The Health Care Rub

As Senator Clinton and Mitt Romney debate the pros and cons of mandatory health insurance, one vital ingredient has been forgotten: the physicians who provide our medical care.

With demand for medical services growing, we need to encourage more people to go into medicine. But doctors aren't getting much respect these days.

Last year, the government's Center for Medicare & Medicaid Services ordered that doctors' Medicare reimbursements be cut by 10% effective January 1, 2008. Then in December, Congress postponed the effective date to July. Will those cuts take place?

With the increase in the over-65 population to 38 million and the more than 4 million elderly and disabled Medicare enrollees in New York and New Jersey, it's almost impossible for doctors to avoid participating in Medicare and accepting Medicare fees.

Physicians can opt out of Medicare and treat patients privately as long as they sign contracts agreeing to forego Medicare payments for all services and patients for two years. Few do this, and last year 94% of physicians participated in Medicare, up from 88% in 2000.

But, here's the rub for Medicare patients: Cutting reimbursements affects patient service. Some bright, young people might be discouraged from entering the profession, so patients might not get the best possible doctors.

Also, physicians take a limited number of Medicare patients, allocating their time first to others who pay the higher fees. The bigger the gap between Medicare and other rates, the longer that Medicare patients have to wait for appointments.

To constrain increases in Medicare spending, Congress in 1997 set up a formula for adjusting doctors' Medicare reimbursement rates. If actual expenditures grow more than by a target growth rate, payments are reduced for the following year. Or, if more elderly people catch flu one year, doctors' rates go down the next.

In 2006 and 2007 Medicare reimbursement rates were supposed to decline by 4.5% and 5% respectively, but Congress passed legislation to keep rates the same, at a cost of $11 billion for the two years. Congress's December action to rescue the physicians from cuts until July 1 cost $2.7 billion. No one knows what will happen this summer.

According to the scholar in Health Care and Retirement Policy at the American Enterprise Institute, Joseph Antos, "the real fraud is that Congress is not complying with the law and cutting spending." Congress pretends to be cutting Medicare costs in its budget, but lacks the courage, year-by-year, to go through with cuts.

Congress regulates physicians' rates down, but regulates construction workers' wages up. Under the Davis-Bacon Act, workers' wages for any project with over $2,000 in federal funds are set by the Labor Department at prevailing wage rates.

Operators of asphalt spreaders in New York City are required to be paid hourly rates of $49.52, plus $24.80 in benefits, for a total of $74.32. They get 10 paid federal holidays a year, as well as Election Day. In contrast, in Manhattan a 25-minute check-up will garner a Medicare payment of $73.87, going down to $66.07 in July.

If Congress were serious about health care costs, there are other options. Americans could pay more of the cost. Medicare eligibility could gradually rise to 67, rather than 65, in line with the Social Security retirement age.

A managing partner of Washington D.C.'s Neurology Center, Dr. Brian Avin, suggests establishing a standard for electronic records to encourage doctors to buy cost-saving digital databases. "I won't go electronic until there's a standard," Mr. Avin said in a telephone conversation, "because I don't want a $600,000 investment for my 18-physician practice to become obsolete."

Physicians acknowledge that doctors practice "defensive medicine," doing more tests than necessary to discourage, or win, malpractice lawsuits. If Congress were to pass tort reform, costs for unnecessary tests and malpractice insurance would fall.

Americans could do more to keep themselves healthy. Forty-five years after the Surgeon-General said that smoking was dangerous, there are still half a million cigarette-related deaths and far more illnesses, even though smoking has declined. And levels of childhood obesity are rising, with 17% of children between two and 19 seriously overweight, twice the rate of the 1970s.

This is not just a short-term issue that will seem to go away in July when Congress decides whether to cut physician reimbursements. It is a long-term concern affecting patient care and international competitiveness. Let's end the charade of cutting Medicare reimbursements and, instead, take a sensible approach to health care.

Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. She can be reached at dfr@hudson.org.