Why Medicare Sucks part 2

by Ouida on May 24, 2010

In my previous post, I talked about health care in general, the artisan’s approach to health care and the advent of managed care.  Managed care worked to a certain extent, slowing the rise in health care costs.  There are two other aspects of health care that are important to understand.  Imagine two doctors both in the same specialty, general surgery.  Including college, they have both had 13 years of training:  4 years of college, 4 of medical school and 5 of residency.  When they graduate they both go into private practice, in other words, they become small business owners, but their behavior in private practice is entirely different.  Doc A reads about new techniques and procedures.  He spends his time outside the office reading medical evidence and modifies his practice to adapt to changing medical standards.  Staying well informed about the changing face of medicine is a priority for him.  Doc B doesn’t really do what Doc A does.  He figures that what he learned in residency should be enough to see him through the rest of his medical career, the next 30 years.  He reads only occasionally.  In his area, he was the last to incorporate laparoscopic cholecystectomy into his practice dismissing it initially as a passing fad.  Which doctor would you rather go to?  Should they each be paid the same for their services?  Because so many aspects of medical care are actually hidden from the marketplace, consumers actually cannot make informed choices.  Fortunately medical boards and insurers have stepped in to level the knowledge playing field for physicians.  Insurers are increasingly deciding that they will not reimburse for services by non board certified physicians and medical boards have stated boldly that board certification is the minimum standard for medical competency.  Boards have also gone the additional step of making re-certification an ongoing and active process requiring that physicians read at least 2 articles per week.  So here is the important concept here:  No two doctors are the same and factors that may assist in comparison are not readily available.

Concept number 2:  Medicine is a practice of probabilities.  We know that when a woman undergoes a tubal ligation anywhere from 1% to 5% of these procedures will fail and she will have an unintended pregnancy.  That unintended pregnancy will either be a pregnancy in the uterus or a pregnancy in the tube, an ectopic pregnancy.  That 1%-5% failure rate does not mean that anything was done wrong during the initial tubal ligation.  It simply is what it is.  No medical procedure or drug is 100% efficacious without adverse events (works 100% of the time without complications).  A hysterectomy will cure abnormal uterine bleeding 100% of the time, but a woman is assuming a 4% risk that she will experience ureteral injury requiring further surgery and repair.  An endometrial ablation, a less invasive technique, to address the same problem will “cure” 85% of women but that means 15% of women will require additional procedures over the next 3 years to address the original problem.  In medicine, we know that the majority of people will experience a positive result from the drugs and procedures we recommend, but not all will.  And some will experience adverse events.  Lawyers want you to believe that an adverse event means that something was done wrong.  That is not necessarily so.  We know that roughly 4% of women who undergo hysterectomy will experience an injury to their ureters specifically no matter what we do.  Does that mean something was done wrong by the doctor? No.  Patient’s themselves are the variables and while patients are similar and are likely to behave similarly under similar circumstances, no two patients are alike.  Is using malpractice data helpful?  Oddly no.  Physicians are sued in the event of adverse outcomes some of which are truly the result of the failure to adhere to accepted standards of care.  Many more are simply the exercise of the odds. Should we look at outcome data to compare physicians?  We definitely should, but we should look at the data over time.

Okay, so we have that no two doctors are alike although medical boards and insurers are trying to standardize physician competency and we have that medicine is a practice of probabilities.

So how does Medicare fit into this?  It is simple really, but first I have to cover one more thing.  I discussed in part 1 of this series that insurers decided that reimbursement should be based on documentation of work.

There are 5 parts to a patient visit:

The Chief Complaint

The History

The Exam

Supporting documentation such as labs.

Medical decision making

A physician gets a certain amount of points in each category based on the documentation he or she provides for each category. Those points are used to create a code and that code is used for billing.  Once insurers began to demand this documentation, and each element has to be documented the way the insurer wants, you to document it a new industry sprang up around health care.  That industry is called billing and coding, another up-tick in the spiral of rising health care costs.

Today every practice no matter how large or small has teams of medical coders, people who did not even exist in medical practice 25 years ago, whose sole function it is to make sure that physicians and hospitals get paid for the services they provide.

There is something else that goes on that has to be made clear.  Physicians are paid about 65 cents on the dollar.  What this means is that for every $100 dollars a physician bills out, he’ll get $65 dollars back and that is a best-case scenario.  That  lost revenue comes in the form of denied medical claims (an insurer decides not to pay for an office procedure because the physician did not ask their permission to do the procedure first, or an insurer decides not to pay for visit because they did not like the physician’s documentation, or because of capitated rates, the idea that a $100 dollar procedure is really only worth $80 dollars as far as the insurance company is concerned.)  What the general American public does not understand is that when they walk through the door of their doctor’s office, their doctor has a 1 in 3 chance of not getting paid for that visit.  Doctors know this so they have to make up for the anticipated revenue loss by seeing more patients.  A doctor who would have been able to take care of his practice seeing 20 patients per day must now see 30.  Please understand how crazy this is.  Your auto mechanic has had 2-4 years of training.  He is paid roughly $75 dollars per hour.  If he presents you with a bill for, $150 dollars you pay it.  You don’t send him $100 dollars and tell him to forget the rest.  Yet this happens all the time in health care.

What does Medicare have to do with this?  Medicare and Medicaid account for more than half of all health care dollars spent in the US.  Medicare has become the 800-pound gorilla in the room using its immense size to ratchet down expenses.  Usually all other insurers will follow Medicare’s lead.  If Medicare lowers its reimbursement for the diagnosis and treatment of condition X other insurers eventually will too.

Medicare has another issue and this is a big one; it is called compliance.  It seems that government firms are concerned with preventing fraud, concerned to the point of crowding out all logic.  Billing Medicare too much for services is considered just as egregious an act as billing Medicare too little for services.  My cousin is a partner in a large OB/GYN group, she and I had an occasion to talk about health care one morning last Fall.  She told me that a group across town had just been fined $100,000 by Medicare for under-coding.  Let me explain.  Remember how I explained how a visit is coded?  Well let’s say a physician sees a patient.  He cannot remember the number of elements in each category that constitute a level 3 visit so he codes it out as a level 2 visit just to play it safe and avoid the risk of billing too much for his work.  Medicare considers billing at level 2 for a level 3 visit, just as fraudulent as billing at level 4 for a level 3 visit.  My cousin’s practice made the investment in electronic health records a decade ago because they thought it would streamline costs and be a boon for their patients.  The cost to them? $100,000.  In actuality there is very little opportunity for practices to recover capital investments like that other than to see more patients and do more procedures.  But we’ve already seen the perverse incentive to see more patients because you know you are not going to be paid on a certain percentage of your work.  Now you have the incentive to see more patients and do more procedures to cover the capital investments needed to improve your practice.  My cousin’s practice was considering hiring a compliance expert to audit their charts to insure they were in compliance with Medicare.  The cost of the compliance expert?  $30,000.  Compliance is another industry that did not exist 20 years ago that has sprung up around Medicare. My cousin’s practice ultimately decided to drop Medicare.  The costs of compliance simply outweighed the benefits of continuing to accept participants in the program.  When any practice accepts Medicare, they agree to allow Medicare to swoop in with little notice and audit that practice.  All insurers can do this in theory, but Medicare does this with some degree of regularity.  Consider the costs of Medicare compliance another up-tick in the rising costs of health care.

Here are the new concepts addressed:

1)  physicians are not reimbursed 100 cents on the dollar.

2)  attempts to reduce costs have actually increased costs by creating additional industries to a) ensure that physicians get paid and b) to ensure compliance with Medicare

3)  it is difficult to compare one physician to another because outcome data do not tell the whole story and it is impossible to determine physician behavior within his own practice.  Is your doctor reading and keeping up with medical trends or is he falling behind?

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{ 2 comments… read them below or add one }

Ruth T. Vincent May 25, 2010 at 2:00 pm

Medicare may stink from a provider Cost VS Reimbursement perspective, but from a user perspective I think it is provides pretty good care. Medicare certainly is not ‘Cadillac’ coverage, but it does provide an acceptable level of care and will do a better job when the preventive care provided for in Health Care Reform kicks in.

Well then, from a provider prespective is ‘outcome’ reimbursement one of the answers? This too as I recall was addressed in Health Care Reform and it attempts to addresses quality medical care delivery while at the same time bending the cost curve? This too will require bill coding changes.

I think there is no question that medical costs are totally out of hand and if accountability attached to reimbursement billing is necessary, I personally don’t see a problem. Those of us who have worked in highly regulated and large volume industries understand the need for accountability to reduce fraud and abuse. Some rules by government, we all agree, don’t meet the logic test and I think the underbilling rule makes no sense, i.e. ,if you underbill and don’t correct within 90 days…TOO BAD. If you overbill, you are ALWAYS liable for repayment…PERIOD!


Ouida May 25, 2010 at 7:48 pm

Medicare only provides good care if you can find a provider who will accept Medicare. Right now you can so it provides good care. But Medicare reminds me of a situation that I got into one day while using a government vehicle for work. I needed to fill the tank and had to go to 5 gas stations before I found one that would accept the government credit card. Yes, Medicare should let under-coding go, but they don’t. Thirty years ago, Medicare was relatively easy to game and people did, but those people are pretty much gone and we are left with a reactive system that is difficult for providers to use.


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