How the Economy Could Impact Physicians

Elyas Bakhtiari, for HealthLeaders Media, October 2, 2008

Physicians might soon find out that healthcare is not completely immune to tough economic times. It's often said that Healthcare is the most recession-proof industry—people get sick regardless of what's going on in the economy and can rely on publicly-funded safety net programs if worse comes to worst, after all.

But as the Congressional debate over bailing out Wall Street draws the news world's focus toward the financial sector, a couple of recent news items suggest physicians are already feeling the effects of a sluggish economy.

The first comes from the Wall Street Journal, which points to evidence that Americans are cutting back on healthcare spending as the credit crunch threatens to throw the economy into a major slump.

For instance, the number of prescriptions filled per year in the United States has declined for the first time in a decade. Physician office visits have also dropped since 2006, and 22% of consumers in a recent survey said economy-related woes were causing them to go to the doctor less often.

This is good news for a work force that is overworked and hit by shortages, right? Well, maybe not if you rely heavily on hip and knee replacements, mammograms, and other preventive or elective procedures. Knee replacements per 1,000 people fell 18.6% between March 2007 and 2008, pap smears fell 6%, and dispensed prescriptions for antidepressants dropped 29%, according to a survey conducted for the WSJ by research firm D2Hawkeye.

Many of these elective procedures are extremely profitable, and doctors may start to really lose revenue if the economy turns for the worse. Ultimately, the consumer cutbacks will increase strain on the system, as patients who forgo testing and preventive care end up clogging hospital emergency rooms with more serious conditions.

But what about that publicly-funded safety net? It's going to take a hit as well. A new report suggests many states may begin cutting Medicaid payments to physicians as early as next year in order to reign in rising costs. According to the authors of the Kaiser Family Foundation Survey, Medicaid enrollment rates are climbing—by 2.1% in 2008—in part because of patients losing their jobs and employer-based coverage.

Every 1% increase in the national unemployment rate translates to one million more enrollees in Medicaid and the State Children's Health Insurance Program (SCHIP) and $1.4 billion in state Medicaid costs, according to the study's authors.

And without additional tax revenue, states may have no choice but to cut reimbursement. At the federal level, prospects of Medicare or Medicaid increases become slimmer as Congress considers spending $700 billion of taxpayer money to fix the current financial mess.

It's a good thing that legislators already voted in July to eliminate this year's 10% reduction in Medicare physician payments, because if it was coming up for a vote now or later in the year, I'm not so sure it would pass.

I'm not trying to be alarmist. Many of these problems—the stagnant reimbursement and rising costs—are not new to the industry. But a bad economy could exacerbate the financial problems physicians have been facing for years and delay much-needed reform.

Elyas Bakhtiari is a managing editor with HealthLeaders Media. He can be reached at
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