Slashing doc pay
Making US rates more like Europe's

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Article Highlights

  • Key ObamaCare vote lowers doc pay to European levels

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  • ObamaCare vote to lower doc pay will hurt doctors, and patients even harder

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  • Slashing doc pay under #ObamaCare is no hollow threat

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A key government panel voted this month to whack what Medicare pays most doctors to treat patients. It's an important step on the path to ObamaCare--because the only way to make European-style health entitlements work in America is to pay US doctors lower European wages.

This is going to hurt doctors--and hit patients even harder, as American physicians scale down their medical practices to adapt to the lower pay rates.

The vote by the Medicare Payment Advisory Commission involves slashing what the program for older Americans pays medical specialists--then freezing these lower rates for years.

"The only way ObamaCare is going to bring our health benefits and spending to European levels is to also adapt European payment rates. As a result, US doctors will adjust their business models in ways that won't be good for patients."--Scott Gottlieb, M.D.

Everyone except primary-care docs would see payments for their services cut by 5.9 percent a year for three years (totalling a 16.7 percent cut in income), followed by a seven-year freeze at the reduced levels. Primary-care providers would have their reimbursement rates frozen at today's pay levels for the whole decade. All this is part of a larger effort to save Medicare upward of $300 billion over 10 years.

This is no hollow threat: ObamaCare set up an agency called the Independent Payment Advisory Committee to fast-track these kinds of proposals into law by sidestepping Congress.

We doctors have mostly ourselves to blame for this mess. Hoping to preserve some organized power for MDs, groups like the American Medical Association made two Faustian bargains with Washington on behalf of physician members.

The first evolved in the late 1990s. In a deal to cut the deficit, the Clinton administration joined with a Republican Congress to cap total payments to doctors and implemented a system of price controls for their services. The AMA signed on to the scheme in part because Washington agreed to leave it to an AMA-run process to decide how the shrinking pie of money Washington spent would be carved up between different medical specialties.

The second Faustian deal was ObamaCare. Doctors' Washington lobbyists overlooked the fact that ObamaCare would inevitably pay something close to (far below market) Medicaid rates for medical services. Nor did they fathom how much would need to be cut from physicians to pay for the plan's costly mandates.

American doctors do earn much more than their European counterparts--if US salaries aren't adjusted for the different wealth of nations. Some of the best data on these pay differences appear in the September issue of the journal Health Affairs, in a study done by one of the administration's assistant health secretaries before she took her government job.

Annual pre-tax income (net of practice expenses) for primary-care doctors was $95,000 in France in 2008, compared to $186,000 in the United States. For specialists, the disparities were wider--with orthopedic surgeons averaging $154,000 in France and $208,000 in Canada compared to $442,000 in America.

The differences reflect lower rates for individual services. In France, for one, private insurance pays doctors about a third of what US physicians earn for office visits--$34 in France vs. $133 in America for a primary-care doctor. Even public programs like Medicare pay twice what similar French programs offer.

In a view echoed around the Obama administration, the analysis concludes that these bigger salaries "were the main drivers of higher US spending" on health care.

To bring European healthcare to America, these price differences always had to be sanded away. The only way ObamaCare is going to bring our health benefits and spending to European levels is to also adapt European payment rates.

As a result, US doctors will adjust their business models in ways that won't be good for patients. Some with busy practices in big cities will opt out of the government insurance systems entirely, and go cash-only. Others will retire early.

But most doctors won't have these opportunities available to them. So they'll need to make up in volume what they lose in margin for their individual medical services.

This will mostly mean hiring more nonphysician providers such as nurse practitioners to see most patients. Doctors will become managers of large clinical staffs, leaving more direct care to less-expensive providers.

Patients will lose access to physicians--and spend more time waiting in busier offices.

As for doctors, there's still some good news. With baby boomers aging, physicians will have plenty of business coming through their office doors. Of course, under ObamaCare, they aren't going to get paid much for seeing most of these patients.

Scott Gottlieb, M.D., is a resident fellow at AEI

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About the Author


  • Scott Gottlieb, M.D., a practicing physician, has served in various capacities at the Food and Drug Administration, including senior adviser for medical technology; director of medical policy development; and, most recently, deputy commissioner for medical and scientific affairs. Dr. Gottlieb has also served as a senior policy adviser at the Centers for Medicare & Medicaid Services. 

    Click here to read Scott’s Medical Innovation blog.

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