Every lawyer, every accountant, every architect, every engineer — indeed, every professional in every other field — is able to do something doctors cannot do. They can repackage and reprice their services. If demand changes or if they discover a way of meeting their clients’ needs more efficiently, they are free to offer a different bundle of services for a different price. Doctors, by contrast, are trapped.
To see how trapped, let’s look at another profession: the practice of law. Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.
What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.
This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.
In a previous Health Alert, I noted that Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.
Yet Medicare is potentially setting about 6 billion prices across the country at any one time.
Is there any chance that Medicare can get all those prices right? Not likely.
What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.
The problem in medicine is not merely that all the prices are wrong. A lot of very important things doctors can do for patients are not even on the list of tasks that Medicare pays for. Some readers will remember our Health Alert on Dr. Jeffrey Brennan in Camden, New Jersey. He is saving millions of dollars for Medicare and Medicaid by essentially performing social work services to reduce spending on the most costly patients. Because “social work” is not on Medicare’s list of 7,500 tasks, Brennan gets nothing in return for all the money he is saving the taxpayers.
We have also seen that there are other omissions — including telephone and e-mail consultations and teaching patients how to manage their own care.
In addition, Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.
Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.
Since doctors don’t like to work for free or see their income cut in half, most have a one-visit-one-morbidity-treatment policy. Patients with five morbidities are asked to schedule additional visits for the remaining four problems with the same doctor or with other doctors. The type of medicine that would be best for the patient and that would probably save the taxpayers money in the long run is the type of medicine that is penalized under Medicare’s payment system.
Take Dr. Richard Young, a Fort Worth family physician who is an adviser for the federal government’s new medical Innovation Center. As explained by Jim Landers in the Dallas Morning News:
[When Young] sees Medicare or Medicaid patients at Tarrant County’s JPS Physicians Group, he can only deal with one ailment at a time. Even if a patient has several chronic diseases — diabetes, congestive heart failure, high blood pressure — the government’s payment rules allow him to only charge for one.
“You could spend the extra time and deal with everything, but you are completely giving away your services to do that,” he said. Patients are told to schedule another appointment or see a specialist.
Young calls the payment rules “ridiculously complicated.”
That’s an understatement.
John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.
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