Media and Federal Government Mislead on Physician “Overcharges” and True Source of Medicare’s Problems

By David McKalip, M.D.

Do you want the $100 doctor or the $200 doctor? That is essentially the question you need to ask as a patient while the media and the Federal government attack physicians as charging “too much”.  With the recent release of Medical physician payment data, the media is full of stories of doctors who are “over-charging” the system. While there is obvious fraud and abuse, that is not the main focus of these stories. Instead medical outlets like Pro-Publica and the Wall Street Journal run lists of doctors charging at the highest possible rate for their care and the percentage of time they charge that rate.  They illustrate the larger alleged “overcharging” issue with anecdotes of obvious abuse, but ignore or minimize findings that the vast majority of billing and collecting by physicians is proper.

What is at the heart of the erroneous conclusion that doctors are “over-charging” Medicare is the fact that Federal government actually sets the prices for what doctors are paid.  Think about this for a minute.  Does the federal government set the prices for plumbers, lawyers, auto mechanics, nurses, or even local law enforcement or firefighters? The answer is no!  It turns out that the complaints by the media about doctors charging “Top Dollar” (as ProPublica dramatically calls it) is about a doctor collecting $208.07 for a comprehensive medical evaluation.  So if you go see your brain surgeon (like this doctor/author) and he spends about 45 minutes of his time on determining the diagnosis, prognosis and best treatments for your brain tumor, was $208.07 too much for that?  What about a heart surgeon evaluating your damaged heart valve, or your internal medicine doctor looking at you and your out of control diabetes? Would it be better if that doctor were paid $108.31? That is the amount sought by some who want to see the “average” payment be the “middle code” (a level 3 out of five – as if some sort of arbitrary set of coding numbers accurately describes the correct level of payment – see table below)! Would you get the doctor to spend as much time and devote as much attention? Would they instead hire a nurse to do your care (which happens all too much already precisely due to low physician payment)? Would a student decide it was a good idea to invest the time to become a doctor, take on the debt, run their office, face the malpractice risk and devote time away from their family and leisure for $108.31 for full service?  Don’t bet on it.  In fact the true value for the care received by patients is probably closer to 250% of that rate (see table at end of story).

Consider the training of an internal medicine doctor. Four years of college then four years of medical school then three years of residency. Then consider they must become board certified and then maintain that certification with continuing medical education.  Is the skill and experience of that doctor to do an initial history and physical worth only $208.07? How about for a neurosurgeon who spent seven to eight years in residency (after 8 years of college and medical school).  Now consider the fact that the physicians have delayed much of their life to learn Medicine (during the prime of their young adult life), must buy malpractice insurance sometimes at the $100,000 level, comply with endless costly regulations of the government including computerized records costing tens of thousands and still keep their office open and staff paid. Is that visit really only worth $208.07? It turns out that Medicare has looked at this issue and discovered that the alleged “overpayment” is about $43 per case and the cost for investigating each one (which occur in 7% of cases for subsequent office visits) would be up to $55 per case. The investigation would cost more than the return on the findings.  Further, most times the coding used is fully justified based on documentation. This is especially with the new computer systems the government coerced doctors into buying which have built in features designed to generate the highest possible code (a level 5). Paradoxically this pressure to buy computers led to higher coding and payment since it became easier to document all the things doctors have really been doing for years – a fact that stunned government officials! Further, the amount paid out to hospitals in alleged improper payments is twice that allegedly paid to doctors. Finally, the analysis of groups of data is not the same as individual audits of charts. It turns out that when physician coding is audited individually, it is often found to be accurate and physicians have a high rate of winning appeals against such “overpayment” claims.

This is a case of government price fixing producing what it always does: shortages. In this case there is a well-known shortage of primary care doctors since they can’t afford to stay in practice with the low payment from Medicare. That is why there is a proliferation of nurses, nurse practitioners and physicians assistants.  This phenomenon is well known. Think of the gas lines when Richard Nixon imposed price controls on gasoline, or the waiting list for New York apartments with price controls or the Venezuelans lining for food with the price controls in that country.  Price ceilings cause shortages, in this case a shortage of doctors willing to work for less to see more patients themselves.

The fact is that the Medicare fee schedule pays doctors far too little. It is a government price fixing scheme set by bureaucrats who are desperately trying to hide from the following fact: the Government can’t REALLY pay for the promised cost of Medicare it created in 1965. Rather than admitting that this big government programs can’t deliver (like the VA) it sets unreasonably low prices for valuable physician services. It is now trying to find other excuses to not pay for the doctor’s bill for care you need as a patient with so-called “pay for performance” (PFP). PFP (and global charges/bundling) is merely a scheme where doctors are given a single budget for your episode of care (say a heart attack) and penalized if they spend more money on you than the government and insurers want to spend. That leads to rationing of care as budgets are tightened.

The next time you see a story about a doctor charging “too much” for a Medicare visit, ask yourself how much it costs for an hour of labor to have your mechanic work on your car, your plumber to come fix your toilet, your lawyer to make a Will, your accountant to do your taxes and more.  Do you really think that your brain surgeon is worth only $208.07 to see your for your brain tumor but it is okay to pay hundreds to have your transmission replaced, Last Will drawn up,  or air conditioner fixed?   There is only one reason why these stories are coming out now, and that is that the government is running out of money that it promised for health care in the massive government system called Medicare. It is about to get even worse with the supermassive system called Obamacare and the VA system is crashing as we speak. The easy target is the doctor, but the American people should recognize the real culprit if the government that created these programs in the first place.

There is no solution to be found in more price controls, regulations, audits, investigations, pay for performance and the like. There is no real solution for patients in the media/government/corporate demonization of doctors who are already spending less time with patients as they hustle to make up for lower payments and higher cost of practice. The real solution is to do the following: 1) confine government health care benefits to those who are either poor or combat wounded vets (with private vouchers), 2) allow people to keep their own money to buy all health care and health insurance tax free, and 3) allow the market to work as patients use their own money to shop and drive down costs and increase quality and access to care for all.



Code – for 1st office visit Medicare Payment 2014 Likely True Market Value*
99201 (level 1) $43.08 $107.70
99202 (level 2) $74.21 $185.53
99203 (level 3) $108.31 $270.78
99204 (level 4) $167.07 $417.68
99205 (level 5) $208.07 $520.18
The payment rates for Level 1-5 codes paid by Medicare for Physician 1st office visit. This is the price fixed artificially by government bureaucrats that has led to physician shortages as their costs have gone up without compensation. These payments to doctors have barely budged for years. A more accurate representation of the actual value of these physicians services is also provided (*based on 2.5 x Medicare rate, applied across all specialties as an approximate value). Is $208.07 really “too much” to pay for an evaluation by a doctor of a brand new patient? The real problem is the limited Federal budget and the inability of politicians to deliver on their Medicare promises.

3 Replies:

  1. Pingback: Minnesota Physician-Patient Alliance » Blog Archive » Doctors are not at fault for Medicare’s soaring health care costs: Obamacre’s cost containment strategy

  2. Sen. Burticus

    We all know now that the Supreme Court of the United States, after finding no enumerated federal power over sick treatment or insurance in Article 1, Section 8, has declared the 2,700 page (Orwellian-named) Patient Protection and “Affordable” Care Act (“CONgressCare”) is constitutional, since it is a TAX.

    However, those of us who have read our founding documents recognized that such a tax would obviously represent another direct federal tax on individual citizens without apportionment in proportion to the census, which is prohibited by Article 1, Section 9, “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census…” The framers’ intent clearly was to prohibit the federal government’s current practice of directly taxing the citizens of the several states, then puppeteering the state legislatures with “federal money” robbed from their own citizens.

    The justices also seem to have forgotten the provision in Article 1, Section 7, “All Bills for raising Revenue shall originate in the House of Representatives…” Those paying attention know the CONgressCare bill originated in the U.S. Senate, not the House.

    Such contradictions become apparent when judges attempt to justify federal usurpations by wringing new meanings out of our founding documents and laws, rather than, as counseled by Thomas Jefferson, “On every question of construction, let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or intended against it, conform to the probable one in which it was passed.”

    Since it is improbable that a supposedly strict constructionist as Chief Justice Roberts would be so ignorant of the constitution he is sworn to uphold, I can only surmise that the probable explanation is the NSA spies have some serious “dirt” on him. This, in turn, is what happens when the court blesses other obvious usurpations as the (also Orwellian-named) “Patriot” Act, National Defense Authorization Act, Foreign Intelligence Surveillance Act and Cyber Intelligence Sharing and Protection Act.

    The framers’ intent is clearly stated by Alexander Hamilton in Federalist #78, “Every act of a delegated authority, contrary to the tenor of the commission under which it is exercised, is void. No legislative act, therefore, contrary to the Constitution, can be valid. To deny this, would be to affirm, that the deputy is greater than his principal; that the servant is above his master; that the representatives of the people are superior to the people themselves; that men acting by virtue of powers, may do not only what their powers do not authorize, but what they forbid.”

    Jefferson’s Resolutions on the Alien and Sedition Acts also clarify “…that whensoever the General Government assumes undelegated powers, its acts are unauthoritative, void, and of no force…, that the government created by this compact was not made the exclusive or final judge of the extent of the powers delegated to itself.” Since the court has failed to “let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution,” the state’s are faced with his suggested remedy “where powers are assumed which have not been delegated, a nullification of the act is the rightful remedy…”

    Of course, one would have to be delusion to expect the elephant/jackass sock puppets in our state legislature to nullify usurpations by the elephant/jackass sock puppets in CONgress. Yet voters keep holding their noses and re-re-re-electing only candidates wearing elephant or jackass costumes. Nothing changes.

Comments are closed.