Can Concierge Medicine Fix What Ails Medicare?

There’s a tsunami of change coming to the American health care system. The federal health care reform law, the Affordable Care Act, better known as “Obamacare,” takes effect in 2014. But there are two deadlines much closer that all of us need to be aware of.

Come Nov. 23rd – that’s about 3 months from now – the so-called Super Committee of 12, the joint House-Senate Committee that was created earlier this month as part of Congress’ action to resolve the national  debt-ceiling crisis, must meet to decide where to cut an additional $1.2 trillion to $1.5 trillion from government spending.

If the Super Committee can decide to agree to cuts, health groups and analysts say healthcare programs, notably Medicare, are a prime target. (That’s because Medicare is the biggest federal health-care program.) But many political observers are skeptical that the committee of six  Democrats and six Republicans will be able to agree on any cuts much less on a program as contentious as Medicare.

“I think basically you have a situation where Republicans have found it difficult to agree to any new revenue of any kind, and you have a commitment from Democrats to not cut entitlement programs unless there are new revenues to balance it out,” said Josh Gordon, policy director of The Concord Coalition (http://www.concordcoalition.org/), a nonpartisan budget watchdog organization, in a recent article in MedPage Today (http://www.medpagetoday.com/Washington-Watch/Washington-Watch/28025).

If the panel can’t come to an agreement, if Congress rejects the plan, or if President Obama vetoes the plan, a “trigger option” will kick in, making automatic cuts of $1.2 trillion. If the trigger option goes into effect, doctors and hospitals that treat Medicare patients would see a 2% across-the-board cut.

Particularly hard hit would be primary care physicians (notably, general practitioners, internists, pediatricians) who, because they earn substantially less than specialists, already operate on a very thin profit margin. A 2% cut in their Medicare reimbursements would seriously impact this group, prompting some – especially senior doctors in their 50s and 60s – to seek early retirement and shutter their practice.

But wait. Unfortunately, there’s a much bigger tidal wave of cuts five weeks later, which makes the Super Committee cut look like a splash in a pool by comparison. That’s when Medicare is scheduled to cut doctors’ reimbursements by 30%.

We already have done the numbers in this scenario and it’s not a pretty picture.  A well-managed internal medicine physician typically has a 60% overhead; a 29.5% Medicare cut would result in a 74% reduction in take home pay.  A 21% cut would result in a 52.5% cut in take home pay. If the office is less efficient, i.e. 75% overhead, the 29.5% cut would bankrupt the practice.  Most major private insurers index from Medicare—therefore these cuts will have system-wide effects.

Just about everyone agrees, then, that Medicare is broken: It costs too much money and doesn’t provide enough quality health care. But rather than eviscerate, or even scrap, Medicare, John C. Goodman, president and CEO of the National Center for Policy Analysis (http://www.ncpa.org/), writing last week in The Wall Street Journal, suggested reforming Medicare by encouraging concierge doctor arrangements.

For example, a typical concierge doctor charges about $1,500 per patient per year. In return, patients get telephone and email consultations, same- or next-day appointments, electronic medical records, and electronic prescribing. If patients and doctors are willing, Medicare should be willing to throw its 7,500-item price list away, pay some portion of the concierge fee, and let the marketplace handle everything else.

Medicare should encourage physicians to repackage and re-price their services in ways that are good for the doctor, good for the patient, and good for Medicare,” said Goodman

About SignatureMD

With offices in Los Angeles, California and Richmond, Virginia, SignatureMD (signaturemd.com) is one of the nation’s largest firms providing initial conversion and ongoing support services to concierge medicine physicians. SignatureMD currently partners with more than 160 affiliated primary care physicians and specialists across 31 states, and its network is rapidly expanding.