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How are the Doctors affected by Reform

What's Up, Docs?            

The AMA signs its members up to be civil servants.                    WSJ, July 20, 2009

Everyone supports "health reform" as an abstract goal, but that mile-wide consensus is an inch deep when it comes to substance. Increasingly, however, most of the major health industry lobbies seem prepared to concede the mile -- as long they get their inch.

The latest example is the American Medical Association's unqualified endorsement Thursday of the health bill patched together by House Democrats. In a letter to Ways and Means Chairman Charlie Rangel, the doctors group lays on its "appreciation and support" pretty thick, and pledges to "work with the House committees and leadership to build support." The so-called tri-committee plan is also the most left-leaning out there, funding its new coverage for the uninsured in part by cutting payments to doctors and hospitals in Medicare and Medicaid.

But lobbyists don't lobby for less revenue for their members, and Democrats seem to have procured the AMA's bouquet with what the AMA letter says is the promise of "fundamental Medicare reforms, including repeal of the sustainable growth rate," or SGR. The SGR is a formula that Congress created in 1997 as a form of fiscal triage, mandating automatic cuts in physician payments if entitlement spending rises too steeply. Next year, they're scheduled to drop by 21.5%.

Doctors despise the SGR, and understandably so.  Medicare's administered prices are already 20% to 30% lower than those of private insurers, and then Congress threatens to arbitrarily pay even less for the medical goods and services it wants to buy. However, Washington always swoops in with an 11th-hour reprieve that defers the pain to another year, given that even deeper cuts would cause many doctors to stop treating Medicare patients. But this only makes the distortions worse, creating an uncertain business climate and forcing some doctors to compensate by shifting costs onto their private patients or making up in volume what they lose on margin in Medicare.

Yes, ending this incoherent farce is a great idea. But the AMA is essentially saying that if doctors get paid more, all else is negotiable. Other industry lobbies such as the insurers and drug makers have made the same calculation, putting their short-term self-interest -- usually ensuring that government programs remain generous (enough) -- ahead of the long-run threats. It can't last.

The SGR is a perfect illustration of the only approach the political class has ever tried to control health spending -- and a preview of what is certain to happen under ObamaCare. As costs explode, Congress will try to wring out ever more "savings" by underpaying doctors and hospitals, and this central planning will be far easier because it will control the bulk of U.S. health dollars. Physicians -- especially the specialists who provide expensive treatments that the White House has decided qualify as "waste" -- will gradually be converted into civil servants a la the U.K. or Canada. All medicine will function, or not function, like Medicare does today, but much worse.

Some doctors realize as much. A coalition of 17 state medical associations and three specialty organizations is poised to break with the AMA over its Washington work. Another group of state hospital associations is at odds with their Beltway representatives over the deal cut with the White House to help defray universal coverage with $155 billion in across-the-board Medicare cuts. The plan "will do nothing to encourage changes in the delivery of health-care services," their protest reads, while hurting the nearly half of U.S. hospitals operating on a deficit or close to it.

Oh, and the Mayo Clinic -- upheld by President Obama and other Democrats as a model for reform -- also weighed in on the House bill Thursday, though without the AMA's fanfare. While noting "some positive provisions," it "misses the opportunity to help create higher-quality, more affordable health care for patients. In fact, it will do the opposite," the clinic's policy shop wrote in a statement. "In general, the proposals under discussion are not patient focused or results oriented. . . . The real losers will be the citizens of the United States."

Including, ultimately, the doctors who belong to the AMA.