Doctors vs. Obamacare—and Vice Versa

Published May 31, 2016

Don’t expect doctors to give the Patient Protection and Affordable Care Act a clean bill of health. The act will reinforce the worst features of existing third-party payment arrangements in both the private and public sectors, arrangements that already compromise the professional independence and integrity of the medical profession.

Doctors will find themselves subject to more, not less, government regulation and oversight. Moreover, they will become increasingly dependent on unreliable government reimbursement via Medicare and Medicaid payment, as irrational government payment approaches are expanded to larger portions of the population.

Under the new law an estimated 18 million of the 34 million who would gain coverage over the next 10 years would be enrolled in Medicaid. Such a massive Medicaid expansion will displace private health coverage and expand government control over health care financing and delivery.

Physician payments in the major entitlement programs are well below the prevailing rates in the private sector. On average, doctors in Medicare are paid 81 percent of private payment; physicians in Medicaid are paid 56 percent of private payment.

No Payment Fixes

The new law does not substantially change the general pattern of the government’s systems of physician payment. Indeed, it only expands their reach and adds new regulatory restrictions.

For example, beginning this year the new law will prohibit physicians from referring patients to hospitals in which they have ownership, with the exception of those that treat a large number of patients enrolled in Medicaid.

In 2011, Medicare primary care physicians and general surgeons will receive a 10 percent bonus payment. In 2013, the law prescribes primary care physicians participating in Medicaid will get no less than 100 percent of the Medicare payment rates for their services for two years, 2013 and 2014. The law authorizes additional federal taxpayer funding to cover 100 percent of the incremental costs to the states of these required increases. There is no provision for continued federal taxpayer funding beyond these two years.

Draconian Payment Formulas

Medicare authorizes a set of administrative payment systems for doctors and hospitals. For physicians, the basic Medicare fee schedule is based on a formula called the Resource Based Relative Value Scale (RBRVS), which pays physicians based on the estimated “inputs” required to provide a medical service, such as the time, energy, and effort.

Medicare physician payment is annually updated on the basis of the Sustainable Growth Rate (SGR) formula, which ties annual physician payment increases to the performance of the general economy. Under the SGR, without congressional intervention the initial Medicare pay cut would amount to 21.3 percent.

The impact is not hard to fathom. The Fairfield County Medical Association in Connecticut reported that if such cuts were to take effect, 41 percent of county doctors would stop taking new Medicare patients, and nearly one out of four doctors would drop Medicare altogether.

Congress has shown no inclination to fix this problem without adding to the federal deficit, and thus can be expected to continue resorting to stopgap measures to keep its own Medicare payment formula from actually going into effect.

Government in the Operating Room

On top of existing payment rules, regulations, and guidelines, the new law creates numerous new federal agencies, boards, and commissions. Three have direct relevance to physicians and the practice of medicine.

Section 6301 creates a “nonprofit” Patient-Centered Outcomes Research Institute, which will examine clinical effectiveness of medical treatments, procedures, drugs, and medical devices. Section 3403 creates an Independent Payment Advisory Board, with 15 members appointed by the president, which will provide justification for continued payment cuts. Section 3002 extends the Physician Quality Reporting Initiative, which drives the time-consuming compliance with Medicare pay-for-performance rules.

Much of the outcome of this legislation will depend on how the findings and recommendations of these regulatory entities are implemented and whether the recommendations are accompanied by financial incentives, penalties, or regulatory requirements. In any case, this is not a prescription for medical innovation.

Surprise: Doctors Unhappy

Polling results identify deep discontent among doctors. A recent U.S. survey of physicians conducted by Athena Health and the online physician community Sermo found 79 percent of U.S. physicians are less optimistic about the future of medicine, 66 percent indicated they would consider dropping out of government health programs, and 53 percent would consider opting out of insurance altogether.

More ominously, with the nation already facing a shortage of physicians, particularly in geriatrics and primary care, many doctors also say they would leave the profession altogether.

None of this should be surprising. The new law doesn’t address doctors’ most pressing concerns, such as tort reform. And it worsens the already painful problems caused by third-party payment and government red tape.

Patient Control of Spending

A key goal of health care reform should be to restore the traditional doctor-patient relationship. In such a relationship, doctors are the key decision-makers in the delivery of care, and patients are the key decision-makers in the financing of care. This cannot be achieved unless and until patients control health care dollars and decisions and third party insurance executives are directly accountable to those who pay the health care bills.

Obviously, Congress needs to start over and get it right.

Robert E. Moffit is director of the Center for Health Policy Studies at The Heritage Foundation ( This column originally appeared in Physicians News Digest and is reprinted with permission.