NCPA - National Center for Policy Analysis

A Simple Way to Improve Medicare

December 1, 2010

Medicare's "doc fix" has been enacted and reenacted countless times over the past decade, says Jeffrey A. Singer, a surgeon in Phoenix, Arizona.

Each time the day of reckoning approaches, the American Medical Association (AMA) and others implore Congress to prevent the cuts under the sustainable growth rate.  They argue, correctly, that cuts to physicians' reimbursements will decrease the number of doctors participating in Medicare.  As more doctors leave, the argument goes, seniors will get less access to health care.

Inevitably, in the eleventh hour, Congress "fixes" the problem by passing temporary legislation upping the reimbursement rates.

Yet there is a simple short-term solution to the dilemma faced by Medicare, its beneficiaries and its providers, says Singer.

  • Let Medicare providers set their own fees, and end the ban on what's known as "balance billing."
  • Prior to the institution of government price controls in the 1980s, Medicare would pay a provider based upon a predetermined fee schedule.
  • Providers were free to bill the patients for the unpaid balance of their fees.
  • Assume, for example, that Medicare would pay $80 for an office visit; a doctor could accept that in full or charge $100 or $120 or whatever to his patients.

If doctors were set free from Medicare price controls by ending the ban on balance billing, then the Medicare administrators would be better able to reduce Medicare's contribution to provider reimbursement without fear of a physician exodus from the system.  The entire doc fix debate would become moot.

As Medicare beneficiaries pay a greater proportion of the providers' bills, market forces will ensue and price competition will lead to better choices for senior patients, says Singer.

Source: Jeffrey A. Singer, "A Simple Way to Improve Medicare," Reason Magazine, November 25, 2010.

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