January 13, 2010

The Truth about ObamaCare

By John Lilly

A senior Obama Administration official almost let the cat out of the bag about the real impact of Obama-style health care "reform." Here's the background.

The three most important things in real estate are location, location, and location. In health care, one could argue that it's reimbursements, reimbursements, and reimbursements. One in every six workers receives a paycheck that depends on physician and hospital reimbursement for services. Except for Medicaid, Medicare reimbursement rates are the lowest of all entities that reimburse physicians and hospitals. All private insurance and Medicare Advantage reimbursements are higher than traditional Medicare ones. Medicare and Medicare Advantage plans take a $425-billion cut in the current health care reform legislation.

In 2008, a Physician Foundation survey found that 36% of physicians said Medicare reimbursement is less than their cost of providing care, and 65% of physicians said that Medicaid reimbursement is less than their cost of providing care. Raise your hand if you work for free. Then why is the administration asking one-sixth of all U.S. workers to do just that?

Larry Summers, the Obama administration's Director of the National Economic Council, spoke at The Economic Club of Washington at their April 2009 meeting. C-SPAN was there, and at roughly minute 41, Summers said the following:

That's why health care reform is so important because a large fraction of the federal budget is health care and if health care spending is growing three to four percent a year faster than the rest of the economy then there is no way that the federal budget can be under control. And if you try to control federal spending without controlling overall health spending you know what's going to happen. The people in the federal programs aren't going to be able to ...

Then he paused before continuing:

The health care system isn't going to want to serve the people in the federal programs. That's why the health care agenda is crucial to the long term financial sustainability agenda.

I think it is obvious that Summers was going to say that "the people in the federal programs aren't going to be able to find a doctor if you have Medicare," but he rephrased it before his original thought came out of his mouth. When he talks about overall health spending, he is including all public and private entities that reimburse physicians and hospitals. Federal spending includes just Medicare and Medicaid.

When Medicare reimbursement does not cover the cost of doing business, guess who will have a tough time finding a doctor. If there is a choice, then doctors, like any rational consumer, will prefer plans like Medicare Advantage and private insurance, which have higher reimbursement rates. The administration's idea of holding down costs is forcing all reimbursements down to Medicare levels or lower. They know that if there are alternatives, patients who are stuck with traditional Medicare won't be able to find a doctor. Recently, one of the Mayo Clinics in Arizona stopped taking Medicare because it's a money-loser. Mayo's hospital and four clinics in Arizona, including the one that stopped taking Medicare, lost $120 million on Medicare patients last year. The program's payments covered only 50% of the cost of treating elderly primary-care patients.

If all reimbursement rates are forced down to Medicare rates or lower, then get ready for five-minute doctor visits and waiting times measured in weeks and months before appointments for major diagnostic testing like MRIs.

Unfortunately, the Republicans do not have the answers, either. Their proposals will not control costs. Only when you introduce free-market competition and eliminate the current reimbursement system will you get lower costs. That will require a fundamental change in Medicare and all reimbursement systems.

John Lilly, MBA, D.O. is a family physician and the vice president of The YOUNG Conservatives of America (tycoa.com).