The ACP Advocate Blog

by Bob Doherty

Monday, June 14, 2010

Is "private contracting with benefits" the answer to Medicare's woes?

My blog today is from the American Medical Association's House of Delegates meeting, where much of the discussion is over Congress' continued inability to reach agreement on the Medicare SGR physician pay cut. Many of the delegates have coalesced around the idea of private contracting as the solution.

Currently, physicians and Medicare patients are allowed to enter into private contracts for their services, provided that they mutually agree to forgo any Medicare reimbursement for a two year period. This is true private contracting in that it gets the government completely out of the picture: Medicare beneficiaries voluntarily agree to give up their Medicare physician benefits to enter into a private payment contract with their physician.

The AMA delegates, though, seem to have a different kind of contractual relationship in mind, where the Medicare patient could still receive full reimbursement from Medicare for their physician services, but their doctor would not be bound by the legal limits that Medicare places on how much their doctor could charge above Medicare's allowed amounts. Instead, there would be an agreement between the physician and the patient on how much the beneficiary would be expected to pay for services above Medicare's allowed charges. This approach might be described as "private contracting with benefits"- since it tries to have it both ways, maintaining current Medicare benefits, while allowing physicians to charge their patients more than Medicare allows, with the patient's consent.

I understand the appeal of private contracting with benefits. At a time when Congress is incapable of agreeing on legislation to ensure that Medicare will pay physicians a fair fee for their services, private contracting with benefits provides an "escape valve" to get around Medicare's price controls. The argument also goes that seniors shouldn't be penalized with a loss of benefits for entering into a private contract. Private contracting with benefits could help maintain access for seniors who are at risk of losing their doctor, and provide a lifeline to practices that are struggling financially.

I don't see private contracting with benefits, though, as the answer to the immediate 21% SGR cut, or for that matter, for most of the problems with Medicare's dysfunctional payment system. For one thing, I see no chance, nada, that the current Congress and administration would agree to allowing seniors to enter into private contracts and maintain their Medicare benefits. This will be viewed by a majority in Congress, and by the current administration, as opening the door to a massive cost-shift to seniors. At a time when seniors are already worried that they will be losing benefits under the new health reform law (they actually will get better benefits under traditional Medicare, but many don't believe it), I don't think many politicians would vote for something that would likely be viewed by many seniors as eroding their benefits by requiring them to pay more out-of-pocket. AARP, which has been allied with organized medicine in support of repealing the SGR, likely would fiercely oppose opening the door to physicians charging seniors more than Medicare’s allowed charges.

Even if the political winds change and Congress ultimately comes around to support private contracting with benefits, this won't happen in time to avert the current 21% SGR cut. Tying reversal of the current SGR cut to private contracting with benefits is not a winning formula to get 60 votes in the current U.S. Senate and majority of the House of Representatives.

The other problem with private contracting with benefits is a more substantive policy one. If Medicare patients are going to be allowed to enter into private contracts that allow their doctors to charge more without giving up their Medicare benefits, then legal safeguards would need to be included. ACP policy, first adopted in 1998 but reaffirmed by the Board of Regents in 2010, supports private contracting, but with safeguard s to protect patients:

"The American College of Physicians supports the primacy of the relationship between a patient and his/her physician, and the right of those parties to privately contract for care, without risk of penalty beyond that relationship.

Such statutes should include the following patient protections: (1) a requirement that physicians disclose their specific fee for professional services covered by the private contract in advance of rendering such services, with beneficiaries being held harmless for any subsequent charge per service in excess of the agreed upon amount; (2) a prohibition on private contracting in cases where a physician is the "sole community provider" for those professional services that would be covered by a private contract; (3) a prohibition on private contracts in other cases where the patient is not able to exercise free choice of physician; (4) a prohibition on private contracting for dual Medicare-Medicaid eligible patients; (5) a requirement that private contracts cannot reduce patient access to care in cases of emergency or life-threatening illness; and (6) a requirement that the Centers for Medicare & Medicaid Services and the Medicare Payment Advisory Commission monitor Medicare beneficiary access to health care and report to Congress and the public if access problems develop as a result of private contracting."

In other words, there is a place for "private contracting with benefits" as part of a total restructuring of Medicare payment policies, but such an option would need to be constructed in a way as to allow for true price (and quality) transparency and to protect vulnerable seniors who really would have no choice. Private contracting with benefits does not eliminate the need to restructure Medicare payments to provide better value to seniors and taxpayers or support the value of primary care. And it won't help get us the votes needed now to reverse the 21% Medicare SGR cut.

Today's question: Do you see private contracting as the solution to the SGR cut? Do you agree that the safeguards proposed by ACP should be included?

6 Comments :

Blogger Arvind said...

Bob, if you told me that you belonged to the Communist Party of USSR, and the party's other name was the ACP, I would take your word for it. Because what you describe fit the communist manifesto perfectly.

I have heard the word "prohibition" many a time in the past. Its a way for tyrannical governments to exert their force upon their subjects. Please refrain from using this word again in your posts. And don't forget that you are in the USA, not the USSR. (Oh, I forgot, the USSR does not exist any more).

June 14, 2010 at 9:34 PM  
Blogger Steve Lucas said...

The AMA plan does nothing to bend the cost curve. Taken to its logical conclusion, where doctors can charge any rate as an add on, and we will see an increase in cost.

There is enough money in our system, the problem is distribution.

I would allow people to move to a retainer medicine model. The big change would be allowing the monthly fees to be tax deductible, not something Congress wants to do in this environment.

My perfect world would be an $80 per month fee with a 600 person panel limit. Doctors could band together to share office expenses and provide coverage. Patients would get time with the doctor, same day or next day appointments, and doctors would get paid for all of the extra work involved in running a practice.

This would eliminate codes, coders, and related computer expenses. (Not something the AMA wants.) Doctors would choose a computer system that best fits their needs, not the governments or insurance companies. Doctors could then find and work with other cash based service providers for labs, imaging, and other testing services.

Medicare and private insurance then becomes the provider for hospital stays and specialist referrals.

The ACP is correct in wanting to provide protection for the patient. Medicare with benefits is rife with the opportunity to not only shift cost, but allow unscrupulous service providers to take advantage of a large population.

Steve Lucas

June 15, 2010 at 9:17 AM  
Blogger Robert J. Sobel, M.D. said...

The SGR cut is absurd and belittles outpatient clinical care. Part A and Part D must be reformed a hell of a lot more. Then, we can move forward on helping primary care regain some leverage.

Passing more on to the patient has been the modus operandi of private insurance and is, as expected, backfiring. Nevertheless, the best are smarter than Medicare here at rewarding more fairly. What they both fail at is drug and new technology costs?

June 15, 2010 at 11:20 AM  
Blogger Jay Larson MD said...

Private contracting may not so much be a solution but rather an outcome of SGR cuts. Each physician has their limits and a 21% Medicare cut (or lack of Medicare increase for that matter) may exceed physicians’ tolerances resulting in changing practice styles. So far this year Medicare has held reimbursements for 4 weeks while Congress debated SGR cuts. This makes it difficult to keep a practice going, especially knowing that the SGR cut solutions are still up in the air.

Even though private contracting would result in higher out of pocket costs to Medicare recipients, office visits with physicians as compared to procedures would be relatively affordable. A Medicare recipient could buy a significant amount of doctor office-visit time for the cost of just one hearing aid or dental implant.

Perhaps the Feds should look at “private contracting with benefits” only for cognitive services. This would help keep cognitive based internists going a little bit longer.

June 15, 2010 at 2:48 PM  
Blogger DrJHO7 said...

How 'bout "private contracting/adios medicare". There's no way, nada, that I will work for a 21% cut in mcr reimbursement. I would unhook from mcr in a heartbeat, work with the pt's that would be willing to work with me through private contracting, and try to survive. Obviously the gov't would have one helluvan access crisis if they let this thing go through. If they want something to rival the oil leak in the Gulf, this would about do it.

It would save the gov't 250 billion on paper if they let the 21% cut play out, however, and save billions more in real time if some mcr (non-)beneficiaries paid for most of their care out of pocket - brilliant! Could even be considered a bipartisan effort...or more correctly,
a non-effort.

June 16, 2010 at 12:48 AM  
Blogger Harrison said...

Is the practice of medicine a public service, or is it first and foremost a business entity?
Private contracting without any public funding component puts it firmly in the realm of a business offering a service for a fee to clients.
It is up to individual practitioners then to define the service being offered and to market it and to find clientele.
Public funding sources expand the client base.
But it isn't really fair to apply public funding without the funding source having control on its own expenses.

We probably have to figure out just what parts of our professional services are public services that should be covered by public funding as entitlements for the beneficiaries.
And the other professional services that we offer should be left to private contracting.

We'll never get there.

Instead we'll just keep arguing about rationing vs cost controls, and we'll keep on choosing sides and referring to those on the make believe opposing side some sort of pejorative name.

That is the sad state of public discourse and our profession is caught in the middle of it.

Harrison

June 17, 2010 at 12:39 PM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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