The Doctor Will See You Now – Or Else!

 
It has been clear since the passage of Obamacare, with its ludicrous economic projections and Enron-accurate accounting, that the outcome of this gargantuan medical gewgaw will be enormous shortfalls in funding for healthcare. The long-term consequences of its financial chicanery are legion, from spiraling deficits, to drastic cutbacks in funding to hospitals and health care providers , to the hyperbolically-described “death panels”: restrictions in payment for health care services as determined by faceless bureaucrats, based on cost considerations masquerading under the paper-thin guise of “medical consensus.”

One of the most disastrous aspects of this plan, both economically and practically, has been the decision to provide coverage for the low-income uninsured by rolling them into Medicaid, the joint federal and state health insurance program for the poor. Medicaid in virtually every state has been an economic disaster, leading to massive state budgetary deficits, and reimbursements to physicians and other health providers substantially below the costs of providing services. This has resulted in the inevitable migration of physicians out of Medicaid, and increasingly from Medicare as well, as Medicare treads the same path of massive bureaucratic burdens on providers and sharply declining reimbursements. The end result has been a crisis of access, where covered patients under these federal programs are increasingly unable to find physicians who will see them. The massive expansion of beneficiaries in Medicaid will drastically worsen this access problem, leaving many, if not most, of the newly covered without health care.

In a classic statist response to this inevitable and impending crisis, our aristocratic masters have discovered, anew, the joys of coercion and intimidation in solving another of their self-engendered debacles:

Justice Department declares war on doctors

Today the Antitrust Division, joined by Idaho Attorney General … forced a a group of Boise orthopedists to accept price controls for worker’s compensation and HMO contracts as part of a settlement accusing the doctors of “price fixing.” According to the complaint, the conspiring orthopedists engaged in two antitrust conspiracies, which took place from 2006 to 2008. In the first conspiracy, through a series of meetings and other communications, the orthopedists agreed not to treat most patients covered by workers’ compensation insurance.

They entered into a group boycott in order to force the Idaho Industrial Commission to increase the rates at which orthopedists were paid for treating injured workers. The Idaho Industrial Commission sets the fee schedule that determines the amount that orthopedists and other healthcare providers receive for treating patients covered by workers’ compensation insurance. The boycott resulted in a shortage of orthopedists willing to treat workers’ compensation patients…

In the second conspiracy, all of the defendants … and other conspiring orthopedists agreed to threaten to terminate their contracts with Blue Cross of Idaho. They jointly threatened to terminate their contracts to force Blue Cross of Idaho to offer better contract terms to orthopedists.

The proposed settlement prevents the Idaho Orthopedic Society and the named orthopedists from agreeing with their competitors on fees and contract terms. The settlement also prohibits them from collectively denying medical care to patients, refusing to deal with any payer or threatening to terminate contracts with any payer.

To say this action is chilling is a profound understatement: the implications of this settlement are nothing less than the erosion and ultimate destruction of our current system of providing health care in this country.

At first glance, this appears to be a legitimate attack on a price-fixing scheme by physicians to increase their income. The reality is far more sinister.

The Justice Department, in cooperation with the Idaho State Attorney General, brought suit against the physicians under the Sherman Antitrust Act. Passed in 1890, it was designed to prevent collusion by Standard Oil and other oil companies to raise prices by creating monopolies or cartels. The Act and its application has been controversial since day one, and it has morphed over the years to address real or perceived commercial malfeasance far removed from its original intent.

The case against the physicians in Idaho represents a tectonic shift in the way government deals with the physicians they pay. As the Mises Economics blog points out:

This case is a watershed for two reasons: First, until now the Federal Trade Commission, not the Justice Department, has taken the lead in prosecuting physicians. Since 2000, the FTC has brought about three dozen cases against physicians (all but one of which settled without any trial). But the FTC only has civil and administrative jurisdiction; the Antitrust Division has civil and criminal jurisdiction. The Sherman Act makes no distinction between civil and criminal “price fixing,” so in a case like this, it’s entirely a matter of prosecutorial discretion whether to charge the doctors with a civil or criminal offense. Based on the descriptions in the Antitrust Division’s press release, there’s certainly no reason they couldn’t have prosecuted the doctors criminally and insisted upon prison sentences — and there’s little doubt such threats were made or implied to obtain the physicians’ agreement to the proposed “settlement.”

The second reason this is a landmark case is that the Justice Department has unambiguously stated that refusal to accept government price controls is a form of illegal “price fixing.” The FTC has hinted at this when it’s said physicians must accept Medicare-based reimbursement schedules from insurance companies. But the DOJ has gone the final step and said, “Government prices are market prices,” in the form of the Idaho Industrial Commission’s fee schedule. The IIC administers the state’s worker compensation system … This isn’t a quasi-private or semi-private entity. It’s a purely government operation.

What’s more, the Antitrust Division has linked a refusal to accept government price controls with a refusal to accept a “private” insurance company’s contract offer. This leaves little doubt that antitrust regulators consider insurance party contracts the equivalent of government price controls — and physicians and patients have no choice but to accept them.

Please read the whole article, in particular the update at the end. This settlement is nothing short of stunning.

Has the nickel dropped yet?

Virtually all health care provided in this country is contractual, whether by the Federal Government or third party private insurers. The consolidation of the insurance industry and the growth of government-funded health care — which Obamacare vastly expands — means that, with the exception of certain cash-based niches such as cosmetic surgery and Lasik procedures, physicians are legally obligated to accept the contractual fee for any covered service. The cartel in health care lies not with the physicians — who remain loosely organized if at all and prohibited (rightly and ethically so, in many ways) from unionization — but with the government and the insurance industry. The insurance industry closely tracks federal actions, both in regulation and fees — and hence both private insurance and the Federal Government collude in very real ways to fix physician fees.

In most areas of the country, a small number of major national insurance carriers insure the vast majority of patients not covered under Federal programs — thus leaving physicians largely powerless to refuse the increasingly austere payments these plans offer, lest they find themselves without patients. Thus the government and private insurance carriers are free to ratchet fees downward to the point where there can no no longer be economic viability for physicians. This is exactly the scenario under which the Idaho orthopedists declined to see patients — very reluctantly — who were covered under workman’s compensation, and threatened to withdraw en mass from their Blue Cross of Idaho contracts. They quite simply had no other leverage against the government/insurance cartel.

Now they have none.

It is important to realize that under antitrust law, there does not need to be a formal agreement or conspiracy to “fix prices” — collusion can be inferred by the behavior of competitors, to wit: if enough physicians in an area decline to see, say, Medicaid patients, because of unsustainably low fees, the Justice Department may infer that they are colluding to fix prices, and move against them with an antitrust action.

Checkmate.

It should not be difficult to see the inevitable outcome of this coercive economic thuggery. Physicians will inevitably be forced into large organizational relationships — primarily hospital-based (toward which there is a virtual stampede from private practice over the past 2 years) for economic security. But this financial haven will prove short-lived, as the endless financial pressures of burgeoning health care costs and spiraling federal and state deficits will drive many physicians from practice altogether as burdensome regulation and plummeting incomes ultimately drive the best and the brightest to find employment elsewhere. There will then be no doctor to see you — coerced or not — and the answer, as always the case in such government-engendered crises — must be a government solution: government-employed physicians. Hello, National Health Service.

Hyperventilatory, catastrophizing rhetoric? Right-wing extremist fear-mongering? Hysterical overreaction to loss of income? No, none of the above. Mark my words, we are witnessing the disassembly of the American system of medicine — a system which, for its many flaws, has provided the best and most advanced health care the world has ever known. For some, its destruction will be a victory, flush with the naive Utopian vision of universal, government-controlled health care.

For you, the patient, the outcome will prove far less sanguine.

9 thoughts on “The Doctor Will See You Now – Or Else!

  1. What these orthopedists apparently did is obviously illegal under the anti-trust laws. No doctor is required to accept the fee offered by the government or an insurance company. What you cannot do, under the law, is discuss a joint negotiating strategy with other independent docs, which the law views as colluding with your “competitors” to fix prices. The idea of the anti-trust law is to protect a market from monopolistic behavior.

    Three exceptions: 1. Group practice; 2. Independent docs in a joint risk arrangement; 3. “Clinical integration”. Any doc involved in business collaboration with other docs should understand these rules.

    You can argue that the rules are unfair, or unfairly administered…I might even agree with you.

    But I see nothing new, so yes, an over-reaction.

  2. Alan,

    That what they did may have violated antitrust law is a given. The problem here is twofold: 1) The effective monopoly exists on the side of the state and large insurance companies, who dictate fees for a very large percentage of these physicians’ practices. While it is true that any given physician may decline the contract rates offered by workman’s comp or Blue Cross, by so doing they will lose a large percentage of their patients, and be forced out of business — yet by accepting rates which do not even cover the cost of their expenses, their business is just as endangered. Heads I win, tails you lose. 2) The justice department is defining collusion quite loosely, in such a way that if any substantial number of physicians decide their payment rates are too low to survive (e.g. Medicaid) and drop out, Justice can interpret that as collusion.

    Time will tell, I suppose, but I would be very surprised if this legal thuggery is not used with increasing frequency as plummeting reimbursements force more and more physicians out of federal and state plans. The resulting checkmate is going to drive physicians in large numbers out of the profession, IMO.

  3. Dr. Bob: I agree with you that the antitrust laws are unfairly stacked in favor of insurance companies. I agree with you that the payment system is very broken.

    However, I don’t have too much sympathy for the plight of these orthopedists, who earn 3 or 4 or 5 times what I earn as a primary care doc (a geriatrician).

    You are also correct that the fees paid by government programs are riediculously low.

    This will be the case until a single health system covers everyone. In the meantime, the political support for adequate funding of medicare and medicaid is not there.

    There are many different ways to create a single system, not necessarily a British or Canadian or French or German or Taiwanese system. Every other developed country has a more effective system and a more cost-effective system, than us.

    Health care in the US is overpriced. Proceduralists make too much relative to primary care. Technology is overused, applied to the wrong patients. The payment system rewards overuse. There are too many “entrepeneurs” in every part of the health care system.

    So we agree that it is all a mess, but focus on different aspects of the innumerable broken parts.

  4. Just as an FYI to all. Take a look at any hospital bill you receive. i dare say that physician services are by far the least expensive part of that bill.

    Seems they are going after the wrong pockets

  5. I think one can see from the various comments that there is little sympathy for physicians. As a practicing General Surgeon I have seen my overhead (read insurance/govt bureaucracy) increase 500% over the twenty years that I have been in practice while my reimbursement is now at 25% of where I started. I ask you this: what business can withstand that sort of change. The coming demographic changes ie. exploding demand coupled with evaporating providers will create a great gnashing of teeth for the good old days when one could easily find a competent physician to take care of whatever problem, minor or life-threatening, that might arise. As for me, I think that the public is going to get what is coming to them.

  6. What Americans obviously need is the British system in which private practice brooks absolutely no interference from government. If you have insurance (and about 25% of the population do) you can enter a system where no type of treatment is denied you, the government has no influence on fees, everyone has a single room, the food is excellent and the quality of care unsurpassed. The uninsured can fund themselves out of savings (often a more economic alternative) or sponge on the taxpayer. The government provides a safety-net for everyone else, but it is rationed. You may have to wait for elective surgery, you won’t have access to the most expensive drugs, you may get treated by doctors in training who are not well supervised, and be subject to endless bureacratic interference. Still this system does produce a lower infant mortality that in the USA and greater longevity, so it can’t be all bad.

  7. What doctors bill for a procedure, is not what they get paid by the insurance companies. If a doctor bills $400 to glue a wound closed, they may only get paid 1/4 that by the insuarance company. This is an issue that the public who reads their health care bills do not understand.

  8. If things go as they’re going in Europe, there will be no way for a doctor to get patients without going with the program.

    In other words, you either accept the ridiculously low reimbursement offered by the program or you have no income at all.

    And the program will guarantee you an income, as it assigns patients to you while assuring there is no competition (doctors here aren’t free to set up practice, if there’s a “proper number” already in the area you’re not allowed to set up shop there, with the “proper number” being determined by the doctors already there and government agencies).
    This goes so far that there are restrictions on the number of students medical schools are allowed to take on each year, the number being adjusted to account for the number of doctors expected to retire by the time the freshmen graduate.

  9. Proceduralists provide a highly skilled service that takes more than a decade of training. If you want the services of the proceduralist, you’d better be prepared to pay for it.

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