SPBA Email Alert: Health Reform

 Subject: SPBA Email Alert: Health Reform: Today’s (December 13th)

SPBA Email Alert – December 13, 2010

Health Reform Insights
Personal candid insights from SPBA President Fred Hunt


We are so busy focusing on the future of the payment side of health care,
that we forget to examine the necessary flip side…those who provide
medical care.  It’s scary, so let me devote most of this e-mail to that.

What if everyone has health coverage, but they can’t get a doctor in an
adequate or timely manner??  That’s the situation in many countries where
the government brags that it provides “coverage” to everyone.  (Lesson:
“Coverage” and “health care” are not synonyms.)  The signs are now clear
that PPACA has shifted us into high gear towards a mega doctor shortage (and
thus shortage of actual access to care).  Here’s the situation:

(1).  For years we have known that we would face a shortage of doctors as
the baby-boomer generation of doctors retired, and both old and young
doctors found it easier to be in non-clinical medical work, where new
profitable fields have opened, such as media expert-doctors, consultants,
authors, and entrepreneur & business activities that are not quite “medical”
and thus do not trigger the costs & hassles of being a practicing doctor..

(2).  An assortment of incentives have steered more doctors into specialty
practice…even though it has been known for decades that the greatest need
(and already a shortage) is in general practice family physicians.

(3).  Government continues to dodge handling nagging problems such as tort
reform and other things that add to the costs & hassles of being a
practicing doctor.

(4).  The effects of Congress’ 1997 health reform law create an SGR that
will impose draconian cuts (now approaching 25%) cuts on the payments (which
doctors already felt were too low) the government will make to doctors for
Medicare patients.  This comes at the same time as Medicare faces a glut of
new baby-boomers and PPACA will make almost half-a-Trillion dollar cut in
what government spends on Medicare.

(5).  Medicaid was already bleeding state & federal budgets, and often pays
doctors less than even Medicare.  PPACA will add about a 30% increase in
this money-losing category of medical practice.

(6).  All sorts of pressures point to cuts & pressure on doctor pricing in
the coming years for the other (not Medicare or Medicaid) patients, such as
pressures that will come from states to minimize the payments from their
state exchanges.  The whole medical community has relied on extensive
cost-shifting of losses from government programs made up by increases in
charges to private payers, who are getting tired of feeling ripped-off by
this practice.  So, cost-shifting opportunities will be severely shrunk.

(7).  There is a quadruple-whammy disconnect between the reality of the
structure of medical practices versus the  new government pressures.  The
majority of doctors today are in private practice, especially in small &
medium size practices.  However, everything seems to be trying to
marginalize that form of medical practice.  How?  >>Hospitals have pushed to
have more doctors as employees (and many young doctors prefer the
predictable hours & paycheck, and someone else taking care of the logistics
& insurance).  >>There has been a perception that bigger is better in
medicine so there is pressure for more groupings such as the Medical Home
and other combined concepts that make doctors feel like just a cog in a
machine.  >>Now, PPACA creates a strong push to have large Accountable Care
Organizations (ACOs, sort of a rebirth of the original HMO concept) as the
main provider of medical services.

NOTE:  Many of these same problems & pressures are also impacting the
changing future of hospitals, especially small & medium, and specialty
facilities.  So, that is why most of my forecasts later also apply to
hospitals & facilities.

The Physician Foundation has done a survey to gage the mood & plans of
doctors.  (Go to

>>60% of docs say that PPACA will lead them to close or significantly
restrict their practices to certain categories of patients (Read that to
mean only patients who generate profitable payments….not the ever-larger
Medicare & Medicaid population.)

>>Of the 60%, 93% said they would have to close or significantly cut back on
Medicaid patients, and 87% said they’d close or significantly restrict
Medicare patients.  This is presumably on top of the shortage of doctors who
will accept new Medicare & Medicaid patients today.

>>Besides natural retirements, 40% of doctors say they will drop out of
patient care in the next 1-3 years (note that their target time of year
three is 2014, when PPACA really kicks in).

>>59% say that PPACA will force them to spend less time with patients.
(Time with patient has always been an effective measure of “quality” of
care, so this is actually a decrease in quality.)

>>Over half of doctors said that PPACA will cause patient volumes to
increase, and 69% said they no longer have the time or resources to see
additional patients in their practices while still maintaining quality of

>>In Washington DC (among politicians, AARP, and policy wonks…myself
include), it was assumed that SRG “doc fix” and impending fast-rising cuts
in payments for Medicare services was a desperate situation for doctors.  It
was, after all, the issue that got and kept the AMA as a “supporter” of
health reform.  However the Physicians Foundation survey reports that
doctors are about evenly divided about the impact importance of SRG (36%)
and health reform (34%) to their practices, and which will have the greatest
impact on their taxes.

FORECAST: My personal forecast is that doctors and all of us have been
feeling the pre-tremors, and by 2014 (assuming no dramatic change…meaning
more than just repealing PPACA), there will be a major earthquake of
doctors’ (and hospitals’) world, and much of what they and we patients have
known will no longer exist.  It will be a brave new world, and as I quoted
someone in my last e-mail, it will be a time when patients will need to
become accustomed to less-is-more when it comes to costly care & technology.
Mega is also presumed to be the mode of doctor & hospital combined medical
delivery.  Though the coordinated concept makes theoretical sense, I’m
betting that patients will equate mega with bureaucracy and lack of
continuity of personalized attention (which surveys have shown is how many
view many large doctor practices now).

Personal interaction may well shrink.  A person’s smart-phone will be their
doctor…to tell them the latest health news & reminders, have databases for
feedback & answers, and maybe even for transmitting check-up & diagnosis

FUNNY DEJA VU:  This is a back-to-the-future scenario for me.  Because of
my involvement in health policy during the writing & passage of ERISA, in
1974, I was selected by a leading hospital to be a guinea pig for a (then)
cutting-edge full physical check-up without any humans.  Even the finger
prick for a blood sample was non-human.  Today’s technology would be able to
do much more, but the basic problem I had in 1974 will remain.  Many health
questions are not flat yes or no or multiple choice.  Machines don’t
understand nuances and can’t hear your tone or look into your eyes to
determine what you are truly trying to say about an ache or concern, or
notice that my hearing test headphones were too small, so let in outside
noise that drowned out the test noise, so I was rated as deaf in one ear.  I
did my best, the results were reviewed by top specialists at the hospital
(sounds like Medical Home or ACO concept), and the report arrived. The
report was far more detailed than normal physicals, but that precision and
the many bright red “abnormal” findings they triggered left me sure I would
soon be dead.  Fortunately, a neighbor had her med school books, and saw the
despondent panic in my eyes.  It turns out that many things cutting-edge
machines can measure (or misconstrue) vary wildly from testing to testing or
have no “normal”.  So, 36 years later (no thanks to the mechanical check-up)
I am alive and well.  So, medical care in a few years may be déjà vu for me.

The changes & shrinking in the medical provider arena will make employee
health benefits far more important than ever before.  They will not be
“fringe” benefits.  In the fast-approaching new world, an employee health
plan is a vital part of survival of the employer entities’ functions &

Every employer knows that having a key computer or system out of service for
almost any time can be crippling.  That is why most employers have contracts
for very prompt diagnosis & repair of the problem to get the computer system
functioning again.  As all employers have trimmed staff levels in recent
years  and have thus less back-up, if a key person at any level is
out….especially out for a long undetermined time…it is just like having
the software system down for a long unknown amount of time.  In today’s
health system, a worker can get in to see a doctor and see whatever series
of specialists might be recommended  pretty quickly, and thus there is a
diagnosis…which gives both the employee and the employer some timeframe
for recovery, and recovery proceeds quickly  As the statistics & reasons
above show, this current situation of having enough doctors will be ending
in 1-3 years.

In countries where there are doctor and/or facility shortages (usually
because of government policy and/or the economics described above), that
initial appointment & diagnosis process can take months, and getting the
actual treatment can take more months.  (It took 18 months off the job for a
friend of mine in Canada.  That left the employer without the needed person
that long, and the worker’s reduced income during that period devastated
both family income and morale in the company.)

So, the new reality (especially since about 10 years from now, a labor
SHORTAGE is expected as most baby-boomers retire or die) is that employers
will be desperate to have a process (like their computer systems repair) to
get employees seen, diagnosed, and treated as soon as possible, and
self-funding will be the only way to custom-design the coverage for that
particular workforce.  It is pure survival economics.

So, smart employers (I’m including union-management multi-employer plans) of
all kinds will want to keep and maximize their employee health plan.
Wellness programs and even on-site of shared clinics will spread.

You may ask if employers can afford to maintain their employee health plan.
Besides the inestimable survival factors noted above, it will be very
expensive to not have an employee health plan.  There is a penalty fee if
you don’t sponsor a plan.  It’s not bad now, but will rise and rise.
However, the biggest cost factor is that you don’t just send employees off
to buy their own coverage.  You will be expected to make the big boost to
their paychecks to pay for not only the cost of the coverage elsewhere…but
they (and you) will also have the payroll taxes for that big boost in income
which will also raise their IRS & state/local income taxes and any other
items tied to pay level.  Employees are going to expect you to make them
whole for ALL their extra costs because you do not have a health plan.
Again, it is simply human psychology & economics.  I think it will cost more
than working with a TPA to design & administer a customized prompt employee
health plan.

So, let me end with one of the first thoughts.  In the system that is taking
shape (and can not be stopped), having health “coverage” or “insurance” is a
very different thing than getting health “care” & services.