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What If Doctors Got Paid Only Medicare Rates?

Whenever I think of our health care system I think of Dr. Frankenstein’s monster, assembled from an assortment of parts, trying to find and give love but reviled by all. Short of killing the monster, how do you fix it?

One of the biggest problems with our health care system is the unchecked growth of health care costs. We know that Medicare does a better job of controlling health care costs than private insurers. Along with this comes lower reimbursement rates for doctors which leads to the oft reported phenomenon of doctors not accepting new Medicare patients or dropping out of Medicare altogether.

Every time I read one of these stories I wonder why doctors can’t make a living based on their reimbursements. What would happen if we were paid Medicare rates for every patient we see? Would we really lose money or would we just be getting less than what we’re getting now? If so, how much less?

I was pleasantly surprised when about a month ago I came across a study looking at just this question: What if every doctor was paid Medicare rates? This study was published in March 2010 (I can’t believe I missed it) by the Urban Institute and the Medical Group Management Association for the Medicare Payment Advisory Commission (MedPAC). It used reported physician compensation along with RVUs to calculate what annual compensation (take home pay) would be if all services were paid for under Medicare rates. They took into account regional payment differences, practice expenses, and non-RVU based income.

They projected that if the average physician accepted payment based on the Medicare Fee Schedule her annual compensation (her take home pay) would be roughly $240,000.  That’s sounds like a very nice yearly income. So why do some doctors not like Medicare reimbursement rates? It’s because that total represents a 12% loss in income from $272,000.

Let’s look at some more data. Take a look at the annual incomes for the following specialties and think about whether you consider these amounts fair compensations:

Orthopedics:              $457,000

ENT:                            $380,000

Neurosurgery:           $689,000

Radiology:                  $488,000

Those look like great incomes to me, and in fact, all four of these incomes would put you in the top 4% of incomes in the U.S. I picked these four because these would be the hardest hit under a universal Medicare payment plan, they all would take over a 20% hit in annual income. Here’s what the table looks like with the change in income:

Orthopedics:              $362,000        -20.8% from $457,000

ENT:                            $282,000        -25.6% from $380,000

Neurosurgery:           $462,000        -32.8% from $689,000

Radiology:                  $389,000        -20.2% from $488,000

Lest you think I’m unfairly biased against specialties, here’s what will happen to the three primary care fields:

Family medicine:       $169,000        -10.6% from $189,000

Internal medicine:     $175,000        -7.9% from $190,000

Pediatrics:                  $180,000        -8.5% from $197,000

These are not insignificant drops in income and I’m sympathetic to the idea that this would be a deep hit to doctors, myself included. If we’re going to curb health care costs (overall health care costs are rising at an unsustainable rate) we’re going to have to look at not just how doctors get paid but also how much they get paid. The point of highlighting this paper is to show that Medicare rates for all, on an absolute level, would provide an excellent income for doctors. It’s only because we get paid so much more that Medicare rates seem stingy.

It may be painful but at some point, we as a profession need to recognize that we are getting compensated very well and that we too will have to make sacrifices to maintain the solvency of our health care system. One of our duties in caring for our patients is making sure they can afford the care they need and if that means that I have to drop from the 94^th to the 92^nd percentile in income, I’m willing to take the hit.