Friday, November 20, 2009

What's Wrong with Cutting Medicare?

This Congress keeps producing healthcare reform bills that try to pay for themselves via some reduction in Medicare payments. Those cuts will probably not happen, but conservatives decry them anyway, just in case.

What's the big deal about cutting Medicare? Let me explain using round numbers and oversimplification.

Let's set up the situation. Besides having to pay for whatever supplies are used on them (e.g., drugs, bandages), patient fees also have to cover things like the light bill, payroll, and rent as well as a reasonable operating margin (aka profit, which every business must have to survive).

Say a clinic sees 100 patients a day. Each patient's fees need cover 1% of that overhead on top of whatever went into their actual care. Let's just say that comes out to an average of $100 per patient per visit.

What if Medicare says they'll only pay $90? The clinic's options are try to cut costs, see fewer Medicare patients, see more patients, or cost shift.

The first option is a continual process in any business, and belt tightening happens in the medical field as much as anywhere, but that will only get you so far. Some physicians take option number two — which hurts Medicare patients — but in some specialties too many patients are on Medicare to make that a viable option.

Seeing more patients may allow the facility to pay its bills, but it puts more stress on the staff and the patient — if a doctor normally sees 5 patients an hour, upping it to 8 makes him work harder and means each patient gets less time with the physician. That's bad.

That leaves us with option #4 — cost shifting. If it takes $100/patient visit to pay the bills, and if a chunk of your patients don't pay that, you must make that money somewhere else. Let's say charging your non-Medicare patients $110/visit will cover expenses. It's not nice, but what can you do?

Now let's say the large insurance companies say they'll only pay $100. What happens?

The patient with neither Medicare nor insurance must now pay $130 so the clinic can pay its bills.

This is the state of things today. These proposed further Medicare cuts would take the reimbursement down to $80. Who's going to make up the difference?


Some of you will pay more at the doctor's office and/or in insurance. Some of you will wait longer to have a shorter visit with a very busy doctor. And some of you will have to find a new doctor after yours can't pay his bills and closes his doors.

Taking money from Medicare to pay for health care reform is simply cutting off your nose to spite your face.

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