Government: A Wedge Between Patient and Doctor

In the examination room, patients trust that the physician has their best interests at heart. Most do. Because patients no longer pay the bill, however, an alarming conflict of interest stands between patients and doctors.
The conflict, which affects every patient and every doctor, began with Medicare. The original Medicare law of 1965 promised that "Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine. . . ." Since then, however, Congress has chipped away at that promise through various regulations. Here's how.
Hospitals are paid according to Diagnostic Related Groups (DRGs), implemented in 1985. And doctors are paid according to Current Procedural Terminology (CPT) codes, developed in 1966. While both were meant to standardize payments across the country and limit government liability for medical costs, they have become a wedge between patient and doctor.
Medicare pays hospitals a fee according to the diagnostic code, not the actual cost of the care given. This can pressure doctors to do less, regardless of their patients' needs. As doctors order more tests or treatments, hospitals keep less of the DRG payment as profit. If the case becomes especially complicated, the hospital can submit a request for additional funds under a different DRG, but that process can be a bureaucratic nightmare of competing claims on the medical necessity of care already given.
Similarly, doctors submit fee-for-service CPT codes, generated by the American Medical Association and the Health Care Financing Administration (HCFA), which administers Medicare. CPT codes are usually changed annually according to the Medicare budget and political pressure. HCFA expects Medicare spending for physician services to shrink next year due to managed care enrollment. If spending does not fall--say, if senior citizens refuse to enroll in HMOs--HCFA would trim the physician fee schedule in the next year. That could drive doctors to see fewer Medicare patients or limit the care given to them.
Likewise, many HMOs limit payments to doctors through "withholds." HMOs withhold a percentage of each payment until the end of the fiscal year. Then, the doctor's number of referrals and hospitalizations, compliance with patient quotas, and patient satisfaction surveys are considered, along with the solubility of the HMO. Doctors may receive all, part, or none of the "withhold" money.
State governments have begun to adopt this technique in their Medicaid programs. In a soon-to- be-implemented "Performance Payment Plan," for example, the Minnesota Department of Human Services (DHS) will withhold, on average, 0.8 percent of each reimbursement. The goal is to improve compliance in child and teen check-ups; the intent is to expand the withhold to cover other requirements in the future. Jim Chase, director of purchase and service delivery for DHS, said "Our goal is to get as many people in as they can for those services." Logically, this means shorter appointment times for other patients, extended waiting times of those who are chronically ill, and more expensive emergency treatment for those who suddenly become sick.
As a result of these and other cost management techniques, the mindset of doctors and hospitals is shifting from compassion to calculation. The doctor and hospital feel pressure to do less, to stay within the diagnostic payment code, and to quickly discharge their patients. Patients become viewed as financial risks waiting to happen.
While no rules prohibit doctors from prescribing and curing according to their best medical judgment, there can be enormous financial penalties for doing so. Worse still, the doctor never knows for sure which course of treatment will elicit a penalty. The 1996 Health Insurance Portability and Accountability Act made health care fraud a felony punishable by fines, prison time, forfeiture of assets, and loss of license. Treatments considered medically unnecessary by HCFA can be classified as fraud, as can billing errors. All medical practices, not just Medicare and Medicaid, are subject. HCFA even proposed that fraud and abuse investigators be allowed to carry loaded firearms into doctor's offices.
The end results of such management controls: financial and ethical conflict of interest between patients and doctors.
The answer to fear and conflict lies in this principle: "He who holds the gold makes the rules." Until patients regain individual control and management of their health care dollars, outside administrative decisions and financial conflicts of interest will threaten medical judgment.
Written for the Heartland Institute's Intellectual Ammunition, January/February 1999.