in once again to make sure that provider payments don’t get cut and doctors don’t flee the system. After receiving higher payments for a few years, medical providers aren’t going to be content with returning to the old rates. And since all states are required to carry out the Medicaid expansion by 2014, there will be millions of more patients in the program, and it will be even more urgent to ensure that the whole system remains viable. The two-year Medicaid rate hike in the health law is certainly an improvement over the status quo -- but it also ensures that another doc payment fight will come down the road.

-- Suzy Khimm is a journalist who covered health-care reform at the New Republic and is now a political reporter at Mother Jones.

By Multiplatform Editor  |  April 1, 2010; 2:49 PM ET
Categories:  Health Reform  
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Next: Facts on the ground


Here is a suggestion: maybe the Docs should take a pay cut. They are paid far more than their counterparts in other developed countries.

Posted by: pwkennedy | April 1, 2010 3:28 PM | Report abuse

Yeah, why is the compromise no cut at all? Make it 5%. My wife's doctor is complaining all the time about how much teachers are getting paid, let him get a cut too.

Posted by: Hopeful9 | April 1, 2010 3:43 PM | Report abuse

I've got a revolutionary idea! Let's try to get the Federals to do what any three digit IQ corporate planner would do. Attack costs from the production side instead of only focusing on the consumer. Do you think anybody in Congress could suggest ways to cut a doctor's overhead so he or she can accept Medicaid without losing money?

Posted by: bobsteph1234 | April 1, 2010 4:24 PM | Report abuse

I would like to believe that the cost bending will pick up some of this by 2014, but I don't think that will happen.

Medical care along with all other safety net programs are chronically underfunded. I think that medicaid funding should shift over time from the states to the feds alone. That would equalize coverage across states and provide a funding stream that is not as subject to economic downturns as states can't deficit spend and the feds can.

In this supposedly Christian, highly religious, holier than thou, country, especially the "red states" where church going is above the national average, why is it so hard to fund programs for the least among us. Didn't Jesus have something to say about this?

he invited the rich young man to sell all of his possessions and give the proceeds to the poor. (Matthew 19:16-30, Luke 18:18-30, Mark 10:17-31)

But when you give a banquet, invite the poor, the crippled, the lame, the blind, and you will be blessed." (Luke 14:13)

n his portrayal of the day of judgment, Jesus pictured people from all nations gathered before him, separated into "sheep" and "goats." (Matthew 25:31-46) To the "sheep" he says, "Come you blessed of my Father, for I was hungry and you fed me..." In their astonishment they ask, "When did we do that?" And he answers, "When you did it to the lowliest of my brothers (and sisters)." Conversely, to the "goats" he says, "Out of my sight, you who are condemned, for I was hungry and you did not feed me..."

Just sayin'....

Posted by: srw3 | April 1, 2010 4:45 PM | Report abuse

Wage and price controls never work.

Posted by: millionea7 | April 1, 2010 4:56 PM | Report abuse

"State governments have already been grumbling -- some quite loudly -- about the additional costs they’ll have to take on with the health law’s massive expansion of the Medicaid program."

Uh, why yes indeed, the States are grumbling... as are state taxpayers. For many states (Florida, for example), it simply isn't possible (due to state constitution provisions) to raise taxes arbitrarily, so essentially the PPACA is requiring cuts in state education programs, fire protection services, etc. to pay for health care -- including the health care of some non-indigent citizens who currently pay for insurance.

Most states now have projections of the spending increases: alarm is growing as the numbers continue to surface. The state numbers, along with those Rep. Waxman will receive as part of his committee hearing on April 21, should make the situation clear... well in advance of the November federal and state elections.

Posted by: rmgregory | April 1, 2010 5:03 PM | Report abuse

Couple points:

-The AMA's new top legislative priority, after the "doc fix" is to prevent the Independent Payment Advisory Board from having juristiction over doctors. So watch the language in the "doc fix" for protection against so-called double jeopardy. If the AMA gets this protection it will cripple the IPAB.

-As you increase payment rates under Medicaid, costs for the program explode. CBO's estimate for states' increased costs is only $20 billion over 10 years--a fraction of what the true cost would be if states continue with higher benefit levels. Anticipate benefit cutbacks toward the end of the decade. Many Medicaid patients are going to continue to be relegated to getting their care at community clinics.

Posted by: bmull | April 1, 2010 6:16 PM | Report abuse

pwkennedy: "Here is a suggestion: maybe the Docs should take a pay cut. They are paid far more than their counterparts in other developed countries."

No, actually we get paid about the same (I mean if you look at data and annoying stuff like that):

Unfortunately, we also spend a lot more money extracting payment from those awesome insurance companies which is an expense that the single-payer docs don't have:

Posted by: J_Bean | April 1, 2010 6:17 PM | Report abuse

How about helping out new docs with their student loans for treating a certain % of medicaid patients (lowering interest rates or forgiving some % of the loan).

What J_Bean said. When I worked in my father's office, we generally had to submit a claim to Aetna 3 times before it was paid. Insurers make money by not paying claims. Every day they don't pay a claim is another day they get to invest that claim money. This give insurers a perverse incentive to make payments as slow and as small as possible. It is one of the many problems with for profit health insurance companies.

Posted by: srw3 | April 1, 2010 6:45 PM | Report abuse

@J_Bean; but not this part of what j_bean said...

"No, actually we get paid about the same "

From the link...
In the United States, GPs earn 35% more than the average across the countries studied.

Not really the same at all

Measured in USD PPP, the remuneration of specialists in 2004 (or latest year available) was highest in the Netherlands and the United States.
Again the US is at the top...

The remuneration of self-employed specialists was almost 50% higher in the United States than in Canada...And although specialists in Canada work about the same number of hours as those in the United States, their remuneration level in USD PPP is almost 50% lower.

J_bean, I am just not sure why you would cite a paper that contradicts your point...

Posted by: srw3 | April 1, 2010 6:57 PM | Report abuse


- $50,000 more for a specialist and $30,000 more for a GP is non-trivial.

- As you well know billing expenses come out of practice gross, not physician take home pay.


- There are already great loan programs for primary care physicians. The money goes unclaimed because students still prefer lucrative specialties.

I'm not against high pay for physicians. I just want to make sure we're getting good value for that money. I don't think we are.

Posted by: bmull | April 1, 2010 7:01 PM | Report abuse

@bmull: I am against the kinds of salaries that doctors pull down. There needs to be a change in medical school funding so that doctors aren't burdened with huge debt and then docs could be paid like other professionals, (engineers, academics, etc.) Lawyers are also grossly overpaid in the US.

Posted by: srw3 | April 1, 2010 7:26 PM | Report abuse

This is just shocking. Congress will have to increase spending to pay for this and the deficit will not be reduced like Obama promised. In fact the deficit will increase! Who could of predicted this?

Posted by: cummije5 | April 1, 2010 7:40 PM | Report abuse

Look at the salaries with respect to household incomes in the various countries. Look at salaries in other fields. You'll see the same discrepancies between U.S. professionals and European professionals. The average household income in the U.S. is about $55K per year while the average household income in Germany (e.g.) is about $42K per year. By your reasoning Americans are "overpaid" compared to Europeans.

Posted by: J_Bean | April 1, 2010 7:47 PM | Report abuse

The problem with Medicare and Medicaid underpaying the docs is that ultimately the costs get passed on to the rest of us who are not in Medicaid or Medicare. So unless there are cost controls for all of us (or cost transfer is prohibited), we'll end up either picking up the tab through higher taxes (for higher reimbursements) or through higher medical costs (and higher health care premium costs). So it goes..

Posted by: Beagle1 | April 1, 2010 8:06 PM | Report abuse

Well J_Bean,

With their lower salaries European's get:

shorter work weeks (~35 hrs/week in many European countries)
6-8 weeks of vacation
Low cost universal health care!!!!!
a real social safety net
Heavily subsidized higher education
Higher levels of retirement payments from industry and government

To earn those higher household incomes, US workers work more hours than any European workers.

How much would this be worth to the average american worker? A lot more than 13K per year.

Besides, the average US household gets about 25% more while the average us doctor makes about 35% more on average than a typical european doctor.

I was just quoting the document that YOU said proved that pay rates were the same and they are not. Your argument about household incomes also falls on its face given the benefits most europeans get from their government...Universal health care alone would account for the difference in salaries, not to mention the peace of mind that comes from knowing that insurance companies won't do the 3 Ds on you (discuss, delay, deny) every time you make a claim. Almost free university education, including graduate and doctoral work is another huge benefit in most European countries. When I was in grad school, I met some doctoral students from the Netherlands who got free tuition along with a stipend, along with travel expenses to come to my university and study. How many US universities provide that?

You will have to do better than this to have a convincing argument.

Posted by: srw3 | April 1, 2010 8:07 PM | Report abuse

Here is a suggestion, maybe people on Medicaid, and all insurance plans, should be given an incentive for seeking better value treatment options. Unfortunately the current shadow pricing system makes figuring out how much medical care is going to cost a difficult proposition, since there is price discrimination where docs can make up the profit by soaking people paying cash and on private plans.

It doesn't seem like such a tragedy that only 40% of doctors accept a particular health insurance plan, but if you had an HSA based plan, you could go wherever you wanted.

Posted by: staticvars | April 1, 2010 11:54 PM | Report abuse

This is only the beginning. If Obama manages to get his amnesty passed (AKA comprehensive immigration reform) we will add millions to medicaid rolls in short order, then millions more as they bring their extended families in. Most who don't qualify for medicaid outright we still qualify for some sort of subsidy.

Posted by: dflinchum | April 2, 2010 6:58 AM | Report abuse

Perhaps we should consider all the waste, fraud and abuse that the WH summit on HC Reform established and that nobody talks about ever since.

The administration says this is $50 billion while that doesn't calculate out to $1 out of every $3 spent when $2.7 trillion is the gross spent and 17% of our GDP!

No that amount [33%] would be $891 billion a year! But even if more than $1 billion a year that is currently recovered each year for the past 20 years is somehow raised to the low levels [3%] US insurers have as they are much more effective in stopping waste, fraud and abuse, raising physician rates, hospital rates, drug rates, device rates and any and all other rates won't allow any government HC plan to survive!

But much more important remains the fact that regardless of what physicians are paid, we do not have enough of them to care for our population now, and will not be able to raise their numbers [nor the ranks of nurses] quick enough to provide the care we now have committed to!

Better we worry about how we can enable ourselves to maintain the HC we currently have than argue about raising inadequate pay that if not increased will just see fewer physicians.

The only place we can get relief without more cutting, is to attack waste, fraud and abuse; but the administration has targeted only a $2 billion recovery in the next two years.

Too little and too late!

Posted by: rnyoung6688 | April 2, 2010 10:04 AM | Report abuse

Of course it is easy to state the Dr's are paid too much. Unless you've walked in a physicians shoes and been through the time, effort and training to be a physician then your opinion is just that - your opinion. The zero liability statements by those who don't have a hand in the system are not helpful. Some seem to think that anyone earning more then they are are earning too much.

How about individuals taking a little responsibility for their own health and wellness rather than perpetuate the continued downward health spiral that we are all facing? Where is the liability reform to protect Dr's?

Lot's of questions and few answers.

Posted by: nagy065 | April 2, 2010 10:08 AM | Report abuse

pwkennedy is quite right... he's put his finger on the problem... but the solution isn't happening so long as physicians, through their trade association, the AMA, wields near absolute power (handed to them by Congress, long ago) to decide who can compete with them, under what conditions.

For YEARS the AMA has exploited this power to limit the numbers of physicians that medical schools will admit and graduate. This is the actual "first cause" for health care costs increases to perpetually exceed inflation. This... that health care has become so terribly expensive.. is WHY Americans have, more and more, turned to third party payors (insurance, employer or government programs) to PAY for health care. But third party payors are even worse at controlling costs than direct purchase, so that has made things yet worse.

The "remedies" under discussion (and those recently enacted) do not address this basic problem, and won't bring down health care costs. Congress, again, has bought a pig in a poke (with OUR money, of course).

Posted by: Iconoblaster | April 2, 2010 12:01 PM | Report abuse

nagy065 thinks "Of course it is easy to state the Dr's are paid too much. Unless you've walked in a physicians shoes and been through the time, effort and training to be a physician then your opinion is just that - your opinion."

Rubbish. Try applying that mythology... that only physicians are qualified to decide how much physicians should be paid... to any other occupation or profession. If only dogcatchers could decide what dogcatchers should be paid, it would be dogcatchers, rather than doctors, who would be spending their afternoons playing golf at the club.

The market determnines pay and price for everything... if its a FREE market, with open competition, the result is the best product at the lowest price. If the market is NOT free, but is regulated or controlled by the industry itself (as medicine is), the producers enjoy greater market power than their customers, and they exploit it to increase their own profits.

The "medical liability" burden is a hoax. It is far more difficult than laymen might imagine to successfully sue a physician under current law (despite outlier anecdotes) Studies have shown that medical malpractice insurance costs are NOT a major contributor to the vast increase in health care costs generally.

Health care costs an arm and a leg because physicians have been granted the legal power to limit competition in their industry, and limiting competiton makes their trade more profitable. That is it.

Posted by: Iconoblaster | April 2, 2010 12:12 PM | Report abuse

Paying for our aging U.S. population is a big problem? How about -- raising taxes? Solved!... Look, our elected officials only have to be honest with us, and we with ourselves. We have a huge aging population reaching retirement. I'm one of them. And I've been paying into SS and Medicaid for 40-plus years! Well over a quarter a million dollars. My money, which I gave the Govt. So now we're all supposed to feel guilty about benefiting from the system we set up to keep us from the streets??! I don't think so. Point is, the Republicans have known we'd have to raise taxes to do this regardless of who we elect -- they could well be in charge of it. This is the issue the Conservatives don't get about HC, SS and all the other social and financial support systems they think are "Socialist." THE PEOPLE WANT THEM BECAUSE THEY KNOW THE BUSINESS AND FINANCIAL INDUSTRIES DON'T CARE WHAT HAPPENS TO THE PUBLIC, AS LONG AS THEY PROFIT AND GET THEIR CUT. WE, THE PEOPLE, NO LONGER TRUST THEM. Higher taxes are going to happen and it was inevitable.

Posted by: jcluma | April 2, 2010 12:15 PM | Report abuse

"For YEARS the AMA has exploited this power to limit the numbers of physicians that medical schools will admit and graduate. This is the actual "first cause" for health care costs increases to perpetually exceed inflation."

I work on health policy and every time I see this claim I laugh. It is not true. The supply of docs per capita has gone up over the last several decades. What happened to health care costs during this time? Costs shot up. Areas with more doctors have higher, not lower, health care costs than areas with fewer doctors. (Unless the docs are primary care providers.)

Seriously, nothing reveals a more basic lack of knowledge about the health care costs than a claim that the AMA is trying to restrict physician entry to drive costs higher.

Posted by: steveh46 | April 2, 2010 12:56 PM | Report abuse

srw3: You are attempting to put the difference between European salaries and U.S. salaries in context. That's exactly what I'm trying to do to. Take, for instance, U.S. vs. German primary care physicians. The American docs make 3.3 times the average US household income, the German docs make 3.2 times the average GERMAN household income. IOW, the American doc makes about 3% more than the German doc (and invests more in training than the German doc). Comparing international salaries is silly. Compared to Indian MDs, Canadian MDs are vastly "over paid", except that Canadian MDs work in Canada and Indian MDs work in, well, India.

Oh yes, and don't try cherry picking French and Japanese MDs unless you look into the tax breaks given to medical personnel in France and MDs in Japan. Worldwide, we live comfortable, upper-middle class lives and the variance from country to country isn't that great. As an interesting historical note, eastern europe has the lowest physician incomes partially due to the fact that there was much less income disparity under communism and partly because medicine in the Soviet days was generally viewed as woman's work and less well paid than engineering.

Posted by: J_Bean | April 2, 2010 1:26 PM | Report abuse

J_bean: Look at the median incomes instead of average incomes if you want to really compare salaries. The US average income is skewed upwards by the plutocrats at the top of the income scale. The GINI index for the US is around 41% while Germany is around 28%.

"The most careful studies suggest that the top 10 percent of households, with average income of about $200,000, received 42 percent of all pretax money income in the late 1990s. The top 1 percent of households, averaging $800,000 of income, received 15 percent of all pretax money income." This data is 10 years old, but the inequality has only gotten worse since then, since middle class wages have stagnated while plutocrat wages have skyrocketed.

Again you will have to do better if you assert that US doctors are not paid more than doctors in europe.

Posted by: srw3 | April 2, 2010 2:28 PM | Report abuse

Before scrutinizing a post please respond to what is stated and not something you "think" is stated. I don't claim that Dr's should be the ones determining what they are paid (not sure where that came from?).

Dr's do not determine their pay. Medicare and the insurance companies determine reimbursement. Dr's have experienced significant wage deterioration over the past 10-15 years thus they have been on the receiving end of a pay-cut over the years. Actually, we just received a medicare cut of 21% yesterday. Commercial insurance is likely to follow. It's not the Dr's driving up the cost of healthcare. It is also the fattening and sickening of America that is to blame (accountability?)

I would welcome you to hang your shingle and set up your practice so you can understand the topic you purport to know something about. Oh yeah, Dr's. (not the government) have conspired to limit your ability to practice medicine.

Please take more than a shotgun approach to defining Americas healthcare problems. Physicians are tired of being blamed for the problems in healthcare while no one is willing to address the real problems, unenlightened lifestyle choices and poor governmental regulation of enacted laws to protect the people.

Posted by: nagy065 | April 2, 2010 6:47 PM | Report abuse

First of all. Doctors net salary only account for less than 10% of all healthcare spending.

In the 1990s doctors take home salaries accounted for 17% of healthcare costs.

So doctors are being reimbursed less and less.

So where is the other 90% of the cost of healthcare being spent? Answer that question and that's the money ball solution to the healthcare crisis.

Second lawyers are the ones who "educate the public" on the malpractice myth. I have read the studies lawyers always state. They go purely by insurance premiums doctors pay out and closed claims cases for their 1% figure. However to date they have never or no one has done a double blinded multi instituonal study on the costs of defensive medicine. Just prelimary retrospective analysis from some governament based practices (very hard to sue government doctors) vs private hospitals show that private practices order 3-4x more tests than there government doctors associates. So is it because it's near impossible to sue doctors who work for the government? Or is it the greedy private practice doctors doing more test for more money. That like asking which came first, the chicken or the egg.

Malpractice lawyers never want a study to show te costs of defensive medicine because they know doctors in government protected practices are very likely to get sued and studies have shown malpractice lawyers rarely sue doctors working for goverenment hospitals like the VA because of limiation of moneatary rewards.

Posted by: aneftp | April 2, 2010 10:31 PM | Report abuse

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