They call it the “doc shock,” and it is the next fiasco to be brought to you by the Patient Protection and Affordable Care Act, the name of which grows more bitterly comical with each day’s news of higher premiums and lost health-care coverage. Democrats have a big idea for fixing it, and physicians are not going to like it.
The economics is pretty straightforward. Higher prices for medical services are built into the Obamacare model: If you inject a ton of money — or many, many tons of money, if you were weighing it out in pallets of hundred-dollar bills — into the demand side of the equation but do little or nothing on the supply side, then you expect higher prices as an expanding river of money chases an amount of goods that is not expanding at the same rate, or that is in some cases fixed or even declining. higher demand + limited supply = higher prices. Even the Obama administration knows this, which is why one of the health-care bill’s few nods to reality was a plan to raise compensation rates for Medicaid temporarily, in hopes of enticing more doctors to take Medicaid patients, which precious few of them are willing to do. The idea was to bring Medicaid rates into alignment with Medicare rates, rather than forcing physicians to take a 40 percent haircut for the privilege of treating poor people instead of old people.
The problem is that Medicare rates stink, too. Depending on which study you want to believe, somewhere between one-third and one-half of primary-care physicians already are restricting the number of new Medicare patients they will see. Many are dropping out of the program entirely. After losing hundreds of millions of dollars treating Medicare patients, the Mayo Clinic’s general-care facility in Glendale, Ariz., stopped taking new Medicare patients in 2009
. In Texas, doctors are in open revolt against Medicare, with hundreds dumping the program completely
over the past few years.
Obamacare promises to make this worse by proposing to further reduce physicians’ fees at the same time it is proposing to raise them. The Obamacare price-fixing authority, the Independent Payment Advisory Board, is explicitly charged with reducing Medicare spending, but it is also legally forbidden to do so by reducing benefits, which leaves physicians’ compensation as pretty much the only meaningful source of cuts. So while higher demand + limited supply = higher prices, higher demand + limited supply + price controls = shortages. Massachusetts discovered as much when, after it enacted its state-level version of the ACA, waiting times to see doctors increased dramatically and many physicians simply refused to participate in the program. So long as doctors are free to decide which patients they will see, and free to decide where they will practice, this is going to be a stumbling block for the central planners in Washington.
There are a couple of ways that you can get around that problem. The first is by abandoning most attempts at cost savings. That’s not such a far-fetched idea; it is, in fact, exactly what we’ve been doing with Medicare for many years now, passing the so-called doc fix to put off legally required spending cuts in the program. But you can only do that for so long. The federal government and the states face real spending restraints: They can tax, borrow, and, at the federal level, print money in great heaping quantities, but there are limits, and health-care spending is on track to bump up against those limits in a painful fashion.
You can also try to expand the supply of providers by transferring responsibilities from doctors to nurse practitioners and the like. (“If you like your doctor, you can keep your doctor . . . but you won’t see your doctor — your actual treatment will be provided by a nurse practitioner.”) Allowing a larger role for nurse practitioners and other non-physician specialists is a good idea in and of itself, and would have been worthwhile in the absence of Obamacare — if you want prices to go down, expand the supply. But short of a radical deregulation of medical practice (which would have to happen state by state), it is not going to be sufficient to reverse the trends set into motion by the ACA, especially given that so much Medicare compensation is tied to physician-delivered services.