Healthcare Reform: Good for Doctors Now, But the Bite Is Coming

Like insurance companies, physicians and hospitals will benefit from healthcare reform, but the long-range impact on their financial health won't necessarily be good.

On the positive side, these providers will get more insured patients. On the negative side, the changes in reimbursement methods that Medicare is looking into will lead to major changes in how healthcare is delivered and paid for. There will be winners and losers, and many doctors may eventually earn less than they do now.

In the short run, however, it's hard to see how they won't do well. To begin with, coverage will start growing within six months after President Obama signs the bill passed by the House on Sunday night. The bill will immediately allow parents to cover their young adult children and will prohibit children from being denied insurance because of their health status. Adults can't have their coverage dropped when they get sick, and people who are denied health insurance because of their health conditions will be eligible for beefed-up high-risk insurance pools. All of these measures should reduce the number of patients who can't pay their bills.

Then, four years from now, the big Medicaid expansion and the individual mandate to purchase insurance will take effect. By 2019, these provisions will expand coverage to an estimated 32 million people, greatly reducing the number of patients who can't pay their bills. The impact will vary from physician to physician, depending on whether they now provide care to uninsured and Medicaid patients. Those who do will benefit the most from the expansion of private insurance; the requirement that coverage purchased in the health insurance exchanges meet minimum benefit standards will improve the situation even more. But no physician will benefit from getting more Medicaid patients unless Medicaid programs increase their reimbursement, which physicians say is less than the cost of providing care.

Unfortunately, this is unlikely to happen unless the economy turns around and states' budget deficits are erased. Even in that case, Medicaid may not pay better. The states are crying about having to provide Medicaid to more people, and they're likely to hold the line on payments to healthcare providers.

Hospitals have complained about having to accept reduced Medicare payments to help fund reform. But the American Hospital Association (AHA), which relayed these complaints to the White House, does not represent all hospitals. Both the Federation of American Hospitals (FAH), which represents for-profit facilities, and the Catholic Healthcare Association (CHA), which represents about 600 nonprofit institutions, came out in favor of reform before Sunday's vote.

Apart from the moral issues involved, hospitals have a financial stake in reducing the amount of uncompensated care they provide. Consider this remark from FAH President Chip Kahn:

We think [reform] is the right thing to do and, clearly, in terms of the health of the hospitals, it will make a big difference over time because the kind of accommodations we have to make financially to assure everyone's care when they come through the doors is a major problem for us. Coverage expansion can go a long way to solve that problem.

In the long run, hospitals, like physicians, will have to contend with new Medicare reimbursement methods that stress quality and may even include global budgeting. Reform provisions would require Medicare to try out accountable care organizations, payment bundling, and other methods that would require hospitals and doctors to work together. Private insurers are also moving in this direction. But the hospitals, which have deep pockets and already employ more than a third of doctors, are better positioned than small practices to ride out this impending storm.

The bottom line for healthcare providers is that reform will change how they do business. But even if this results in lower payments to some doctors and hospitals, providers will benefit if they get more paying customers and if current experiments lead to cost controls that prevent a systemic collapse.

Image supplied courtesy of the U.S. Defense Department