Thursday, July 1, 2010

Physicians and Economic Uncertainty

Physician practices are like small businesses. Physicians dislike uncertainty. They hesitate to invest in new equipment, balk at hiring new staff, and step back from bold innovations.

For the economy as a whole, physician uncertainty is not an insignificant problem. Health care is the only expanding economic sector. It consumes 17% of GDP.

At its heart, economic expansion is psychological. Uncertainty breeds recession. These are uncertain times. We may be in the throes of a double-dip recession. Unemployment hovers near 10%. All three major stock indices are at yearly lows. The oil spill saps confidence in Obama’s leadership.

Adding to these uncertainties are impacts of Obamacare on physicians and costs of doing business.

To bring costs down, the Administration says it will gut Medicare by $585 billion. This will require cutting physician and hospital pay, rationing care, trimming waste and abuse, and rationalizing physician practices through these demonstration projects :

1. Bundling of physician and hospital fees

2. Forming accountable care organizations

3. Paying for performance through comparative data analysis

4. Coordinating care for the elderly, who consume 85% of resources

These four demonstration projects are experimental and therefore uncertain.

Then there are the employers themselves. ACA, the affordable care act, is an acronym and oxymoron wrapped in one package. Starting in 2003, Congress reimbursed employers for 28% of cost of prescription drugs for retirees. ACA ended that. Instead it taxed the benefit. The change will cost business $14 billion. Under ACA, business will have to cough up another $20 billion or so to cover the cost of covering children of employees up to age 26.The new law will impose fees and excise taxes and coverage of those with pre-existing illnesses on health plans. The plans will pass their increased costs of doing business on to business. All told, in its first year, ACA will raise health insurance costs for business by more than 10%

Add to these uncertainties these certainties. Taxes will be raised to pay for the $13 trillion deficit. This year the deficit accounted for 24% of GDP, a record unsurpassed since World War II. The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.

The deficit, largely a product of entitlement, may require a VAT tax to cover.

Obama has made no secret he will cancel Bush tax cuts when they run out this year. He will hike capital gain taxes. All of this creates more uncertainty. It defies past history. Presidents John Kennedy and Ronald Reagan made permanent tax cuts. The certainty of these cuts “lifted all boats.”

At the moment, physicians as business people and employers at large have a sinking feeling.

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