What if every Doc was paid Medicare rates?

Currently, physicians earn reimbursement from multiple different payers such as Medicaid, Medicare, and private insurers. If doctors were paid only according to Medicare rates, most would be losers – specialists more than others.

Researchers from the Urban Institute and the Medical Group Management Association conducted a simulation for MedPAC, the Medicare Payment Advisory Commission. The focus of the simulation was to determine the effect if all physician services in the nation were paid using the Medicare fee schedule. Typically, physicians earn revenue from multiple different sources including public payers (Medicare and Medicaid), private payers (such as Blue Cross/Blue Shield), and even the patients themselves (co-pays and deductibles).

The Medicare fee schedule was revamped in the 1990s to a system which placed relative values on the work of physicians with a goal of minimizing income inequalities between primary care physicians and procedure-based specialties. Unfortunately, the resource based relative value scale (RVRBS) still produces significant disparities in physician income benefitting those performing the most procedures.

Data for this study derived from a 2008 physician compensation survey investigating only those physicians engaged in full time clinical practice. Twenty-six medical specialties were then grouped into five categories: (1) primary care, (2) non-surgical, non-procedural specialties, (3) non-surgical, procedural specialties, (4) surgical specialties, and (5) radiology.

The study produces excellent data comparing actual and simulated compensation for physicians (either hourly or annually). Additionally, the study allows for the contrast of the 26 medical specialties against one another in order to determine relative compensation.

When looking at the first metric, mean compensation, the medical profession stands to lose nearly 12 percent under the simulation (Medicare as sole payer) compared to actual compensation ($240,030 vs. $272,723). No medical specialty wins in this situation, although the following specialties and subspecialties experience the greatest financial losses (over 10 percent lost income): family medicine, heme/onc, psychiatry, dermatology, gastroenterology, OB/GYN, ophthalmology, orthopedics, otolaryngology, general surgery, neurosurgery, urology, and radiology.

If the Medicare fee schedule was a uniform payer for all physicians, there would not be any significant change in the relative compensation ratio between primary care and other medical specialties. However, large disparities in compensation would still persist. Only psychiatrists would earn less than family medicine doctors (which are used as a reference point). All other specialties remain better compensated than primary care. Radiology and non-surgical, procedural specialties would earn greater than twice the annual compensation of primary care. Non-surgical, non-procedural specialties would earn 44% more and surgical specialties would earn 78% more than primary care.

Commentary

If Medicare were the sole single payer to all physicians, most doctors would see declining incomes of over 10 percent. Implementing such a strategy might reduce overall health care costs by 2.5 percent (physician costs represent 21% of all health care costs) or $58 billion.

However, while the nation might save $58 billion dollars a year, there would likely be no change in the distribution of physicians geographically or among the various specialties which results in difficulties accessing health care. The Medicare fee schedule does not adequately score the relative value of physician work across specialties.

The political reality of moving towards a single-payer health care system has largely been obliterated after the passage of the Patient Protection and Affordable Care Act (PPACA) which reinforced the current multi-payer system of public and private insurers. As PPACA becomes implemented over the next decade, advocates for lower cost health care could try to reinvigorate the call for “the public plan.”  A Medicare buy-in, which might -according to the above analysis -constrain costs by reducing payments to providers, is probably the best strategy for a “public plan”.

Advocates of any Medicare buy-in would rightly so be met with steep opposition from health care providers, who would stand to lose tens of thousands of dollars, per provider, every year.

by

Cedric K. Dark, MD, MPH