Every year Congress goes through a Medicare ritual. The law as written requires about a 20% reduction in payments to doctors. Medicare’s rates are already low causing many physicians to refuse new Medicare patients who don’t have supplemental insurance.These physicians usually are the best in each locale; it’s the weakest that stay in the system or the teaching physicians who are driven by complicated forces. Further reductions in physician payment would gut the system. So annually Congress suspends the reduction.

The problem is that the government wants to devise some way of reducing physician payments that both saves money and makes the system work better for all concerned. The government is not noted for saving money while increasing efficiency and productivity.

Gail R. Wilensky was the administrator of the Health Care Financing Administration now Centers for Medicare and Medicaid Services (CMS) – a name change by a federal bureaucracy usually means they’re up to something suspicious.  HCFA itself had another name. Dr Wilensky (she’s a PhD) is a very smart woman who understands Medicare’s rules for physician reimbursement – there can’t be more than five people who do in the entire galaxy. Last month in the NEJM she discussed how physician payment could be reformed. How something formless can be reformed is never considered.

Wilensky is not very hopeful. The last two sentences in her piece show why:

There is no quick fix for physician payment reform. Under the most optimistic of scheduling scenarios, the implementation of a redesigned system is unlikely to occur before January 2013. The first quarter of 2009 is none too soon to start.

Why is it so hard to do the impossible? To begin with, every time Medicare changes the rules for payment an army of lawyers and coders goes to work finding new ways to legally get around them.  Furthermore, we’d have to understand what we’re doing now. The following paragraph from Wilensky’s piece is beyond my powers of translation:

Because the risk of inappropriate volume increases is much greater with a disaggregated billing system, as the experiences of the 1980s showed, updates to the fee schedule have followed a top-down strategy. Since the early 1990s, overall Medicare spending has been tied to a preset target — initially to the volume performance standard (an amount that was set into law each year) and now, through the sustainable growth rate (SGR), to the rate of growth in the economy. Fees are adjusted whenever overall spending is greater (or less) than the target level.

What Wilensky wants is for the government to set prices and control costs such that they will not have the effect that government price controls always have – they decrease the supply of whatever is subject to these controls. She’s after the philosopher’s stone and Eldorado. We’re all going to see more of this as we move to a national healthcare system run by the federal government. If you have school age children tell them to forget Spanish as their foreign language. They should opt for Bureaucratish.