Medicare Is Losing Talent

Published August 1, 2002

A growing number of U.S. physicians are refusing to accept new Medicare patients, and some physicians are withdrawing from Medicare altogether. The reason: Medicare’s complex system of administrative pricing is cutting physician reimbursements by 5.4 percent this year while forcing frustrated doctors to comply with an ever-growing body of incomprehensible rules and regulations.

“For years,” writes Robert Pear, veteran reporter on health care policy for The New York Times, “doctors have expressed frustration with Medicare, grumbling about reimbursement and complex federal regulations. But the latest reaction appears to be different. Doctors are acting on their concerns, in ways that could reduce access to care for patients who need it.”

In spite of the sobering news, the American Association of Retired Persons (AARP) strongly opposes increased payments to doctors and other providers in Medicare unless Congress first agrees to provide a “meaningful” prescription drug benefit in the Medicare program—a benefit that, under AARP’s own definition, would cost no less than $750 billion over 10 years.

That is far in excess of leading administration and congressional proposals and would guarantee a sharp acceleration of the rapidly rising cost of the financially troubled Medicare program. In making this demand, AARP is, in effect, holding doctors and other medical professionals hostage even though they, as a class, may not have any specific stake in the cost, design, or structure of the Medicare prescription drug benefit.

Archaic Central Planning

Medicare is a system of central planning and price regulation in which virtually every aspect of the financing and delivery of medical services to senior citizens is under bureaucratic control. Congress and the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs Medicare, define which benefits, medical services, and treatments or procedures seniors will (or will not) have available to them in the program.

With every benefit change, biomedical breakthrough, or innovation in technology or service delivery, Congress must change the law or authorize the Medicare bureaucracy to make the appropriate adjustments in changing the benefits or adding services or procedures.

This process is painfully slow and inefficient. Medicare patients must often wait while patients in the private sector receive much quicker access to new medical services and technologies.

The medical community has long lamented the morass of red tape, sluggish and inappropriate payments for services provided, and more recently fears of retaliation for even unintentional noncompliance posed by the current Medicare system. The emerging refusal of physicians to see Medicare patients is a new and ominous development that, if brought to the attention of Congress and the Bush administration, could prompt long-overdue substantive reform.

Steps toward Reform

Senior citizens’ reduced access to care and the deepening demoralization of doctors are rooted in the outdated structure of Medicare itself. Instead of relying on Medicare’s central planning and price regulations, Congress should enact structural changes that would enhance patient choice and control over health care decisions and move toward a more rational system.

A model for such reform exists in the popular and successful Federal Employees Health Benefits Program (FEHBP), the patient-centered, consumer-driven system that covers members of Congress, federal workers and retirees, and their 9 million family members.

To address the problems of Medicare before they reach crisis proportions with the forthcoming retirement of the 77-million-strong baby-boom generation, Congress and the administration should act quickly to initiate reform in the system. Specifically, they should:

  • Increase Medicare payments to doctors practicing in the Medicare program, reversing the 5.4 percent cut in this year’s Medicare physician reimbursement.
  • Intensify their review of the regulatory burdens facing doctors and other providers in the Medicare program and give them timely regulatory relief.
  • Continue to press for comprehensive Medicare reform. Congress and the administration should start to create a new competitive system modeled after the FEHBP.

Such a new system, based on patient choice and a competitive market, would enhance the quality of health care for a growing number of senior citizens and improve the working environment for physicians. The new competitive system would be characterized by rapid innovations in benefits and the efficient delivery of medical services, free of the sluggish bureaucratic process and red tape that hobble benefit-setting in the current Medicare program.

Doctors, Medicare patients, and the taxpayers who fund this system deserve such reform.

Robert E. Moffit, Ph.D., is director of domestic policy studies at The Heritage Foundation.

For more information …

This article summarizes Robert Moffit’s April 22, 2002 Heritage Foundation Backgrounder No. 1539, “Why Doctors Are Abandoning Medicare and What Should Be Done About It,” available online at