Wednesday, January 6, 2010
Losing Money on Medicare
Medicare, the government insurance company for everyone over age 65 (and for the disabled), pays fees to primary care physicians that guarantee bankruptcy. Additionally, 70% of hospitals in the United States lose money on Medicare patients. That's right ... for every patient over age 65, it costs the hospital more to deliver care than the government reimburses. That is why Mayo Clinic has said it will not accept Medicare payments for primary care physician visits at its Arizona facility. Mayo gets it. Nationwide, physicians are paid 20% less from Medicare than from private payers. If you are not paid a sustainable amount, you can't make it up in volume. It just doesn't pencil out.
Mayo lost $840 million last year on Medicare. Since Mayo is considered a national model for efficient health care, if they are losing money it doesn't bode well for the rest of us who are much less efficient and who have fewer resources for integrated patient care. Instead of Medicare payments for clinic visits, Mayo will start charging patients a $1,500 fee to be seen at their Glendale, Ariz., clinic. Much like a retainer, this fee will cover an annual physical and three other doctor visits. Each patient will also be assessed a $250 annual administrative fee.
Primary care physicians are on the front line of patient care and senior patients are the most time-consuming. The average Medicare patient takes 11 different medications. Just refilling and coordinating the medication can take up an entire office visit, without addressing other health concerns. I grant all Medicare patients a half-hour visit because I would be chronically behind if I didn't. After paying office overhead, I am broke with Medicare.
I do not welcome the 65th birthday of my patients, but I continue to see them because I love my senior patients. No kidding, I really love being their doctor. They are grateful and respectful and have interesting health conditions. I am able to see them because I make my income from my administrative position and I have other patients who pay outside of Medicare.
Sad but true--unless we have true payment reform that values primary care and pays for coordination of care, I fear Medicare patients will not find enough willing physicians who accept Medicare in the future.
Toni Brayer, FACP, is an ACP Internist editorial board member who blogs at EverythingHealth, designed to address the rapid changes in science, medicine, health and healing in the 21st Century.
Labels: geriatrics, health care cost, medicare
posted by Toni Brayer, MD at
3:00 PM
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4 Comments:
Unless these payment inequalities are addressed, Health Care Reform will not succeed. You cannot have 50% of people receiving public insurance (Medicare, Medicaid, VA) and expect providers to give quality care if they are not paid adequately.
I have already dropped Medicare and am taking no new patients. In my city it is difficult for a Medicare patient to find a new physician. The more widespread this becomes, the message will finally it Washington and perhaps we can expect some relief.
In the meantime, young residents are walking with their feet.
Well said.
Will the message get to DC? I don't know - so far the OB/Pediatric trend of dropping these patients and thus leaving whole swaths of regions without medical-maternity and pediatric care has not turned any of their heads. So sad.
Thanks for this post.
I've heard this complaint many times, and to be honest, I find it somewhat difficult to believe. Let's do some math.
http://www.cchap.org/storage/newsletter-three-files/article%201.pdf
The link shows some real Medicare reimbursement numbers for pediatrics in 2007. Pediatrics is primary care, and the reimbursements aren't very different. For an existing patient, the Medicare rate for an office visit given in the link above is around $85 on average, versus $106 for commercial insurance.
If a doctor sees 16 patients a day, that's 8 hours of patient time at 30 minutes per patient. Throw in 2 hours of overhead and that's a solid 10 hour day, but 50 hours a week is a pretty typical workweek for many professional occupations in the US.
16 patients * 5 days a week * 48 weeks a year (leaving 4 weeks for vacation/holidays) = 3840 patient visits per year.
3840 * 85 = $326,400 in gross revenue for our hypothetical doctor seeing only Medicare patients.
Doctors offices have significant overhead; I know a number of doctors, and think that $100,000-$200,000 is not out of order for total overhead for a PCP, though this varies greatly by state. Let's take the midpoint, $150,000 per year in overhead. In one practice that I'm familiar with, two doctors share overhead of around $300,000 total, splitting a staff of eight, plus the cost of offices, malpractice insurance, etc.
After subtracting out overhead, our doctor's net income is $176,400 per year. No, this is not the high flying income of a specialist, but it is not poverty wages either. And this is without a single commercially insured patient!
Now in practice a doctor may not fill 100% of their schedule. Let's assume 10% vacancy - that would reduce the doctor's net to around $144,000 per year.
Let me know if you see a grave error in my numbers - but what I see is that the common saying that Medicare isn't enough isn't true. It may be true that Medicare doesn't pay enough for many doctors to earn what they think they're worth, but that is a different story.
P.S. Referencing the link above again, I see that Colorado Medicaid pays significantly less, about $50 per patient. At this rate, a doctor would net only $23,000 per year using all of the same assumptions as above - now that's ridiculous, and it explains why Medicaid patients struggle to find docs.
I pay $123.00 per month plus the $96.50 Medicare fees required under the Medicare plan. In addition I pay $20.00 per visit to a normal care physician and $35.00 fee for each visit to a specialist. In addition I pay $50.00 for a visit to an emergency room and average 30% of charges foe hospital stay and necessary services, tests, etc.
The $123.00 monthly fee adds up to $1473.00 per year. The PPO (or HMO) receives the $96.50 each month from the government So I really think that the Mayo up front charge is not too bad. The problem is that a very large proportion o the US citizenry cannot even afford my payments let alone an up front charge of $1500.00. With the median (50% of wage earners below and 50% above) families having about $47,000 annual income, and less than 0.5% savings rate they don't have the ability to pay these fees. See Paul Samuelson's graph of how people spend their incomes depending upon incomes. Examine the BLS tables on the current expenditures for families from one person up to 6 or more children.
Most industrialized countries that we compete with on a global economy provide universal health care, with insurance or single payer basis as the natural right to individuals and consider it to n]be "fair".
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