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A Bungled Budget

Rick Johnson, for HealthLeaders Media, February 7, 2008
Don't let the wails of disapproval fool you; healthcare groups were not caught off guard by President Bush's budget proposal that would slash some $560 billion from Medicare over the next decade, according to the Wall Street Journal.

But seeing trouble on the way doesn't always help. Last fall at the annual MGMA conference I talked with William Jessee, MD, about the continual decline in reimbursement. With so many private payers piggybacking their rates on these dwindling Medicare rates and some 47 million uninsured, the financial outlook for medical groups appears bleak.

And don't discount the impact of the cost of running a practice, says Jessee. He points out that, according to the MGMA, Medicare reimbursement for 2008 is expected to decline by 1.7 percent compared to 1999, but operating costs have increased by 62 percent over that time.

"When your costs are going up 62 percent and your revenue is going down 1 percent, something's got to give," he says.

Indeed. Unfortunately what's giving might just be the number of qualified people willing to practice medicine in such an unfriendly economic environment.

As the AMA stated prior to last week's State of the Union Address, without Congressional action, physicians face a significant payment cut from Medicare this July. And a survey of members found that 60 percent of physicians would limit the number of new Medicare patients they can treat if the 10 percent cut occurs. We've seen reports like this one in the past, and Congress has come to the rescue.

The AHA was also very critical of the president's plan, saying it would have a disastrous effect on America's healthcare system. In a prepared statement, the AHA's Rich Umbdenstock says, "At a time when physicians are in short supply, this budget calls for cuts to teaching hospitals that prepare tomorrow's physicians. At a time when our economy is faltering, this budget cuts hospitals serving some of America's poorest patients. At a time when an aging America depends on modern hospital care, this budget drastically reduces funds that help hospitals keep cutting-edge technology available for communities. This budget cuts programs that help rural communities keep their healthcare, train the nurses and caregivers of tomorrow, and assist children's hospitals in training pediatricians and other specialists."

Clearly, the Bush administration is aware of the basic principles of inflation--at least when it comes to its defense budget. After all, it has increased military spending by about 30 percent since Bush came to office, even as funding for so-called entitlement programs heads downward. A White House fact sheet says cuts to Medicare and Medicaid would save $208 billion over five years and the alternative would be "massive tax increases, sudden and drastic cuts in benefits, or crippling deficits."

Scary stuff--but not nearly as frightening as the prospects of the inevitable shortfall of physicians we face and the likelihood that those we have will be hard-pressed to accept Medicare patients.

So now healthcare lobbyists will descend on Congress to right the executive office's bloated--to the record tune of $3.1 trillion--and slipshod federal budget. But I'm expecting Congressional revisions that amount to Band-Aids where sutures are needed.


Rick Johnson is a senior editor with HealthLeaders Media. He can be reached at rjohnson@healthleadersmedia.com.

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