Blue Cross Slashes Doctors' Pay

Last month Blue Cross put physician reimbursement cuts into effect in California and doctors were predictably outraged. "I don't know how anybody can afford to stay in practice and accept Blue Cross rates," Dr. Charles Fishman, a San Luis Obispo dermatologist told the Los Angeles Times. "Boo hoo" was undoubtedly the response from many readers. It's hard for the average American to feel much sympathy for a profession where the median income is $215,000 a year. Soon, Medicare will be making its own cuts, and weC"BBll hear a new round of complaints from doctors.

The point of all this cutting, of course, is to rein in spiraling health care costs. But reducing reimbursements to doctors never works in the long run, and you'd think payers would have learned that lesson by now. Why doesn't it work? Because medicine, as Dr. Arnold Relman, the former editor of the New England Journal of Medicine, once observed, is the ultimate piece work industry. When you pay them less per "piece," physicians can and do increase the volume of services they provide in order to make up for lost income.

That means that we donC"BBt end up saving any money by tightening reimbursements. But we do end up pissing off doctors, who donC"BBt really want to have to run around doing more procedures and seeing more patients just to maintain the same income. It also means we patients can expect to be given a lot more unnecessary procedures, because when doctors do more, they donC"BBt necessarily do more of what we really need. In the 1990s, managed care trimmed physician reimbursements and an avalanche of unnecessary procedures and blood tests and CT scans was the result.

All of which is just one more reason why fee-for-service has got to go. ItC"BBs a broken payment system, and it simply encourages bad quality care. Doctors need to be put on salaries.

Alan Sager, at Boston University, suggests that we take the portion of our national health care bill that already goes toward physician reimbursement C"BB about $500 billion C"BB and say to doctors, in effect, you can keep the money, but you have to take it in the form of a salary. Surgeons would no longer be paid separately for each surgery, and primary care physicians would no longer get a separate fee for each office visit.

We might want to redistribute the money a bit, so primary care doctors make a little more and the super-specialists make a little less. The main idea here is to recognize the fact that we canC"BBt save money by squeezing doctors, and what we ought to be doing is removing the financial incentives for giving patients care they don't need.