NCPA - National Center for Policy Analysis

Freedom: A Doctor-Patient Privilege

October 15, 2015

In the five decades since the enactment of Medicare, the federal government has increasingly restricted the freedom of doctors and Medicare-eligible patients to contract privately for supplemental or alternative health services. Physicians face sharply below-market payments from Medicare, stringent price controls, increased regulations and at times incompetent and arbitrary administration by the program's bureaucracy. This trend could drive more doctors away from Medicare, potentially leading to a crisis like that in Medicaid -- the health program for low-income people -- in which patients have difficulty finding doctors willing to treat them.

While some will respond by calling for more rules and limits on nonparticipating physicians, a better solution lies in the opposite approach: providing more flexibility for Medicare patients and their doctors to contract for services free of undue federal regulation.

  • As a centralized, top-down program, Medicare Part B determines prices for medical services not on the basis of supply and demand, as the market does, but through bureaucratic fiat.
  • The program has 16 different payment systems for various types of providers and health plans and sets prices for more than 7,000 services in each of 89 payment localities.
  • The Affordable Care Act created the Independent Payment Advisory Board, charged with developing plans to reduce Medicare spending if it exceeds a predetermined rate of growth. This poses a further threat to future Medicare payments to healthcare providers.

The answer to these problems lies not in adding regulations or forcing doctors to participate in the program. Instead, the government should allow greater freedom to contract. This could help relieve some of the stress on Medicare's finances and encourage physicians to continue serving Medicare patients. Lawmakers also should relax opt-out rules so that they are not all or nothing. This approach could lead to greater innovation in health services, which also could help lower costs.

Source: David E. Bernstein, "Restoring Freedom of Contract between Doctor and Patient in Medicare Part B," Mercatus Center, September 30, 2015.


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