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Home Publications Blogs Beat the Press What Would Happen if Physicians Left Medicare in Large Numbers?

What Would Happen if Physicians Left Medicare in Large Numbers?

Monday, 01 November 2010 05:07

The answer is that they would get significant cuts in revenue. The Washington Post, which is known for its problems with logic and economics, never made this point as it discussed the possibility of a mass exodus of physicians from the Medicare program. The Post uncritically presented complaints about Medicare's compensation schedule from Cecil B. Wilson, the president of the American Medical Association that Medicare does not pay them enough money. (The article was headlined: "Physicians Face Painful Decision on Medicare.")

While it is possible that any individual physician can make more money by taking patients from private insurers rather than Medicare patients, physicians in aggregate could only make up for the revenue lost by not seeing Medicare patients if there was a large pool of individuals with money or high-paying insurers who do not currently have access to doctors. Of course, people with money in the United States are already seeing doctors, so if physicians en masse turned away from Medicare then they would simply have fewer patients. (This may be the painful decision referred to in the headline.)

Comments (15)Add Comment
written by izzatzo, November 01, 2010 6:18
... physicians in aggregate could only make up for the revenue lost by not seeing Medicare patients if there was a large pool of individuals with money or high-paying insurers who do not currently have access to doctors.

Any economist knows from game theory that while individual physicians suffer from a natural fear of Rentobia Extractus, a fear of losing economic rents, in the aggregate the condition presents as the Paradox of Doctor Drift.

If a few physicians leave Medicare, they benefit by increasing their rents, but if they all abandon Medicare, aggregate rents decline because they actually have to compete for elite clients, another rent eroding disease acquired after leaving medical school, known as Competition Horribus Socialismus.
they can afford it
written by Tom, November 01, 2010 7:25
A counterargument is that

1. Doctors are already so well paid that they can afford to give up some income.

2. The doctors who can't afford to give up patients are the worst doctors, so people in medicare will get worse care.

Okay, enough with the poor little rich kid whining. Let's play hardball.

3. If enough private doctors aren't willing to serve Medicare patients, Medicare will just have to start hiring doctors directly.

written by Paul Sullivan, November 01, 2010 7:52
Number of medicare patients will continue increasing for years to come. Number of physicians to provide for them, not so much. Physicians will increasingly have the upper hand regarding what kind of patients/insurers, they want to deal with. Price will matter.
written by PeonInChief, November 01, 2010 8:46
Doctors have been threatening to leave Medicare since, well since Medicare came into existence. But they don't, and anyone who can count can see why. Medicare pays a huge fraction of the income of many doctors and, while they don't make as much per patient as they do with the privately insured, they can't afford to give up the income.
written by jm, November 01, 2010 9:10
Some doctors claim (on blog posts) that Medicare reimbursements are so low that they do not cover their administrative overhead costs. This would imply that the more Medicare patients they see, the more they lose.

But I rather suspect that this just reflects the fact that so many doctor's practices are small businesses run by lousy businesspeople, suffering from lack of economies of scale -- especially on the administrative side. I think it makes very little sense for a doctor to be in business for himself, or with a handful of partners. But as the profession is characterized by a very high average level of arrogance, a large fraction of the practioners is probably psychologically incapable of functioning within a larger organization that can handle the administration efficiently. For them, the low profit margins on Medicare patients are a price they pay for insisting on being in business for themselves.
Hire me
written by calif. doc, November 01, 2010 11:03

Oh, please play hardball with us physicians. I would gladly be hired by Medicare with California firefighter wages and benefits. Including the part where I get to retire at age 50 with 90% of my last years income, inflation adjusted for life. And also the part where I work just three days a week.

As Medicare employees we would be allowed to unionize, right?

You think there is rent extraction now, just you wait and see what would happen when the United Federal Physicians teams up with the SEIU. Cannot imagine too many politicians getting elected without the union docs; especially when they team up with other "heroes" such as firefighters and police.

calif. doc
Hollow Threats Don't Deserve a Public Airing
written by Ron Alley, November 01, 2010 11:15
Even though hollow threats don't deserve a public airing, the Post, and most media outlets, recognize their potential to foment controversy and, of course, sales.

If you have had a parent with typical end-of-life issues, you will understand how the medical business works. There are endless cross-referrals, needless exams and and redundant tests. All represent fees to physicians. In many instances, physicians have a financial interest, direct or indirect, in the hospital and test business entities.

My father recently died at age 94. During his last years he learned to just say no to frequent proposals for invasive tests that offered little or no advantage. Those test might have provided some additional information to his physicians, but would not have changed the course of his treatment or increased his lifespan. Each test, of course, required review by the physician and an office visit for consultation.

One particularly egregious example shows just how physicians reap fees from dubious treatments. My father's primary care physician found a condition that could have been treated surgically by implanting a stent. The physician had a referral to a surgeon already arranged. The cost of the surgery would have amounted to tens of thousands. The tests, workups, aftercare and related consultation would have generated additional thousandsin fees. After looking into the situation, we found that the 5 year survival rate for patients 10 years younger than my father was about equal between those who opted for the surgery and those who did not. My father looked at the information, refused the surgery and lived for about 5 years.
Physicians Already Have Left Medicare In Large Numbers
written by ohwilleke, November 01, 2010 12:14
For example: "[A] 2008 survey by the Texas Medical Association found that while 58 percent of the state’s doctors took new Medicare patients, only 38 percent of primary care doctors did."

Far fewer doctors take new Medicaid patients, which has lower reimbursement rates.
I'm glad you wrote about this
written by Brett, November 01, 2010 12:52
This was a question I was wondering about during the health reform debates. One benefit (and this is a stretch) of large numbers of doctors leaving Medicare might be that it could finally encourage Congress to reform the laws that protect doctors high-salaries and impede foreigners from moving here and setting up practices. If there aren't enough doctors who are willing to take Medicare, then the supply must be increased and the doctors on intransigence might doom their special rights and protections by introducing capable doctors willing to take Medicare.
written by DFlinchum, November 01, 2010 3:05
What is likely to happen is that physicians will stop accepting new Medicare patients. We are already seeing that with Medicaid, where doctors/dentists can afford to take a certain number and after that they simply refuse new Medicaid patients.

The health care bill didn't include the doc-fix and if Congress doesn't make adjustments, health care providers will take a big hit.

This is occurring about the time that the Boomers will start receiving Medicare.
The government would have to hire doctors wouldn't they?
written by ljm, November 01, 2010 7:26
If doctor's en masse refused to take medicare, then the government might have to do something like open the VA hospital system to everyone on medicare and put more doctors on the payroll. We'd be on our way to national health insurance. I don't know if the doctors thought of that possibility.
Calif Doc reply
written by Tom, November 01, 2010 9:32
Calif. Doc,

I wasn't suggesting that being employed by Medicare would be either a punishment or cushy. I was just pointing out that it has other options if physicians were to withhold their services from the program.

From deep research on the internets, median salary for firefighters is less than 1/3 of median salary for family practice physicians, so I would be careful what you wish for...
written by liberal, November 02, 2010 7:46
calif. doc wrote,
As Medicare employees we would be allowed to unionize, right?

You already have a union. It's called the AMA, and it's been far more effective than a typical union in ensuring that its members can extract rents. Consider, for example, the absurd lengths that foreign physicians have to go to be licensed to practice in the US.
written by skeptonomist, November 02, 2010 1:47
Payment rate is not the only issue; you must know the administrative costs, in physicians' offices, of Medicare vs. private patients. Ezra Klein


could not find any studies, but maybe Dean has some data. There is no question that single-payer greatly reduces these costs, as well as those on the insurance end.
written by boxer, November 02, 2010 4:03
Saw a clip where socialized physicians in
Britain were quite content to serve everyone and receive an adequate salary for doing so. One had a nice home and a Mercedes. Said he couldn't understand how doctors in America made illness a business. I feel the same.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.