Price Controls On Doctors Are Costing Patients Dearly

Forbes

4 hours ago

Market Manipulation
Just like the December 2024 continuing resolution, the current budget reconciliation bill fails to address the problem of Medicare reimbursing physicians at below market rates. Without a fix, the inevitable consequences will be worsening doctor shortages, declining healthcare quality, higher overall healthcare spending, and the accelerated loss of independent practices.
Of course, how do we know that Medicare's payments to doctors are below their economic value? To start, Medicare's reimbursement rates have declined relative to both the cost of running a medical practice and inflation.
Doctors consistently report that they lose money treating Medicare patients. A survey of doctors found that Medicare's low reimbursement rates (68%) are a primary threat to independent practices. As for inflation, it has grown 34.5% overall since January 2016 while the prices received by doctors have grown less than half as much - just 15.1%.
This is not due to demand for healthcare declining – remember the huge number of aging Baby Boomers seeking health care – or a huge surge in the number of qualified doctors serving patients. In fact, the level of doctors serving patients today - 25.4 active physicians per 10,000 residents - is down from 2019 and has fallen back to 2009 levels.
The problem is government setting prices at below market levels. And setting prices below market rates cause adverse consequences to our health, such as fewer doctors available to serve patients.
This creates serious health risks for patients including longer wait times for appointments, less access to specialty care, shorter doctor visits, larger numbers of medical errors, and more misdiagnoses or missed diagnoses. These risks are more acute for people living in rural areas, who have a higher chance of living in areas deemed 'medical deserts' or regions that lack sufficient access to pharmacies, primary care providers, and hospitals.
Medicare's uneconomical reimbursement system is also changing how patient care is delivered. For example, under the current reimbursement system, Medicare compensates hospitals more than independent physician offices for performing the same service. This incentivizes independent practices to merge with hospitals. Consolidating lower-cost physician practices into higher-cost hospital systems is driving up overall healthcare costs for patients and taxpayers and is reducing patient choice.
Congress has acknowledged that there are serious consequences from government price controls, enacting legislation to raise provider payments by 2.9% for most of 2024. But these payments went back down on January 1, and the problem continues to plague the healthcare system.
Fixing Medicare's flawed reimbursement policy should be a top priority for Congress. The more efficient reform comprehensively addresses Medicare's broader deficiencies by turning Medicare into a cash-based benefit system that funds health savings accounts (HSAs) for seniors.
This direct payment option allows beneficiaries to receive their Medicare benefits in the same manner that they receive their Social Security benefits. At current spending levels, Medicare could give each beneficiary $15,150 annually to cover their insurance and healthcare costs.
Under this system, patients and physicians, not bureaucrats, would take change and prices would reflect value. Providers would have to compete and would be incentivized to find new and better ways to expand value and reducing costs for patients.
Fundamental reforms that establish well-functioning healthcare and health insurance markets will take time. Given this, Congress could act more immediately to index government payments to medical inflation and stop paying different reimbursement rates for the same services depending on where care is delivered.
With more people aging, taxpayers will be spending more and more for Medicare and Medicaid. Unless Congress acts soon to stop Medicare's underpayment of physicians, it is patients who will ultimately pay the highest price with less access to doctors and specialists and longer wait times for life-saving care.