Medicare, Tests and Time

Peter Bach, former adviser to the Medicare and Medicaid administrator, wrote a NY Times op-ed arguing that the Medicare system pays doctors for how many tests they run with a given piece of equipment but not for how much time they spend with patients. Readers responded with letters on the subject.

From the op-ed:

Medicare pays doctors for specific services. If a patient has a checkup that includes an X-ray, a urine analysis and a physical, Medicare pays the doctor three separate fees.

Each fee is meant to reimburse the doctor for the time and skill he or she devotes to the patient. But it is also supposed to pay for overhead, and this is where the problem begins. To Medicare, a doctor’s overhead (or “practice expense”) includes such items as rent, staff salaries and the cost of high-tech medical equipment. When the agency pays a fee to a doctor who has performed a CT scan, it is meant to cover some of the cost of buying or leasing the scanner itself. Services using more expensive equipment generate higher fees.

Any first-year business school student can see the profit opportunity here. The cost of a CT scanner is fixed, but a doctor earns fees each time it is used. This means that a scanner becomes highly profitable as soon as it’s paid for.

In contrast, the doctor-patient visit, which involves no expensive equipment, offers no significant profit opportunity. So the best way for a doctor to make money in his practice is not to spend time with patients but to use equipment as much as possible. That means moving the maximum number of patients through the practice, and spending the minimum amount of time with each one.

Bach offers suggestions for how the system should be reformed. He also includes evidence showing the increase of testing.

The informed patient on Medicare should ask questions about exactly what tests are being performed and why, and should not be concerned with taking up too much of the doctor’s time.

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