Obamacare’s Impact on Doctors—An Update

August 23, 2013 5 min read

Alyene Senger

@AlyeneSenger

Former Policy Analyst, Domestic Policy Studies, Institute for Family, Community, and Opportunity

Alyene Senger researched and wrote about the Affordable Care Act, Medicare, and conservative solutions to health care challenges.

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No class of American professionals will be more negatively impacted by the Patient Protection and Affordable Care Act (PPACA), commonly referred to as Obamacare, than physicians.

Third-party payment arrangements are already compromising the independence and integrity of the medical profession, and Obamacare reinforces the worst of these features.

Specifically, physicians will be subject to more government regulation and oversight, and will be increasingly dependent on unreliable government reimbursement for medical services. Doctors, already under tremendous pressure, will only see their jobs become more difficult.

The Flawed Medicare Payment Formula

Despite being a massive and sweeping piece of legislation—with an estimated 165 provisions affecting the Medicare program—Obamacare leaves Medicare’s flawed physician payment system in place, providing no solution for the perpetual problem facing Medicare physicians.

Members of the medical profession expected Congress and the Administration to remedy this problem through health care reform, but they failed to do so. So, doctors continue to face the threat of deep payment cuts under Medicare’s sustainable growth rate (SGR) formula, which governs the annual growth of Medicare physician payments. The drastic provider payment cuts called for by the SGR would reduce seniors’ access to care. Thus, Congress has passed a last-minute and temporary “doc fix” each year since 2003 to override the flawed payment system. For 2014, doctors face an estimated payment reduction of 25 percent unless Congress passes another doc fix.[1]

Medicaid Expansion and Payment

Under Obamacare, Medicaid will be expanded in states that agree to do so to cover any individual earning up to 138 percent of the federal poverty level—$15,856 for an individual in 2013.[2] The Congressional Budget Office (CBO) projects that this expansion will add 12 million individuals to Medicaid by 2015.[3] But physician reimbursement for Medicaid patients is already significantly below those of the private sector. For instance, in 2008, physicians participating in Medicaid were paid on average only 58 percent of what physicians earn in the private sector.[4] The lower Medicaid payments are already contributing to serious access problems for low-income persons and worsened hospital emergency room overcrowding. In 2011, one of three primary care physicians would not accept new Medicaid patients.[5]

Obamacare does indeed provide some limited reimbursement relief to physicians. In 2011, for instance, Medicare primary care physicians and general surgeons practicing in “shortage” areas began receiving a 10 percent bonus payment. Obamacare also temporarily increases Medicaid payment for primary care physicians to no less than 100 percent of the Medicare payment rates for their services for 2013 and 2014—with the federal taxpayer making up the difference between Medicaid funding and the higher Medicare payment rates. While this is some consolation for Medicaid physicians, it should be noted that Medicare also pays significantly less than the private sector; for example, in 2009, Medicare paid physicians about 80 percent of private-sector payments.[6] There is no provision for continued federal taxpayer funding beyond these two years, so taxpayers in the states will have to fund significantly higher Medicaid expenditures or their Medicaid physicians will face a payment cliff: a big decrease in their payments after 2014.

More Bureaucracy, More Rules

Obamacare will also impose more rules, regulations, and restrictions on physicians. Since 2010, with few exceptions, the law prohibited physicians from referring Medicare patients to hospitals in which they have ownership. Thus, a whole class of physician-owned, specialty hospitals has been removed from competition, even though they enjoyed an undisputed record of providing high-quality patient care.

In addition to the mountain of existing regulations over physician payment, the new law creates numerous new federal agencies, boards, and commissions. There are three that have direct relevance to physicians and the practice of medicine:

The IPAB is essentially a health-care rationing body. By setting doctor reimbursement rates for Medicare and determining which procedures and drugs will be covered and at what price, the IPAB will be able to stop certain treatments its members do not favor by simply setting rates to levels where no doctor or hospital will perform them.[8]

Obamacare creates a “nonprofit” Patient-Centered Outcomes Research Institute. In effect, the institute will be examining clinical effectiveness of medical treatments, procedures, drugs, and medical devices.[7] Much will depend on how exactly the findings and recommendations will be implemented or applied, and which financial incentives, penalties, or regulatory requirements will accompany them. While findings could very well prove valuable to physician and patient decision making, there is also a danger that recommendations or guidelines could interfere with the doctor–patient relationship or retard clinical innovation in the delivery of care.
Obamacare creates the Independent Payment Advisory Board (IPAB) comprised of 15 unelected bureaucrats. IPAB’s goal is to reduce the per capita growth rate in Medicare spending in accordance with specified targets (based initially on measures of inflation and eventually GDP growth) and make recommendations for slowing growth in non-federal health programs. IPAB’s recommendations would go into effect unless Congress enacts an alternative proposal of equivalent savings. The only mechanism available to IPAB is to control spending through reimbursement cuts, which would enable it to limit payment for selected services and medical procedures or for Medicare physician payment. As former Vermont Governor Howard Dean (D) has written,
Obamacare creates a variety of pay-for-performance programs. Specifically for physicians, Obamacare implements a value-based payment modifier, which will be applied to Medicare physician reimbursement beginning in 2015. Pay will be adjusted to reflect performance using quality data from the Physician Quality Reporting System and cost data from Medicare fee-for-service claims.

While these programs are designed to improve the quality of care, the danger is that they will create powerful economic incentives to comply with standardized guidelines at the expense of individual patient care, encouraging doctors and other medical professionals to “check the box” and achieve a high and financially beneficial score as a condition of participating in the government’s health programs.

Doctor Dissatisfaction

The people of the United States are already facing a severe physician shortage. According to the American Association of Medical Colleges, by 2020, the nation will need an additional 91,500 doctors to meet medical demand.[9] Obamacare exacerbates this problem by further worsening physicians’ attitude regarding the health care system. According to a survey by The Doctors Company, the largest insurer of physician and surgeon medical liability in the nation, not only do doctors believe that Obamacare will not improve the health care system, they also anticipate that it will make the current condition worse. According to the survey, nine of 10 physicians are unwilling to recommend health care as a profession to a family member.[10] Worse, the survey found that health care reform is motivating doctors to change their retirement time line, with 43 percent of respondents stating that they are considering retiring within the next five years as a result of the law.

Despite the American Medical Association’s high-profile endorsement of the law, based on a myriad of polling and surveys of physician sentiment, none of this should be surprising. Obamacare neglects physicians’ most pressing concerns, such as tort reform, and significantly worsens the already painful problems that come with third-party payment and government red tape.

Patient-Centered Health Care Reform

A key goal of health care reform should be the restoration of the traditional doctor–patient relationship. In such a relationship, physicians would be the key decision makers in the delivery of care, and patients would be the key decision makers in the financing of care. This cannot be achieved unless and until patients, not the government, control health care dollars and decisions, and third-party insurance executives are directly accountable to individuals and families, who really pay the health care bills.

Obamacare accomplishes none of these reform objectives, and, indeed, takes the country in the exact opposite direction. It encases the very worst features of today’s third-party payment system—lack of direct accountability and consumer control—in statutory cement. That is why Congress must repeal Obamacare and start over.

—Alyene Senger is a Research Associate in the Center for Health Policy Studies at The Heritage Foundation.

[1]Centers for Medicare and Medicaid Services, 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, May 31, 2013, p. 2,http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf (accessed August 21, 2013).

[2]U.S. Department of Health and Human Services, “2013 Poverty Guidelines,”http://aspe.hhs.gov/poverty/13poverty.cfm (accessed August 20, 2013).

[3]Congressional Budget Office, “Table 1: CBO’s May 2013 Estimate of the Affordable Care Act on Health Insurance Coverage,”http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf (accessed August 20, 2013).

[4]Centers for Medicare and Medicaid Services, Office of the Actuary, “Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers,” May 31, 2013, p. 8,http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2013TRAlternativeScenario.pdf (accessed August 21, 2013).

[5]Sandra L. Decker, “Two-Thirds of Primary Care Physicians Accepted New Medicaid Patients in 2011–12: A Baseline to Measure Future Acceptance Rates,” Health Affairs, Vol. 32, No. 7 (2013), pp. 1183–1187.

[6]Centers for Medicare and Medicaid Services, Office of the Actuary, “Projected Medicare Expenditures under Illustrative Scenarios,” p. 8.

[7]For an excellent explanation of comparative effectiveness research and its potential impact, see Kathryn Nix, “Comparative Effectiveness Research Under Obamacare: A Slippery Slope to Health Care Rationing,” Heritage Foundation Backgrounder No. 2679, April 12, 2012,http://www.heritage.org/research/reports/2012/04/comparative-effectiveness-research-under-obamacare-a-slippery-slope-to-health-care-rationing.

[8]Howard Dean, “The Affordable Care Act’s Rate-Setting Won't Work,” The Wall Street Journal, July 28, 2013, http://online.wsj.com/article/SB10001424127887324110404578628542498014414.html (accessed August 22, 2013).

[9]American Association of Medical Colleges, “Physician Shortages to Worsen Without Increases in Residency Training,” https://www.aamc.org/download/286592/data/ (accessed August 21, 2013).

[10]The Doctors Company Market Research, “The Future of Health Care: A National Survey of Physicians,” February 29, 2012,http://www.thedoctors.com/ecm/groups/public/@tdc/@web/documents/web_content/con_id_004676.pdf(accessed August 21, 2013).