Scrap Medicare Fee-for-Service System

Scrap Medicare Fee-For-Service System, Doctor Says

Posted By Jacob Goldstein On July 24, 2008 @ 12:39 pm In Opinion, Medicare, Doctors

They way Medicare pays doctors encourages excessive testing and discourages spending time with patients, a doctor argues today on the New York Times op-ed page.

The fee-for-service system reimburses doctors not only for their time, but also for overhead ?- which includes the costs of expensive machines used to run tests such as CT scans.

This is why doctors who own their own imaging equipment order far more scans than doctors who refer patients elsewhere for scans, argues the author, Peter B. Bach of Memorial Sloan-Kettering Cancer Center. He writes:

Any first-year business school student can see the profit opportunity here. The cost of a CT scanner is fixed, but a doctor earns fees each time it is used. This means that a scanner becomes highly profitable as soon as it's paid for.

Patient visits, on the other hand, don't incur the overhead of fancy machinery and so aren't big moneymakers in the current system.

Getting rid of this payment system would trim excessive use of expensive tests and encourage docs to spend more time with patients instead, argues Bach, who is a former adviser to Medicare's top brass.

He suggests paying doctors a fixed amount for each patient, with higher payments for more complex patients to discourage cherry picking. Payment for overhead should be based on the typical costs of tests and treatments for a patient's condition ?- similar to how Medicare pays hospitals.

Implementing such a program would be pretty complicated ?- you could run the risk of giving doctors incentive to under-treat patients, and you'd have to do a good job of setting fees to avoid cherry picking.

Still, it's worth considering alternatives to the current system. The recent debate in Washington over Medicare payments to doctors is sure to be back next year. And the health-policy gurus we've been talking to say financial pressures mean some kind of radical restructuring of the payment system is coming sooner or later.