Medicare Review

Current Issue

A Framework for Medicare Reform

John C. Goodman, PhD, President, NCPA

Executive Summary

Health care is the most serious domestic policy problem we have, and Medicare is the most important component of that problem. Every federal agency that has examined the issue has affirmed that we are on a dangerous, unsustainable spending path:

  • According to the Medicare Trustees, by 2012 the deficits in Social Security and Medicare will require one out of every 10 income tax dollars.

  • They will claim one in every four general revenue dollars by 2020 and almost one in two by 2030.

  • Of the two programs, Medicare is by far the most burdensome — with an unfunded liability five times that of Social Security.

  • On the current path, health care spending (mainly Medicare and Medicaid) will crowd out every other activity of the federal government by mid-century.

There are three underlying reasons for this dilemma: 

  • Since Medicare beneficiaries are participating in a use-it-or-lose-it system, patients can realize benefits only by consuming more care; they receive no personal benefit from consuming care prudently and they bear no personal cost if they are wasteful.

  • Since Medicare providers are trapped in a system in which they are paid predetermined fees for prescribed tasks, they have no financial incentives to improve outcomes, and physicians often receive less take-home pay if they provide low-cost, high-quality care.

  • Since Medicare is funded on a pay-as-you-go basis, many of today’s taxpayers are not saving and investing to fund their own post-retirement care; thus, today’s young workers will receive benefits only if future workers are willing to pay exorbitantly high tax rates.

Ideas Changing the World, National Center for Policy Analysis, John Goodman, PhD, President

Feedback . . .
Subscribe MedicalTuesday . . .
Subscribe HealthPlanUSA . . .

Government is not the solution to our problems, government is the problem.

- Ronald Reagan


Medicare Review

Previous Issue

Medicaid: Another loss of access caused by Obamacare: When will it end?

The significant promotion of Obama’s Health Plan initiative was to provide greater access to health care for the poor and poorly covered Americans. California was at the forefront of placing their Medicaid recipients into HMOs. These patients were thrilled with having a health insurance card like most middle class American. They did not notice the GMS at the end of their ID numbers which they interpreted as still being part of the government Medical service. We didn’t either when we were asked to have 500 of these added to our panel. We have always had an average of 20 percent of our practice from Medicaid rolls as our fair contribution to the down and trodden since the reimbursement never equaled our cost of caring for them.

We were asked by our IPA (independent practice association) to accept 500 of these Medicaid/Welfare --recipients into the HMO portion of our practice, which was approximately half of our practice. We were promised improve reimbursement to the Medicare fee system for the first visit and a 10% improvement for the follow up visits. We had assumed that several of these would enter our practice on a weekly basis. It should not have been a problem with our single employee practice in the final years before retirement. She was my receptionist, publicists, patient scheduler, buyer/purchaser of all office supplies, inventory control officer, accounts manager, and my sole office manager for a very controlled practice. There were the usual phone calls from a half dozen patients to schedule appoints, reps to be scheduled for five minutes of my time, daily charts to be processed, and filed. She was busy.

The very first day after these 500 welfare patients were added to our obligations, we had 65 messages on the phone the next morning instead of the usual three or four.  These messages came in at all hours of the day and night. It took her two hours to record all the messages and another three hours to process all the messages.  This rate continued on a daily basis. It was then that we realized that these patients did not have jobs. But they all had cell phones and could call from any place they were, day or night. We found that most of these had not been to a physician for three to 15 years. So there were no significant records to be transferred most of the basic informational data which greatly reduces the initial consultation in the usual new patient. It takes about twice as much time to obtain a complete medical history from the medically unsophisticated. Just to record the dates of a patient’s operations takes seconds to record from a prior record or from the medically informed as it does from a medical illiterate who begins to answer such a question with let’s see, we were living in Oklahoma at the time, my eldest was just starting the first grade, and . . . . . the year of her cholecystectomy took five minutes instead of five seconds.  So the first initial office consultation, examination, ordering lab testing, x-ray requests and prescription writing grew from 45 minutes to 75 minutes. But we got paid Medicare rates of $85. But when these patients returned for their office visits to review their status, response to drugs, go over their lab and x-ray data, make plans for their future care, the office call increased from 15 minutes to 25 minutes. But remember we would get a 10% boost in payment. It took a few months before the data came in and we noticed that the HMO vs Medicaid reimbursement for office visits had increased from $18 to $19.80 under the HMO coverage.

We also found out that our referral arrangements were no longer valid. Some of them noted the GMS at the end of their ID number and tracked them immediately and found the reimbursement was not significantly different than Medicaid and refused to see them. So these patients had far less access to care in their new arrangements than they had with Medicaid. The HMO had to find consultants for these patients in more remote areas. We felt uncomfortable to refer patients to consultants we didn’t know. This increases our liability also. When the HMO said that they could not find any consultants in one specialty that we needed for our patient in the Sacramento area, and gave us the name of a physician in San Francisco, about a hundred miles west of here, we were convinced that Obama’s promised of improved access in his plan was a blatant lie, we sorrowfully knew we had to make plans for withdrawal from this component of humanity.

These patients also gave us greater cause for concern. I always greeted these patients in the waiting room, welcomed them to my practice with a nice warm and friendly hand shake. One patient complained that I held her hand too long. Another asked me at the end of her exam, what could she do about her obesity, I pointed to her abdomen and gave my usual spiel (which is identical to the one Weight Watchers uses) that to maintain her weight of 180 pounds, she was eating 1800 calories. If she would reduce that by 500 calories a day, then in a 7 day week, she would lose 3500 calories which equals one pound. She complained to her HMO that I had called her a fatty, which then directs it to the State Department of Health Services, and hours can be spent on clearing this complaint that never happened. The state feels they need to pacify their “members” and makes such recommendations as “we have advise your doctor to take a course in sensitivity training” or take a course on “HIPAA Compliance.” Such little items on an evaluation form can cause great jeopardy to one’s license and we knew we had to make changes.

We also have completed 40-years of hospital and critical care pulmonary medicine practice having had as many as ten patients on life support in several hospitals at the same time. About five years ago, we moved our office into suburban Sacramento in Carmichael and continued with an ambulatory practice. This was reasonable since the hospitals had all established hospitalists to take care of inpatients. This has been common practice for decades for most physicians. However, our IPA and HMO were so desperate to become an Accountable Care Organization under Obamacare, that they used force to place patients. We were threatened to accept a patient on a gurney. We tried to reason with the HMO that such patients do not belong in an ambulatory care setting, but in a practice that saw hospital patients on a regular basis.

And so after six months, when my one person office staff gave me notice, I had to give my IPA notice that we had to withdraw from the remainder of the 500 welfare patients and extended to the President our apologies that his plan was not working. Their access to care was far worse despite our valiant attempts to improve it, they took more than twice as much professional time to deliver less than a quality of care that they did not understand and generally did not appreciate, that their hostility to my services were hazardous to my professional health, and the reimbursement for our professional care was less than their cost to me.

We should have followed the practice of Sandy Marcus, MD, President of the Physician’s Union, who accepted welfare as 10 percent of his practice, but never added the cost of billing and general harassment from Medicaid which he felt would exceed the 10% contribution to welfare by seeing these patient free.

So we decided it was good policy to see our long term welfare patients, which are 20% of our practice, avoid the cost of billing and make it a true charity. As long as physicians accept any welfare payments, no one recognizes our work. By eliminating  accepting payment, the public recognizes this as charity, gains respect and profession status, with no loss in income.

Feedback . . .
Subscribe MedicalTuesday . . .
Subscribe HealthPlanUSA . . .

Government is not the solution to our problems, government is the problem.

- Ronald Reagan


Medicare Review

Past Issue

In Government medicine, there is a perverse incentive to be uninsured "free riders."

As we move into the 21st century, it is clear that we are living with a number of institutions that were not designed for the Information Age. One of these institutions is our health care system.

Characteristics of an Ideal Health Care System

By John C. Goodman, President

National Center for Policy Analysis

NCPA Policy Report No. 242

Web site:

Why should government be involved at all in our health care system? Aside from providing care for low-income families, the most persuasive argument is that in the absence of coercion people will have an incentive to be uninsured “free riders.” In our society, people who choose not to pay for insurance know that they are likely to get health care anyway — even if they can’t pay for it. The reason is that there is a tacit, widely shared agreement that no one will be allowed to go without care. As a result, the willfully uninsured impose external costs on others — through the higher taxes or higher prices which subsidize the cost of their care. 

What evidence is there that free riders are a problem? One piece of evidence is the number of uninsured:

  • According to the Census Bureau, in 1999 there were 42.6 million people who were uninsured at any one time, a larger percentage of the population than a decade ago.
  • The rise in the number of uninsured has occurred during a time when per capita income and wealth, however measured, have been rising.

Although it is common to think of the uninsured as having low incomes, many families who lack insurance are solidly middle class. And the largest increase in the number of uninsured in recent years has occurred among higher-income families:

  • About one in seven uninsured persons lives in a family with an income between $50,000 and $75,000, and almost one in six earns more than $75,000.
  • Further, between 1993 and 1999, the bulk of the increase in the number of uninsured was among the households earning more than $50,000.
  • By contrast, in households earning less than $50,000 the number of uninsured decreased by about 5 percent.

In deciding to be uninsured by choice, many healthy individuals are undoubtedly responding to perverse incentives created by government policies.

  • On the one hand, we make an enormous amount of free care available to the uninsured; in Texas, for example, it totals $1,000 per uninsured person every year, on the average.
  • Also, federal and state laws are making it increasingly easy for people to obtain insurance after they get sick — thus removing the incentive to buy insurance when they are healthy.
  • Finally, although the federal government generously subsidizes employer-provided insurance, most of the uninsured are not eligible for an employer plan, and they get virtually no tax relief when they buy insurance on their own.

Far from solving the free rider problem, most government interventions these days are making the problem worse. Indeed, we might be better off under a policy of laissez faire.

If we accept the free rider argument, however, what policy implications logically follow from it? One commonly proposed solution is to have government require people to purchase insurance. However, this is neither necessary nor sufficient. Instead, a complete solution would have 10 characteristics. Adhering to each of them would lead to a system that provides a reasonable form of universal coverage for everyone without adding to national health care spending and without intrusive and unenforceable government mandates. . .

To read Dr. Goodman’s Ten Recommendations, go to . . . .

“People who fail to insure are likely to get health care anyway — even if they can’t pay for it.”

Feedback . . .
Subscribe MedicalTuesday . . .
Subscribe HealthPlanUSA . . .

Government is not the solution to our problems, government is the problem.

- Ronald Reagan

For other issues, please visit our archives.

We invite you to sign up for this biweekly newsletter.