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Obamacare and its Impact on Doctors

76093422By Robert E. Moffit

Don’t expect doctors to give the Patient Protection and Affordable Care Act a clean bill of health. The act will reinforce the worst features of existing third-party payment arrangements in both the private and public sectors — arrangements that already compromise the professional independence and integrity of the medical profession.

Doctors will find themselves subject to more, not less, government regulation and oversight. Moreover, they will become increasingly dependent on unreliable government reimbursement for medical services. Medicare and Medicaid payment, including irrational government payment updates, are preserved (though shaved) and expanded to larger portions of the population.

The Act creates even more bureaucracies with authority over the kinds of health benefits, medical treatments and procedures that Americans get through public and private health insurance. The new law provides no serious relief for tort liability. Not surprisingly, various surveys reveal deep dissatisfaction and demoralization among medical professionals.

Under the new law, an estimated 18 million of the 34 million who would gain coverage over the next 10 years would be enrolled in Medicaid, a welfare program jointly administered and funded by the federal government and the states.

Such a massive Medicaid expansion will displace private health coverage, and expand government control over health care financing and delivery. Physician payments in the major entitlement programs, Medicare and Medicaid, are well below the prevailing rates in the private sector. On average, doctors in Medicare are paid 81 percent of private payment; physicians in Medicaid are paid 56 percent of private payment. Needless to say, today there are sporadic access issues for patients in Medicare, and major access problems for patients in Medicaid.

The new law does not substantially change the general pattern of the government’s systems of physician payment. Indeed, it only expands their reach and adds new regulatory restrictions. For example, beginning this year, the new law will prohibit physicians from referring patients to hospitals in which they have ownership, with the exception of hospitals that treat a large number of county patients enrolled in Medicaid.

In 2011, Medicare primary care physicians and general surgeons will receive a 10 percent bonus payment. In 2013, the law prescribes that primary care physicians participating in Medicaid will get Medicaid payment no less than 100 percent of the Medicare payment rates for their services for two years, 2013 and 2014. For the incremental costs to the states of these required increases, the new law authorizes 100 percent of additional federal taxpayer funding. There is no provision for continued federal taxpayer funding beyond these two years.

Medicare authorizes a set of administrative payment systems for doctors and hospitals. For physicians, the basic Medicare fee schedule is based on a formula called the Resource Based Relative Value Scale (RBRVS), which pays physicians based on the estimated “inputs” to provide a medical service, such as the time, energy and effort required to provide a medical service.

Medicare physician payment is annually updated on the basis of the Sustainable Growth Rate (SGR) formula, which ties annual physician payment increases to the performance of the general economy. Under the SGR, without congressional intervention, the initial Medicare pay cut would amount to 21.3 percent. The impact is not hard to fathom.

For example, the Fairfield County Medical Association in Connecticut reported that, if such cuts were to take effect, 41 percent of county doctors would stop taking new Medicare patients, and nearly one out of four doctors would drop Medicare altogether. Congress has shown no inclination to fix this problem without adding to the federal deficit, and thus can be expected to continue resorting to stop-gap measures to stop its own Medicare payment formula from actually going into effect.

On top of existing payment rules, regulations and guidelines, the new law creates numerous new federal agencies, boards and commissions. There are three that have direct relevance to physicians and the practice of medicine, and the nature and scope of the regulatory regime will be decisive.

Under section 6301, the new law creates a “non-profit” Patient-Centered Outcomes Research Institute. It will be financed through a Patient Centered Outcomes Research Trust Fund, with initial funding starting at $10 million this year, and reaching $150 million annually in Fiscal Year 2013, with additional revenues from insurance fees.

In effect, the Institute will be examining clinical effectiveness of medical treatments, procedures, drugs and medical devices. Much will depend upon how the findings and recommendations are implemented, and whether the recommendations are accompanied by financial incentives or penalties or regulatory requirements.

Under section 3403, there will be an Independent Payment Advisory Board, with 15 members appointed by the president. The goal of the board is to reduce the per capita growth rate in Medicare spending, and make recommendations for slowing growth in non-federal health programs. It’s hard to imagine any other outcome other than continued payment cuts.

Under section 3002, the law extends the Physician Quality Reporting Initiative. Focused on the quality of care delivered to Medicare beneficiaries, it is elemental to the time-consuming compliance with Medicare pay for performance rules and incentive payments. Much depends upon federal rules of implementation and enforcement. In any case, this is not a prescription for medical innovation.

Notwithstanding the American Medical Association’s high-profile endorsement of the massive Senate health bill bill (now the law of the land), recent polling underscores deep discontent among doctors. For example, according to a recent survey of physicians conducted by Athena Health and Sermo, 79 percent of physicians are less optimistic about the future of medicine; 66 percent indicated that they would consider dropping out of government health programs; and 53 percent would consider opting out of insurance altogether. More ominously, with America already facing a shortage of physicians, particularly in geriatrics and primary care, many physicians also say they would leave the profession.

But, based on earlier polling and surveys of physician sentiment, none of this should be surprising. The new law doesn’t address doctors’ most pressing concerns, such as tort reform. And it worsens the already painful problems with third-party payment and government red tape.

A key goal of health care reform should be to restore the traditional doctor-patient relationship. In such a relationship, doctors would be the key decision-makers in the delivery of care, and patients would be the key decision-makers in the financing of care. This cannot be achieved unless and until patients control health care dollars and decisions, and third party insurance executives are directly accountable to those who pay the health care bills. Obviously, Congress needs to start over and get it right.


Robert E. Moffit is director of the Center for Health Policy Studies at The Heritage Foundation (www.heritage.org).  He has held positions at U.S. Department of Health and Human Services and the Office of Personnel Management and has been published by The New York Times, The Wall Street Journal, The New York Post and The Washington Post, among others.


  1. Medical costs are increasing down the line and have been for some time and like the inflated housing costs, a correction is inevitable.
    A comprehensive employer based system in Hawaii, which is all private has stimulated great innovation in costs reductions. Medical care is assessed at high levels and efficiency is much improved. All this with the cooperation of medical and insurance industries.

    Likewise in Canada, a largely privately insured national system, costs are contained and care is of a generally higher quality than in the US.
    The high cost of administration has been cut down, and because of this
    more resources are available.

    Unlike the system at large in the US the Canadian and Hawaiian systems are designed with patient in mind. If doctors dictate everything according to their high profit motives, any form of regulation will be condemned. These are businessmen who are winded and dined by the pharma industry to push their products.

    If costs are largely mitiagated by administrative retooling as is very possible, then charges can be reduced as well. If the additional 18 million patients become medicare and medicaid patients, medical non profit associations, which are becoming quite common will take up the slack.

    If the planned “Obamacare” is employed, it will take years to refine.
    during that time many improvements will be employed. The main culprit, insurance companies will find a way to make it profitable for everyone if they have to.

  2. Under Obamacare doctors’ fees will be decreased. Does this new law
    prevent me from making up that shortfall out of my own checking account?

  3. Thank you for this article! As an individual with family members in the profession it is difficult to hear them say that you must turn patients away due to the changes of this new “health care.” I agree with you Amy, the politicians need to go to school for 14-17 years and be told that you can only make “x” amount for treatments, mean while they vote themselves a nice raise and do not have to be on the forced health care plan.

    I am more than happy to keep facts out there and will do everything that I can to fight this new way.


  4. Much of this is a reality for Nurse Practitioners also. I have done everything in my personal power to oppose this law and will continue to do so. My husband is an MD and together we fight this.

    I say let them (politicians) spend (14-17 years – (or in my case 8 years), of grueling education to enter a profession where you cannot fulfill your passion for patient care. On top of this, you get worked to the bone and your pay is reduced. Who will take care of us when we are old?

    Thanks for the article, please keep the facts out there!

    Amy Schaffner, ARNP, FNP-BC, CWOCN

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