Second Opinion: Fixing Medicare - Easy As Pie

In life, certain things of great value are often taken for granted. Healthcare - available to most Americans and having achieved enormous strides in recent years - is such an item. Yet all this success and access comes with a cost. And no one wants to pay it.

A perfect example is Medicare.

Although it accounts for about 35 percent of the total amount spent on American healthcare, it serves only 15 percent of the population. Even so, it has hijacked the reimbursement system.

Medicare reimbursement to physicians has remained flat in recent years while the cost of doing business has been increasing steadily.

If Medicare is to remain viable, the current reimbursement model must change. As Americans live longer, the number of Medicare beneficiaries and total cost of the program will increase. While politicians dicker about bureaucratic arcana such as the “sustainable growth rate,” the real issue is clear: Medicare has made a big promise, and the only way to keep the promise without raising taxes is to decrease what it pays for each service.

Imagine that eight people are promised a slice of pie, and the purchaser has just enough money to pay the listed price of $1 per slice. A month later, the purchaser has the same $8 to spend, but now there are 10 people, each of whom orders pie à la mode. The purchaser tells the baker he will only pay 80 cents for each slice of pie and ice cream. The baker agrees. Next time the purchaser will return with 12 people, and each will want coffee with their pie à la mode, and a cherry on top, for the same $8.

This is what is happening with our healthcare system. Medicare’s fee schedule for private physicians has increased 1 percent since 1998, while the cost of providing the services (as measured by the Consumer Price Index) has increased 24 percent. For years, providers made up the difference by charging private payers more, but these payers are no longer willing to accept that. Most have adopted fee schedules similar to Medicare’s.

We must replace Medicare with a new system that pays physicians fairly.

If not, attracting the best and brightest to medicine will be difficult. The average debt of a medical school graduate is $100,000, and 7 percent of graduates accrue more than $200,000 in debt from educational expenses. They have also delayed entering the work force by 10 years while they train. Decreasing Medicare reimbursement will likely jeopardize the ability of practices to pay a salary necessary to overcome these financial pressures.

There is a solution. Here’s my suggestion: Increase the Medicare physician fee schedule by 10 percent for 2008 (instead of the current plan, which is to cut it by 10 percent), while increasing the patient’s contribution from 20 percent of the allowable to 30 percent. And index the fee schedule to the Consumer Price Index each year beginning in 2009.

This would be budget-neutral to the government and would finally take care of physicians. Patients would pay more, and they would not like it. Neither would the AARP.

But they wouldn’t like to see the effective collapse of Medicare, either, which is where the system is going if not corrected. Medicare made a promise 40 years ago that it can no longer keep without changes. A lesser but achievable promise is better than nothing at all.

Anthony P. Johnson is an ophthalmologist and president and managing partner of Jervey Eye Group in Greenville, S.C. His comments here are his own and do not necessarily reflect the views of Physicians Practice. He can be reached via editor@physicianspractice.com.

This article originally appeared in the July/August 2007 issue of Physicians Practice.