Government Reform - The Government Giveth and the Government Taketh Away

Medicare Physician Payments and Medicaid Aid for Children

If Medicare cuts of 10% for physician pay go forward as planned in January 2008, here, based on an AMA survey of 9000 physicians, is how doctors say they will respond,

•Defer medical equipment purchase, 72%

•Defer health IT purchase, 67%

•Begin referring complex cases, 67%

•Discontinue nursing home visits,58%

•Stop providing certain services, 65%

•Discontinue rural outreach, 57%

•Reduce staff, 54%

•Close satellite office, 41%

•Shift more services to hospital, 40%

•Reduce workload services, 36%

•Leave the office setting or retire, 14%

Compared to a similar survey conducted in 2006, 15% more physicians said they would reduce or end acceptance of new Medicare patients, and 17% more said the would stop seeing existing Medicare patients.

Because the implications for a vulnerable patient population are similar to those for the Stage Children’s Health Insurance Program (SCHIP), the AMA would like SCHIP reauthorization, a state Medicaid problem and physician pay reform move forward as part of the same Congressional Bill. The current SCHIP program covers 6 million people, including 600,000 adults, has fallen short by $700 million.

As this point, it may be worthwhile reprinting a portion of a paper by John Goodman, PhD, health of the National Center for Policy Analysis. Here are four things he says should be avoided when considering health reform.

1. Do not turn a tax subsidy into an entitlement.

The primary way the government encourages private insurance is through tax subsidies. Many reform proposals would completely change the nature of the subsidies; e.g., by creating a refundable tax credit. The risk is that the new tax subsidy could become an
entitlement.

Medicare and Medicaid entitlements are already on a course to crowd out every other government program. We cannot survive creating more health care entitlements.

That means: government's commitment must be defined contribution, not defined benefit. Tax subsidies are going to grow roughly at the rate of growth of national income. Health care spending is growing at twice that rate. The new system of tax subsidies must also grow with national income, not with health care costs.

2. Avoid mandated coverage and mandated benefits.

Proposals to require everyone to have health insurance increase the likelihood that the government subsidy will become an entitlement.

It makes no sense to mandate a benefit package if the cost of the package is going to grow at twice the rate of the subsidy. By keeping the subsidy restrained, you will force health plans to curtail costs somehow - with HSAs, restricting payments to evidence-based medicine, HMOs, etc.

Pay-or-play is much better than a mandate. Since you will never be able to enforce the mandate anyway (and rigorous attempts at enforcement would cost far more than they are worth), let people choose whether to be insured or not. If they choose to be insured, give them a subsidy; if they choose not to be insured, make them pay a tax penalty and put the unclaimed subsidy (or the tax penalty) into the safety net.

Also, with pay-or-play you do not have to define a mandated benefit package, vulnerable to cost-increasing special interest measures.

3. Don't create perverse incentives for health plans.

Insurance pricing restrictions create perverse incentives. If people can switch plans annually at premiums that are unrelated to expected costs, the plans will seek out the healthy and avoid the sick. Once people are enrolled, the plans will over-provide to the healthy and under-provide to the sick.

A much better idea is to give plans an incentive to compete for the sick.

4. Don't encourage people to forgo private coverage by expanding public coverage.

There should be no expansion of Medicaid and SCHIP in a way that encourages people to drop their private coverage in order to get free public coverage. Instead, the incentives should work the other way. We should use public money to encourage private insura