NPR—How Should Medicare Pay Doctors?

Posted by Kendall Harmon

Medicare payments to doctors will fall by 21 percent starting on Monday, but Congress may soon act to block the cut. It's the latest reminder of a chronic problem for the federal government: figuring out how to pay doctors who treat Medicare patients.

The story goes all the way back to 1965, when the federal government was about to launch Medicare — the health-insurance plan for the elderly.

The idea of a government-run health-insurance plan made doctors nervous, and Lyndon Johnson's administration was worried that doctors wouldn't take Medicare patients. So Joseph Califano, Johnson's adviser for domestic affairs, made what seemed like a small concession: Medicare would pay doctors whatever they thought was reasonable.

That worked out well for doctors. They had been providing lots of free care for old people, and they started getting paid whatever they asked for, as long as it wasn't wildly out of line with what others were charging....

Read or listen to it all.

Filed under: * Culture-WatchHealth & Medicine--The 2009 American Health Care Reform Debate* Economics, PoliticsEconomyThe U.S. GovernmentPolitics in GeneralHouse of RepresentativesOffice of the PresidentPresident Barack ObamaSenate

Posted February 27, 2010 at 10:35 am [Printer Friendly] [Print w/ comments]

1. Grandmother wrote:

FYI, Sen. Bunning has the “Doctor Fix” stalled because he cannot find any way to “pay” for it..

ie: ” Short… “Doc Fix” Held Up On Senate Floor-HR4691 contains short extensions of federal laws that are to expire at the end of the month including unemployment insurance, COBRA for the unemployed, the Medicare Doc Fix, highway construction and satellite TV. On Thursday night the bill passed the House of Representatives by voice vote and they sent it on to the Senate. And there it stopped. Senator Jim Bunning (R-KY) refused to allow a vote. He is insisting that the bill contain provisions that would pay for the extensions with economic stimulus funds (PL 111-5). At this time there is no payment provided for the bill’s provisions.

The bill would stop the scheduled 21% Medicare payment cut for Doctors until March 31.”

So I guess we’ll see….........................
Grandmother in SC

February 27, 3:16 pm | [comment link]
2. vu82 wrote:

The problem is the SGR formula, which as noted ties overall Medicare payment to the growth of the overall economy. It doesn’t take a lot of statistical insight to see that this is a nonsense comparison. Medicare is covering the fastest growing and most medically expensive segment of the population- so of course it’s expenses rise faster than the overall economy.

Just FYI if they let the 21% cut stand (doubt they will) all providers will be underwater on Medicare, and it will have the payor standing of Medicaid- you can choose to lose money on it as a public service or give it up. As you might imagine, there will be a lot of option 2. A lot of types of specialty care will become unavailable in short order. I would expect that getting a new primary care doc would be a trial as well, most of the Medicaid patients see “clinics” of some stripe for primary care.

The impending Social Security insolvency is a cakewalk to fix compared to the Medicare debacle. Sadly it looks as if we will have to have an Argentina- style national insolvency before people come to the realization that there is a limit to practical government shuffling of “other people’s money,” and that government provision of open- ended “best of all” medical care is a pipe dream.

February 27, 5:09 pm | [comment link]
3. Country Doc wrote:

For doctors who have less than 20% Medicare patients, they will just absorb it and make appointments farther apart and do less.  Most other doctors will first stop taking new Medicare patients, or send them to a federal health clinic or hospital based clinics who will absorb the cost and ultimately cause lest funds for other medical use.  Non Medicare patients can expect to have more cost to overcome the loss.  A great statement came out of the Soviet Union: “They pretend to pay us and we pretend to work.”  So overworked doctors can now have more time for other activities.

February 27, 5:14 pm | [comment link]
4. Grandmother wrote:

Well, I do hope that no one believes that Doctors get what they bill for from Medicare.  Their payments used to be what was paid three years ago, but I don’t know that is still true.  Another thing, I notice folks never seem to notice that retirees do indeed pay “something” for Medicare, (currently $96 a month or so out of their Social Security), you never hear it mentioned in order to make it sound like we get it for free.  And the other thing, one has no choice in the matter unless one is very wealthy.  It is manditory for one to sign up in a timely manner, or choose to “buy in” at an exorbitant price later. Medicaid is another story altogether.
Grandmother in SC

February 27, 7:43 pm | [comment link]
5. dwstroudmd+ wrote:

American expectations have been discussed and may need modification.  This modification process has begun.  See

February 27, 9:48 pm | [comment link]
6. Country Doc wrote:

dwstroudmd, that was an exellent article you cited.  Being in geriatrics, I figured that 35% of what I order is not needed, but must be done to protect against lawsuits.  I will do what ever it takes to keep out of our corrupt “judicial” system.  It only take one family member to say they want grandmother to die in ICCU on a ventilator for me to immediately transfer to the hospital under the care of the hospitalist, usually to death in a few days.  I have given up on teacing the irrational family members what is good care.  Now, with a 21% cut in Medicare reimbursment Monday, I probably will just quite geriatrics.  I can do other things.  We also have a shortage of Nurse Practitioners in our area, so I don’t know what will happen, but I am too tired to fight.

February 27, 11:56 pm | [comment link]
7. Sarah wrote:

RE: “That’s what my mother wanted. After convincing the doctors that she meant it—that she really was ready to die—she was transferred from the ICU to a hospice, where, five days later, she passed away.”

Of course, the article is titled “The Case for Killing Granny”—when in reality the *decision* of a person to *decline further major interventions* is no such thing as “Killing Granny.”

It’s that kind of bait and switch that really bothers me.

This article would be better titled—“The Case for Tort Reform so that Physicians Will Let Granny Die in Peace.”  But I suppose that would destroy all the “complexity” and “questions” and “confusion” and “nuance.”

February 28, 11:38 am | [comment link]
8. vu82 wrote:


Most recent data I am aware of (inside knowledge) is from before the rounds of cuts Medicare has already made over the last several years- but showed a group of specialists in my area collecting about 52 or 53 cents on the dollar billed on Medicare work. They would probably be at or just below 50 cents on the dollar now- and this is before the 21% cut that goes into effect tonight. Expenses on this type of practice are in the 50 percent range typically. Thus tomorrow they will be “losing 10 percent” (not real statistics but gives the idea) or so on Medicare work. That is roughly in the Medicaid range. This group employs over 200 with only one layoff so far- but you can see what is coming for staff and the decisions that will have to be made.

An informal poll of “real working doctors” I know yielded a range of estimates for defensive medicine from 20 to 40 percent, in line with Country Doc. In our line of work most of this is extra testing to “rule out” bad problems and reassure people. You have to “do something” these days, judgement is out of fashion.

Any real workable reform of the system would have to include:

1. Tort Reform, at least in the punitive damage/ lottery version. A cost to filing on someone and then dropping them from the claim later would also help. A cost- however small- to suing someone and losing would be even better. Empowering/ requiring judges or expert panels to throw out the junk up front would also be nice.

2. Elimination of “free” care, so that every encounter with the system and test requires at least a nominal contribution from the user.

I’m not holding my breath.

February 28, 12:47 pm | [comment link]
9. Mitchell wrote:

“I figured that 35% of what I order is not needed, but must be done to protect against lawsuits.”

I am curious, do you tell your patients you are ordering unnecessary tests because you are afraid they will sue you?  Do you label the tests as unnecessary when you submit them for billing?  Do you tell the patient and their family the test are only being done to avoid law suits, will provide no valuable information, and ask them if they want them anyway?  When you tell them this do they say they want the procedure anyway?

I occasionally do seminars for physicians, hospitals and nursing homes on dealing with the elderly and disabled.  While I have asked, I have yet to have anyone willing to provide a list of routine procedures they perform which they consider unnecessary.  While some doctors say they are practicing defensive Medicine, apparently none of them tell their patients that’s what they are doing, and they certainly do not tell the insurance companies or Medicare, that is what they are doing when they submit the bill.

The Case for Tort Reform so that Physicians Will Let Granny Die in Peace.”  But I suppose that would destroy all the “complexity” and “questions” and “confusion” and “nuance.”

What an interesting perspective, since not providing a medical procedure refused by a patient is not a basis for a malpractice action?  Seems it would be a short article.  You have the most uncanny ability to take a complex area of law and/or ethics and reduce it to a meaningless sound bite.

Obviously you did not read the article.  After making it clear she wanted hospice she was transferred to a hospice.  What is wrong with physicians making sure they know what seniors want, and insisting that they understand the options.  To often children insert their opinion, mom would not want this or mom would want that, when mom can answer for herself.  Why shouldn’t a doctor provide all the options to a senior, and let them make the decision.  Are they too old to understand modern medicine?  Is it your position that if we just had the right kind of tort system a doctor could feel secure in not even telling a senior citizen about a procedure that could possibly add to his or her life expectancy, but not enough to justify the cost in the doctors opinion?

February 28, 9:08 pm | [comment link]
10. Country Doc wrote:

Mitchell, you illustrate why it is so difficult for non-doctors to understand the Kafkaesque medical liability system.  No, it doesn’t matter what the patient wants.  Often they are not competant.  It only takes one member of the family to start a suit.  Often little Willie who lives a long way off blows in after ten years of being away and “takes charge.”  Many times the rest of the family agrees to what is rational, but he doesn’t.  I have had this happen when he was angry because his 86 year old grandmother had worse dementia than when he last saw her!  He wanted her in the hospital NOW AND SEEN BY A SPECIALIST! ( I am the only board certified geritrician in a 100 mile radius). I have a friend who works in a nursing home that has a big bill board on the highway across from the entrance of the nursing home that has a smilling picture of a lawyer in his office and the question,  “Do you have a loved one who died in the nursing home?”  If so call 1-800-SHYSTER.  I no longer argue (that is not a reimbursable service).  I just send them to the hospital or get the MRI or lab test or better yet refer.  I will probably soon get completely out of Medicare.  I already don’t take Medicaid.  I have been sued four times, every one rediculous.  All were won in my favor with prejudice (means can’t be re opened),  but I went through hell for months at a time.  I teach my medstudents to never get involved in the legal system at all costs.  So yes, I’ll continue going to the max on ordering anything that will head off the even slight possibility of being sued.  And yes, I teach classes on medical ethics—assicuate clinical professor of family medicine.  And yes, I no longer will serve as and expert witness in court.  It is corrupt, period.  Just thought I’d touch lightly on it.

February 28, 9:46 pm | [comment link]
11. Mitchell wrote:

You are mistaken.  I fully understand the tort system, and doctors are not the only ones who can understand.  In fact most doctors have a one sided view, just as most medical malpractice lawyers have a one sided view.  As usual, what is best for the public is somewhere between what the doctors and insurance companies want and what the malpractice lawyers want.

I deal with seniors on a daily basis, I am well aware of the difficulty of dealing with people with dementia or suffering from a stroke, as well as dealing with their family.  Seniors are frequently ignored by their family and their doctor.  Many nursing homes routinely have their medical directors sign a paper declaring a new resident incompetent, so they do not have to deal with a resident on complex issues.  It takes to much time.  They would rather deal with a son or daughter over the phone.  I agree not enough seniors have living wills, health care powers of attorney or other advance directives.  That would greatly reduce the problem of dealing with multiple children.  In fact many Senior advocates fought to have a provision in the health care reform bill to pay doctors to discuss advance directives with their patients, but the right shot that down as death panels.

Most knowledgeable people accept the fact that many states need some adjustment to the tort system, as it relates to medical malpractice.  But that is really for the benefit of the doctors.  I do not expect tort reform to have any material impact on the cost of health care to the public.  Our state had tort reform years ago.  It provided some relief for the Docs, but has not reduced the cost of health care to the public.  As difficult as Malpractice suits are for those involved, Malpractice awards are simply not a material component in the cost of health care in the US.
What the system apparently needs is more transparency.  If doctors truly believe procedures are of no value, they need to put that in writing to patients, and have them sign off.  If a patient chooses to undergo an unnecessary procedure, that is between him and his insurer.  If the patient is not competent to make the decision it falls to the family member who has the Health Care Power of Attorney or who under state law gets to make the decision.  Again, if you offer the procedure and your opinion it is of no value, then the issue would be between the individual and the insurer.  It should not be left to the doctor to advise people not to have a procedure because it will cost too much for an old person.  As I have said, I have yet to have anyone identify those unnecessary procedures.

Finally you say the system is corrupt, yet you say you have won all your suits.  If the system was corrupt surely you would have lost. 
You really are burned out on the system and should probably drop out of Medicare as well as teaching medical ethics.  I seriously doubt there is any way that you will think the system is fixed other than an outright prohibition on patients suing doctors.

March 1, 1:29 pm | [comment link]
12. Country Doc wrote:

Mitchell,  the system is corrupt or the four lawsuits would not have been filed.  Kafka wrote about this.  Being accused is the punishment.  However, doctors will take care of this problem as *they* percieve it.  As the Country western song says, “When your phone don’t ring tonight, that’s me.”  Maybe they can repeal that pesky 13th ammendment and make doctors continue as things are.  Cheers…...

March 1, 3:58 pm | [comment link]
13. Clueless wrote:

“Finally you say the system is corrupt, yet you say you have won all your suits.  If the system was corrupt surely you would have lost.  “

The system is corrupt.  It doesn’t matter that one wins all one’s suits.  Playing “lawsuit” is a game for lawyers and patients, they figure it is all in good fun, and nobody gets hurt.

Physicians don’t play games.  We are a different breed of person.  ANY lawsuit is a personal insult; it is an attack on our integrity, our competance our deepest sense of self worth.  It is a slap in the face at all the time we spend in the middle of the night seeing people for free, and it is a slap in the face for all the free care we deliver and the medicaid (and soon to be medicare) patients whom we lose money on, but whom we see as a public service.

If firemen were sued every time they failed to save a burning house, how many firemen would risk their lives, even if they “usually won?”  Why should they do so?  For the money?  For the benefits?

Firemen fight fires for glory, and gratitude.  The pay and benefits are not insignificant but they are far less than the honor.

In the final analysis, most doctors begin their careers with a burning desire to spend their lives, saving lives. It is love that motivates us.  Lawsuits end that love. 

If teenagers could sue their parents for negligence, and drag them through the courts to explain why exactly they failed to provide for their children in a manner that some lawyer thought was “appropriate” 15 years after the fact.  If for two years you had to deal with weekly depositions, and the whispers of neighbor, friends and your other children about how you were “always on Nicky’s case” and “never let him hang with his friends” of whom you didn’t approve which is “why he ended up doing drugs” and then “because you always hated him you sent him to military school”.  If after having your parental laundry and your inmost struggles aired for public display, that parent happens to “win” the lawsuit, what has been won for that parent?  Would that parent have any desire to have more children?  Would the lawsuit have increased his love of his son?  Has justice been done? 

Whomever loses the lawsuit has to pay damages for the pain and suffering that filing the lawsuit put the physician/fireman/parent through. If a lawyer takes it on contingency, that lawyer gets to pay.

Because justice isn’t a game.  A system that allows those who do the dirty, and difficult work to be abused by those who are looking for a little legal amusement or baksheesh is a corrupt system.  And everybody loses in a corrupt system.  Only lawyers and politicians win

March 1, 4:05 pm | [comment link]
14. Mitchell wrote:

I appreciate your position, but we cannot have a system that insulates an entire industry from liability for negligence because some of them do a lot of uncompensated charity work.  Firemen typically work for a governmental entity.  That means that they have certain protections under the law.  If we had the system we had in the early colonies were people of wealth paid a for profit fire service, I assure you they would be subject to suit for negligence just like any other business.

Likewise, if we went to a Canadian or British health care system where the government supplied all medical services, doctors would not have to worry about law suits.  Like firemen, they would be paid a salary and the state would absorb the risk of suit.

Every business suffers if they are sued.  Doctors are not unique in that regard.  When a restaurant is sued for food poisoning, it typically goes out of business, even though that is the first and only time it happened, and they give away free food to the poor. 

Do you think Toyota’s reputation is not suffering from the faulty break and faulty accelerator law suits.  The medical profession in the US is a private for profit business.  They must live under the same rules as any other for profit business.  If you remove Joe’s left leg when you were supposed to remove his right leg, it is of no consultation to Joe that you repaired Tiny Tim’s broken leg and he could not afford to pay you for it.  Who is going to take care of Joe’s family, who is going to pay his mortgage.  He did nothing wrong, other than go to you for an operation.

And doctors are not as unique as they believe.  A lot of other businesses do a lot of charity work, contribute to charity etc, etc.  Just like a lot of doctors go into medicine for the money.

March 1, 5:01 pm | [comment link]
15. Country Doc wrote:

Mitchel, you just don’t get it.  But that’s OK.  We’ll take care of it.

March 1, 5:15 pm | [comment link]
16. Clueless wrote:

I have no trouble with physicians having their educations paid for (as occurs with police and as occurs in Europe) having governmental immunity, and having the protections of unions including reasonable working hours (as have police, teachers and firemen). 

I think there would be a lot of physicians who would be glad to have the pay of policemen if they had no lawsuit or educational worries, and worked a forty hour week, (including during residency)  To expect physicians to take on an average of 150,000 debt or more, to work 80-100 hours a week, in order to come in for free to save the life of an uninsured drunk in the middle of the night, who will then sue them because the legal system lets them, is unreasonable

If health care is a right, justice is even more of a right.  We should all have access to low cost lawyers who will work for us for free. 

Why shouldn’t the poor have access to the same “justice system” that OJ and Paris Hilton receive? 

The reason is that America is in bondage to lawyers who have corrupted our government.

March 1, 7:19 pm | [comment link]
17. Mitchell wrote:

Oh, I think I get it alright.  I now know I need to be sure my doctor doesn’t think he is doing me a favor when he lets me pay him for my care.  If he does, I will ask for a referral to someone who wants my business.  I’m just not interest in a doctor who is in it for the “glory and gratitude.”

March 1, 8:10 pm | [comment link]
18. Clueless wrote:

“If he does, I will ask for a referral to someone who wants my business.  I’m just not interest in a doctor who is in it for the “glory and gratitude.”

And that will work great if you’re not really sick.  If what you want is a business transaction to get a cheap sleep study, stress test, or a prescription for amoxicillin you’ll be fine with that attitude.  A business transaction, done during daylight hours.  Not much different from lawyering.

If what you want is somebody to come in at 3am, when you present in status, and spend the next 5 hours saving your a*s, and the next 18 days, keeping you from sucumbing to complications (very little of which care will be paid for) then you had better pray that there is a physician who will do it for the glory and gratitude, because you will not find one who will do it for the pay.

However you will all be finding this out fairly soon.  I give it less than 3 years.  The good news is, that when folks like #17 have driven all the physicians who are in it for the glory, and all specialists limit their practices to what amounts to the worried well, costs will come down.  Guaranteed.  And the other good news is that the ungrateful and entitled folks will die seizing outside the ER with the big closed sign.  So virtue will increase.  Guaranteed.

So it’s all good.

March 2, 11:35 am | [comment link]
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