Here are some provocative paragraphs about doctors who treat Medicare patients and the rules they have to abide by:
So in other words, abiding by these “price controls” is a condition of receiving Medicare reimbursements – and many doctors turn down the deal. How is this any different from public schools hiring teachers subject to the condition that they (a) don’t charge their students extra fees, and (b) don’t moonlight?
Not only do I see no problem philosophically, but I actively favor such rules. I wish there were more rules! How about a rule that doctors can’t collect any Medicare payments unless they got a perfect score on their MCATs? Recite the entire Ring cycle from memory? Stand on their heads for a hour every day? Make the rules onerous enough, and Medicare effectively disappears – as it should.
The author is George Mason University professor Bryan Caplan, writing in response to his EconLog co-blogger David Henderson, who argued that Medicare imposes price controls on health care. Henderson explains the strict pricing rules put on doctors who see Medicare patients:
. . . the Reagan administration took the next step of imposing price controls on doctors under Medicare. Doctors were no longer allowed to do what was variously called “extra bill” or “balance bill.” They couldn’t charge even a penny more than Medicare paid. That’s what made it a system of price controls. Moreover, under later regulations, if a doctor takes even one Medicare patient, then he has to charge Medicare rates to all his Medicare patients even if those patients would rather ensure access by paying the whole bill (Medicare plus a doctor’s additional charge) out of their own pocket. It is this system of price controls that is causing many doctors to take no Medicare patients.
Caplan responds that if doctors agree to see Medicare patients, then they implicitly agree to play by the rules imposed by the government. If they don’t want to play by the rules, then they shouldn’t see Medicare patients; they should agree to treat only those seniors who have opted out of Medicare and forfeited Social Security payments. It certainly is a provocative idea (like most of Caplan’s ideas).
Here is my question: Wouldn’t some of these issues go away if Medicare started reimbursing patients rather than doctors? Medicare could set a reimbursement schedule for each procedure, prescription drug, etc. Doctors could charge whatever they want and patients could choose which doctors to see based on their fees or their preferences (like we do for other goods). The patient would pay the difference between the doctor’s fee and the Medicare reimbursement if need be. I would think many doctors would decide to charge exactly or just a little above what Medicare reimburses, to attract more patients. Other doctors may decide to charge more and would attract patients willing to pay more for the service. Doctors would probably have to offer patients a choice between different drugs depending on their price, e.g. generic versus non-generic.
That’s how some countries do it — France, for instance.
Beyond the price-control issue, a possible benefit of having Medicare reimburse patients rather than doctors is that the demand for health care may go down at least a little. I have always wondered whether the current system — where patients don’t have to pay much or at all for a consultation or a drug — creates an incentive to consume more. Also, I am assuming that we would see the emergence of supplemental insurance policies — like they have in France — to cover the difference between Medicare reimbursements and doctors’ fees or procedures’ costs. It would also put the burden of dealing with the program on the patients who are using the service rather than doctors — which seems to make more sense to me.
The question is, what do we do about low-income patients (cash-flow-poor seniors) who can’t afford to pay the doctor in the first place, even if they will be fully reimbursed later? The solution there could be to give poor patients a health-care credit card, which would be charged to the government. I am not sure what mechanisms would have to be put in place to avoid too much fraud, but certainly that would be a concern. I have to look into the way the French deal with this issue. I am sure that there’s a lot of fraud, but there’s a lot of fraud in the system we have now.
Anyway, I am just throwing this idea out there. What do you think would happen if Medicare reimbursed patients rather than doctors? Is it even doable?
"I have always wondered whether the current system — where patients don’t have to pay much or at all for a consultation or a drug — creates an incentive to consume more." Oh come on Veronique, you're an economist (one of the good ones) and you know the answer. Of course they consumer more, by a lot more than many other goods would be if treated similarly. This plan is an improvement, although I'm with Bryan.
Reply to this commentLinkReport AbuseYou're right.
Liberals will never go for it though, since this would mean they would then have to go after their constituents for Medicare fraud rather than doctors.
This would also cut costs because the most onerous paperwork burden in any medical practice is Medicare claims.
Reply to this commentLinkReport AbuseIf you give the poor credit cards that someone else pays for, how does that reduce their use of healthcare?
Reply to this commentLinkReport AbuseDirect reimbursement to patients by Medicare would, if nothing else, do a fair bit to moot the third-party payer problem that is endemic in the health-care system. It's also the sort of innovation that could make the addition of a fee-for-service alternative/competitor to the Ryan plan's premium support model, which would go a fair way to actually getting the thing enacted in the current political climate, palatable to the Right.
Reply to this commentLinkReport AbuseI can tell you exactly what would happen if Medicare directly reimbursed the patient instead of the physician, because this is the tack taken by some insurance companies who are in dispute with physician groups over reimbursements. Payment to physicians dramatically falls because the patients keep the money. If Medicare directly reimbursed patients, even fewer physicians would accept Medicare patients.
One other consequence of the Medicare laws is that physicians who see Medicare patients may, by law, no longer provide free or nominal cost medical care. It is Medicare fraud if we charge any patient less than what we charge a Medicare patient.
Reply to this commentLinkReport AbuseDoesn't "reimbursement" imply that there's been some monetary outlay? A system of direct reimbursement would, hopefully, have patients paying out-of-pocket for treatment and then getting a check at a later date cut to them by Medicare for whatever is on the Medicare fee schedule.
As, really, that's the only way such a system could hope to work at least from the macro point-of-view, because of the fraud concerns you rightfully articulate.
Reply to this commentLinkReport AbuseLet me echo the comment made by Chesnj above. It's perfectly possible even under current law to be a 'nonparticipating' provider and to see Medicare patients who pay you directly and are then reimbursed later by CMS. Very few doctors take this approach for exactly the reasons Chesnj says - it turns out that when you try to bill patients later, at least a large minority have pocketed the money and used it for something else. They're often apologetic, but they don't pay the bill. The net effect is that on average you wind up with a fraction of even the relatively low Medicare reimbursement, as I was told when I naively asked my partners why we didn't consider making this change. (They'd tried it a few years back before I joined the group and it was an unmitigated disaster from a financial standpoint, because ultimately they went ahead and took care of patients in the same way they always had, just ended up losing money hand over fist in unpaid bills.)
I can see this working in some highly elective fields where patients aren't typically acutely ill and need urgent or emergent care - dermatology comes to mind - but only if you're prepared to demand payment ahead of time, in cash, and are actually prepared to turn the patient away if they don't pay prior to service. Alternatively, you can decide to be aggressive after the fact, but only if you're actually prepared to send sick senior citizens to collections agencies and possibly even take their house, car, etc. in payment of medical bills plus interest. Very few physicians are prepared or willing to do this, for obvious reasons.
Furthermore, doing so still limits the fees you can legally charge - I think to 115% of the Medicare rate - so most people who are actually prepared to practice in this way would do better to switch all the way to a cash-only model to get out of the business of dealing with CMS (and ideally insurance companies) entirely.
Reply to this commentLinkReport AbuseMedicare derives its cost savings from near monoposony power, if you reimburse patients rather than doctors, you will get the balance billing issue again. Consumer decisions will only reduce costs if healthcare demand is lower than supply; given that we haven't seen that to be the case there is no reason to believe consumer decisions would be better than monopsony.
There's a reason why Wal-Mart is cheaper: it pools all its customers together and refuses to pay much at all for toilet paper, etc. Medicare works in precisely the same way as does Kaiser-Permanente.
Reply to this commentLinkReport AbuseDang... the machine ate my post.... Well, we'll try it again.
I was really with you until this: "That’s how some countries do it — France, for instance." I got a lot more skeptical at that point. ;)
There are three difficulties with your proposition that I see. These don't make it impossible; nor do they make it worse than the status quo. They are simply obstacles to implementation. (All this assumes that you are dead set on a government-payer system.)
1) Approval of procedures - Approval of procedures will still be necessary. Therefore the preliminary bureaucratic games of what procedure/drug is allowed under what circumstances will still be a hurdle for the doctor and the patient.
2) Timeliness of payments - Since there is still a bureaucratic process to go through on the *other* end of the matter (after the procedure or visit), you won't reduce the timelines for payment any. And, you will add to that timeline, as well, because the patient is now an added layer in the process. (Though, if the fee schedule were firm enough, a smart doctor would offer a pre- or at-time-of-service payment plan that would provide a discount or additional service if the patient used it, and would provide some kind of guarantee concerning Medicare non-payment or reduced payment.)
3) Patients having to do their own paperwork - The onus would be on the patient to actually pay the doctor, handling all the bill paperwork. I can see the tv spots now...
[Fade in to grandma making sun tea on her back porch amongst the cats and gladiolas.] "If you think it's horrible that grandma has to be defended against unscrupulous roofing and siding contractors that take advantage of her feebleness and good-heartedness, just wait until evil doctors begin to prey on her! They expect her to read the fine print and deal with all the paperwork! [Cue avalanche of paperwork from kitchen table burying grandma, her hand seen protruding from the pile, feebling groping for her medalert button, while a muffled voice says, "Help! I've fallen and I can't get up!"] You may as well just say "Goodbye, grandma!" [Cue end of Ryan Mediscare video with grandma being dumped.]
And, yeah, "credit cards" would be a baaad idea.
Reply to this commentLinkReport AbuseThe other reason for not reimbursing patients is that there are more patients and those patients vote.
Given the myriad rules, definitions, cost-tables, and so on the government has concerning MediCare, it is almost impenitrable to physicians and hospitals who often have expert staff devoted solely to figuring out the government's ever-changing rules. For the poor sod who's trying to recover from illness or surgery, or who's finally back at work trying to catch up after missing a few days, adding 15-20 hours of work necessary to properly file, track, and argue for a particular reimbursment would be odious, to say the least (because you just know MediCare bureaucrats will deny perfectly reasonable claims or delay them because somebody used the older Form 100037735A when they were supposed to use the updated Form 100037735C-2). They would let their elected representatives know every chance they got, too.
Reply to this commentLinkReport AbuseI like it. There are a mountain of problems with it, but they can be worked out. (That's why we have wonks.) I think it can be sold to the electorate as well. Everybody knows Medicare is in trouble, and if you provide choice to patients they might go for it. In essence, you make Medicare a supplement, which is a great idea. Means-testing can't be far behind.
Reply to this commentLinkReport AbuseHyena - this is not a monooposony power. This is the power of the market. If people have to pay a price demand will surely decrease which will cause the price to drop until equilibrium is reached. When something is free demand goes up - at the margins. The reason the government can get away with paying so little is that the hospitals and clinics charge private payers and insurance with the difference. Private insurance subsidizes medicare/medicaid, and get kicked around, overly regulated called bad names etc. just for the pleasure of paying extra.
Jack Burton Mercer - you are right on the money. Of course, making health care free drives up the cost. Demand for seniors is through the roof. They don't worry about the cost and they are scared of dying -- with all the media crowing about all the things of which you are going to die. So they go to the doctor. Hospitals and clinics can't charge market rates - they have to go with the Medicare rates. Hospitals and clinics make up the difference on the backs of insurance companies. Cost for private insurance goes through the roof to cover medicare/medicaid.
This problem (the cost of medical care being too high) will never be fixed without associating price to medicare/medicaid.
If we go to single payer price won't matter and we'll simply have a shortage. The current system is great for seniors but horrible for private insurance and those uninsured because it has driven the costs so high.
Reply to this commentLinkReport AbuseThe conservative or Republican "solution" to high medical costs should be based on getting the patient involved in decisions about what care should be given (gotten?) and how much it should cost. I am worried about the possibility that patients would keep the reimbursement under this suggestion. But there are other ways to give patients an incentive to say: "that procedure is not worth the money it costs. I will voluntarily forgo that procedure."
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