How Doctors Gouge Medicare
Physicians have long complained that Medicare doesn't pay as well as private insurance does. But a new study following up on Atul Gawande's famous New Yorker piece on McAllen, Tex., suggests that in that city, at least, doctors are taking advantage of traditional Medicare's lack of managed care controls to overtreat seniors there. Which means that McAllen doctors may earn more on Medicare patients than they do on the privately insured -- and that other physicians may also be milking Medicare to make up for a new stinginess on the part of health insurers.
In Gawande's 2009 article, he pointed out that Medicare costs were far higher in McAllen than in nearby El Paso, Tex., despite the similarities of the two areas. He made a strong case that the more entrepreneurial practice patterns of McAllen doctors were to blame.
The new study in Health Affairs compares both Medicare costs and costs for members of Blue Cross and Blue Shield of Texas in McAllen and El Paso. Medicare spending per beneficiary was 86 percent higher in McAllen than in El Paso -- and 75 percent above the national average, confirming Gawande's observation. But the researchers also found that spending for members of the Blues plan was 7 percent lower in McAllen than in El Paso. Inpatient and professional services costs were roughly similar in both cities for this under-65 population, but McAllen spent 31 percent less on outpatient care than El Paso did.
McAllen vs. El Paso, round two
The study's coauthors discounted the impact of price, income and health in the two communities as factors in this disparity. They also pointed out that the market share of the Texas Blues, the state's largest health insurer, probably doesn't explain the difference between the Blues' and Medicare's costs in McAllen in comparison to El Paso.
The likeliest explanation, they said, is that the Blues plan uses "utilization management" -- i.e., limits on unnecessary care -- to help control its costs. Medicare, in contrast, has done little utilization review because it's required to pay for all "medically necessary" care, as defined by doctors. So, for example, while the Texas Blues might not automatically cover an MRI that its reviewers said was unnecessary, Medicare would cover it if the diagnosis fit and a doctor thought it should be done.
Patients as ATMs for doctors
McAllen has the second highest Medicare costs in the country after Miami. In both markets, the rate of hospital admissions is unusually high, and patients near the end of life may see 10 or more physicians -- a sign that their care is fragmented and quite possibly slipshod. As in the drawing that accompanies Gawande's article, the patient has become an ATM machine for some providers.
As new reimbursement methods force doctors to focus on health improvement and care coordination rather than on maximizing volume, the McAllen model of care delivery could become obsolete. But I'm not placing a bet on this just yet. There will be many fierce battles and much gnashing of teeth before we entered the Promised Land of healthcare reform. In the meantime, we can expect more of the same as physicians try to maintain their incomes in the face of adverse economic conditions.
Image supplied courtesy of Flickr.
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