Our senior citizens already have such a system: Medicare. Medicare is presumably the model the politicians would like to apply to all of us. The problem is, however, that Medicare is a system about to collapse. This is the real health insurance crisis we face, one that the candidates never mention. Until the government finds a way to fix the problems with Medicare, it will never be possible to create a system of universal coverage.
To understand the Medicare crisis, it is essential to understand a number of issues relating to the economics of health care. First, without physicians there is no health care. While hospitals, urgent care centers, surgery centers, pharmacies and medical equipment suppliers eat up a great deal of the health care dollar, they cannot exist without physicians to admit patients, give orders, do surgery and prescribe drugs. Thus, physicians are the most essential component of our health care system. Particularly important are primary care physicians: family practitioners, internists, pediatricians and for some women, gynecologists. These are the entry points to the system, the doctors that the patient sees first. Most specialists get their patients by referral from primary care doctors.
In business programs, students are taught that pricing is an essential element of a business’s marketing strategy. For physicians, however, except for the occasional uninsured patient, prices are irrelevant. Insurance companies, including Medicare, dictate to physicians how much they will pay for a service and tell the physician to “take it or leave it” if they want to participate with an insurance plan. When Medicare decreases payments, most private insurers follow suit, as they base their payments as a percentage of the Medicare payment.
You constantly hear about the inflation in health care spending. It is true that there is a continual increase in the total dollars spent on health care because, as our senior population grows and, more importantly, ages, there is an increase in the number of Medicare services that have to be provided. If you define inflation as an increase in the price of (or payment for) services, however, physicians have suffered a dramatic deflation over the past 25 years. For example, in the early 1980s, Medicare paid in excess of $2,000 for a cataract surgery; currently payments for the dramatically improved version of the same surgery are slightly less than $600. At the same time, the costs of running a medical office, including salaries, rent, utilities, insurance and equipment have increased at, if not higher than, the general rate of inflation. You don’t need an MBA to know that progressively rising costs and decreasing payments is a bad business model; one that can’t be sustained.
Primary care doctors are hurt the most by this phenomenon. They provide mostly cognitive rather than technical services, with the former being less well-rewarded. These are time-consuming services that generally can’t be delegated to a paramedical assistant. They are generally office-based, meaning higher expenses.
If you are a Medicare patient that is new to Missoula or one simply trying to find a new doctor, you probably have found it difficult to find a physician to accept you. For primary care physicians, it has reached a point where the costs of providing an office visit are equal to or greater than the Medicare payment for that visit. In other words, seeing Medicare patients has become a money-losing proposition. Medicare has become charity care.
Our representatives in Washington are aware of the problem. If you talk to them personally, they will acknowledge that the SGR is a broken system that needs to be fixed. To his credit, Sen. Max Baucus has made efforts in this regard. Collectively, however, our legislative bodies have not had the time, shown the inclination or possessed the creativity to get the job done. Instead, for the past few years, Congress has passed emergency end-of-year legislation to forestall projected cuts ranging from 5 percent to 10 percent each year, with the promise (always broken) to deal with the issue in the coming year. Most recently, the cuts were delayed until July 1, 2008, at which time payments are slated to be reduced 10 percent with an additional reduction of 5 percent for January 1, 2009.
Currently, approximately 20 percent of primary care doctors are either not treating Medicare patients at all or not accepting new Medicare patients. It has been estimated that, if cuts of 10 percent or more go through, that number will rise to 80 percent or more. Because of that, the Medicare system is close to being one that won’t provide care for our seniors, because they won’t be able to find a doctor willing to treat them.
If this were not enough of a crisis, there is an factor that is about to dramatically worsen the situation: the boomers are coming. The baby boom generation is about to hit Medicare age, and as it does, the volume of needed Medicare services will increase at an accelerating rate, dropping payments for services at the same increasing rate.
If the government is to continue to be responsible for funding health care for our senior citizens, it is going to have to funnel a lot more money into the Medicare system. There is no solution to the Medicare crisis that won’t cost a lot more than we are now spending.
Universal health care coverage is a laudable goal. The fact is, however, that we have it for a significant segment of our population and it’s on the verge of collapse because of a lack of funding. In our “no tax increase” political environment espoused by both parties, to add another 47 million Americans to the health care roles is impossible without greatly expanding our national debt. The elder George Bush once called this “voodoo economics” n he was right about that. Our politicians shouldn’t be allowed to proclaim that they will bring us universal health care coverage until they tell us how they are going to fix Medicare and then create the funding for 47 million more Americans.
George Stern, an MD and MBA, is a practicing ophthalmologist at the Three Rivers Eye Care Center in Missoula.
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