American College of Physicians: Internal Medicine — Doctors for Adults ®


New ACP paper: private contracting threatens Medicare

From the May 1998 ACP Observer, copyright 1998 by the American College of Physicians.

By Deborah Gesensway

SAN DIEGO—While there may be nothing inherently wrong with allowing private contracting between Medicare patients and their physicians, current legislative proposals that seek to expand the practice could lead to serious problems in the Medicare program, according to a position paper approved by the College's Board of Regents before Annual Session. The College suggests instead that Congress should address reimbursement problems directly, rather than through private contracting.

A bill sponsored by Sen. Jon Kyl (R-Ariz.) and Rep. Bill Archer (R-Texas) has attracted support from people who support "freedom of choice," but ACP officials said they believe that passage of the bill will work against Medicare's many successes. Medicare private contracting is defined as allowing patients to pay for covered services completely out-of-pocket without contributions from Medicare or supplemental insurance; physicians, not Medicare, would set the fee.

Noting that 71% of Medicare beneficiaries live on an annual income of less than $25,000, and that the average elderly person spends 21% of income on out-of-pocket medical expenses, ACP argues that expanding private contracting could encourage physicians to drop existing Medicare patients or not accept new ones. The College also expresses concern that private contracting could interfere in the physician-patient relationship by injecting discussion about finances into the exam room encounter.

The College is also concerned that increasing private contracting would make the Medicare system even more complex to administer and lead to billing problems for physicians. With doctors already struggling to meet burdensome Medicare documentation requirements, such as those needed to justify use of evaluation and management (E/M) codes, "private contracting on a service-by-service basis can only increase the potential for billing mistakes," the paper states.

Many advocates of expanded private contracting view the Kyl bill as one way to address the problem of inadequate—and shrinking—physician payment rates. In its new paper, however, ACP recommends several alternatives that directly address issues of reimbursement:

M Allow balance billing of Medicare patients who can afford to pay a higher rate for physician services.

  • Ask HCFA to inform beneficiaries about private fee for service, an option that was approved last summer in the Balanced Budget Act. In that option, patients can join a private indemnity health plan and Medicare will contribute the average annual per capita payment to the plan. The plan can set its own coverage rules, charge patients any premium and reimburse physician at any rate.
  • Educate patients about their right to opt out of Part B and arrange their own private payment options with physicians.

In other action last month, ACP's Board of Regents approved another position paper that makes "the case for graduate medical education (GME) as a public good." That paper will be used to advocate for the College's existing policy position that all health care payers should share in GME funding. The paper also delineates some of the benefits of obtaining health care services in teaching settings.

This paper was needed, College officials said, because funding for GME has been under attack both by the government and by the growth of managed care, which has put additional pressure on teaching hospitals to accept reduced payment rates.

GME is a "public good—a combination of special activities that benefit all of society, not just those who directly purchase or receive it," the paper states, and "like other public goods, GME requires public support and might not survive if funding depended solely on market forces."

Moreover, the paper states, if all payers do not share the funding of GME, only those who can obtain financial support from private foundations—in other words, the affluent—will be able to pursue careers in medicine. As a result, efforts to increase ethnic and racial diversity will be thwarted.

For more information about these positions, visit the College's Web site: www.

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