Medicare for All and the Myth of the 40% Physician Pay Cut

The surge in support for improved Medicare for All—now up to 70% in recent polling—has single-payer opponents ramping up their scare tactics. The Koch-funded Mercatus Center recently claimed that Medicare for all could only work with painful sacrifices from doctors, specifically by paying us Medicare’s current reimbursement rates, which are about 40% lower than private insurance.

If single payer would cost doctors so much, why do a majority of us now prefer it? I invite supporters of the status quo to spend a week at a typical doctor’s office to understand the out-of-control costs of practicing medicine in our current system.

Let’s look at how doctors actually get paid. Most of us accept a mix of Medicare, Medicaid, and private insurance, which pay mostly on a fee-for-service basis: a certain amount for each exam, scan, or procedure. While rates differ from state to state, private insurance usually pays the most, Medicaid usually pays the least, and Medicare is somewhere in between (and for those patients with no insurance, it’s anybody’s guess).

But don’t assume physicians prefer dealing with private insurers just because they pay more. Private insurers make their money by paying out less in claims than they collect in premiums and make us jump through bureaucratic hoops to secure payment. Basic tests and treatments must be cleared in advance with insurers or they won’t be covered. Claims are routinely denied. If you’ve ever spent hours on the phone haggling with your insurance company, then you’ve had a small taste of what it’s like to practice medicine today.

Since for-profit insurers ultimately decide what will be covered, it’s like having a third party in the exam room second-guessing our medical decisions. This process disrupts the doctor-patient relationship that we work so hard to build. And copays and coinsurance (what patients pay out-of-pocket) mean that even smaller practices must employ several full-time staff just to handle payments, billing, and collections.

Smaller practices spend an average of $83,000 per year on claims, coverage, and billing. Doctors personally spend nine hours each week on billing and admin; that’s time we’re not seeing patients. It’s no surprise that doctors today report unprecedented levels of exhaustion and burnout.

Then there’s the issue of malpractice insurance, which takes a big bite out of doctors’ income. Future medical costs are a large part of malpractice settlements but are removed from the settlement equation under Medicare for All. Lower potential settlements mean lower premiums for doctors.

Dealing with one single payer—Medicare—would mean drastically fewer hours of uncompensated administrative time, fewer office staff, and lower overhead. It’s a tremendous amount of time and money that Mercatus fails to include in their analysis.

In reality, relatively few doctors work in private practice anymore. Due to rampant industry consolidation, most providers actually work on salary for larger health systems or hospitals. Under our current multi-payer system, billing and administration account for one-quarter of U.S. hospital expenditures, twice the level in single-payer nations. Medicare for All would simplify hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments, saving billions more in administrative costs.

At the national level, single payer would cut about $504 billion annually in administrative costs. In other words, single payer works by cutting administrative waste and corporate profits, not doctor incomes.

Overall, we estimate that average physician incomes would remain unchanged under Medicare for All. Some doctors, such as family physicians and pediatricians, might see a pay increase while others, such as highly-paid specialists, might see a slight pay cut. But “painful sacrifices” would not be required.

Single-payer opponents will try to pit doctors against patients by claiming that universal coverage only works by cutting doctor incomes. That’s a false choice. The only winners in the current system are the insurance companies who profit by keeping more of our nation’s health care dollars for themselves. By moving to a single-payer program, doctors can finally get back to our calling: caring for patients.

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