There Won't Be Any Health Care Reform Without Physician Payment Reform and There Won't Be Any Physician Payment Reform Unless the Docs Lead The Way

Physicians are facing a 10% Medicare fee cut on July 1st, a total of 15% in cuts on January 1, 2009, a cumulative total of 20% on January 1, 2010, and more each year thereafter.

This spring the Senate Finance Committee is trying to solve the problem. In the short term, the idea is to reach out to future years, when they are betting the Congress would finally fundamentally reform the Medicare physician payment system, and pull those savings back to today in order to stave off the near term cuts. That idea has been referred to as "balloon financing."

In the wake of the subprime fiasco, how any U.S. Senators can come up with so thoroughly dumb an idea is beyond me. At the heart of my disbelief is their notion that the Congress is going to reform the Medicare physician fee schedule a year or two down the line. This problem has been accumulating for years and they have avoided facing it year after year--but don't worry they'll do it next year and be able to make this "balloon payment." And the Congress has refered to the "moral hazard" in subprime lending!

I am coming to the conclusion that it will have to be the docs that break the logjam in health care reform. Please don't misunderstand me, I do not mean to say it is the docs whose fault it is we can't agree on a way to fix the U.S health care system. But fixing physician fees problem may be necessary before any other reform can move forward.

The Medicare physician fee schedule problem has been festering for years. And, what Medicare pays is the basis for what physicians are paid in the private sector--what health plans pay physicians is commonly tied to a percentage of the Medicare fee schedule.

When the Congress created the Medicare Sustainable Growth Rate Formula it was their intention that physician Medicare costs would be controlled. The idea was simple: If doctor costs rise faster than an affordable level, we'll just cut their fees next year to compensate. The hope was that would create an incentive for docs to contain their costs and we wouldn't reward unaffordable Medicare cost trends. Any chance that idea would work, which wasn't much, went by the way when the Congress, year after year, said "never mind" and gave the powerful doctor lobby an increase anyway.

The problem now is that we're out of money. With the Democrats now requiring offsets to any new spending and Medicare about to welcome millions of baby boomers, something has to give in order to keep the docs happy.

About everyone agrees that the Medicare physician payment system is long overdue for an overhaul. So, Senate Finance Committee Chair Max Baucus (D-MT) is now saying we need to just fix the mess and stop dodging the issue--a couple of years from now.

One of the biggest problems in physician payment--first in Medicare and therefore de facto in the rest of the market-- is that the balance between primary and family care on the one end, and specialty care on the other, is out of balance. The primary care guys are hurting and we are on our way to a serious shortage there while the specialties are doing much better and all the new docs are heading for the better money.

The Congress is not going to impose a "solution" to the Medicare physician fee problem without the various medical specialties buying into it. The only thing all the docs can agree on right now is that none of them should get any kind of cut. Congress is afraid of the docs. The doctors have a great lobby--better than hospitals and insurers--and have a knack for manipulating the patient/voter lobby to their benefit.

The fix has to be bottom up--not top down. This physician fee problem is not going to be fixed until the docs--that is the various specialty groups--get together and figure it out. There isn't a lot of chance that will happen anytime soon either.

But until that happens, there will be no Congressional fix. The docs also know this. That is why it will be the docs that block the "balloon" idea. They know that is a slippery slide to an even bigger payment hole.

That is also why there will be big Medicare Advantage payment cuts in 2009. The docs truly need the money, they have the best lobby, the Congress is not going to fix the physician fee problem anytime soon and the "balloon" idea is full of hot air.

And, just as no Medicare physician fee fix is possible without physician payment reform, no big health reform plan can take place either. It isn't that it's the docs fault health care reform can't take place as much as it is they have to be the first of the tough hurdles we have to cross before it can happen. How can any budget scoring of a health reform plan take place without a sustainable physician fee structure?

So far the work between the medical specialties that has to occur hasn't even begun. The AMA itself is hamstrung by what amounts to a low intensity civil war within the ranks between the physician specialties over how to divide the loot.

It will take some key players from the various powerful physician specialties to see an imperative to settle this, and do it, before any real progress can be made.

The sooner the better.