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Provide Appropriate State and Federal Funding for Physician Services

For decades, physicians have given away their services for free to patients who could not afford to pay. However, today’s health care market makes this very difficult. Medicare and Medicaid, which now cover 35 percent of health care in America,86 often pay physicians less than it costs them to provide their services. Commercial insurance companies’ payment rates, computed largely as a percentage of Medicare, have followed the government-run programs into the basement. The nation’s 50 million uninsured, including 6.2 million Texans,87

can rarely pay the costs of their

health care. The squeeze leaves many physicians struggling to keep their practices open, let alone provide charity care. State and federal leaders must realize that cutting physicians’ payments is not an effective tool for controlling health care costs, and often exacerbates the cost of care. They also must realize that without physicians, no health care delivery system can be effective.

Recognize and cover physicians’ cost of providing care

Physicians’ practice costs — like any other business’ operating costs — continue to march upward. While the rate of increase, thankfully, has slowed in the past several years, physicians face growing demands to cover the salaries and benefits of their professional and office staff, purchase new clinical and practice management equipment, buy liability insurance, and pay the rent and utilities.

The Medical Group Management Association’s (MGMA’s) data show that, for 2010, most physician groups were operating on razor-thin margins. MGMA each year compares physicians’ office costs and revenue in dollars per unit of service. (To simplify the accounting for the thousands of different types of services physicians provide, one unit of work is measured in relative value

58 TEXAS MEDICINE January 2013

To stay open, any business must collect enough revenues to cover costs. Especially for patients covered by government insurance programs, this isn’t happening for physicians. MGMA data show that Medicare pays only 61 percent of physicians’ average costs. Medicaid payment per unit of work varies, but for most services, Medicaid payments cover less than half of the average cost to provide services. Faced with losses on every service delivered, physician practices are often forced to limit services to Medicare and Medicaid patients if they cannot make up the losses elsewhere. Physicians in a number of Texas communities say they have no other options but to move or retire.

Ensure competitive Medicaid and CHIP payments for physicians

Medicaid is a state- and federally funded health care program that provides low-income patients access to essential health care services. Without Medicaid, millions more Texans would be uninsured: As of March 2012, Medicaid covered 3.3 million Texans.89

units or RVUs. This is a Medicare measure of the units of service produced. One unit of work is approximately the value of the simplest office visit for a new patient. Physician compensation is 30 percent of the total cost.) In 2010, physician-owned multispecialty groups brought in an average of $59 per unit of work while spending $60 to keep their clinics open, for an operating loss of $1 per unit of work. Family practice groups brought in less ($46 per unit of work) but only spent $45, for an operating profit of $1 per unit of work.88

To qualify, patients must be

low-income, though being poor does not mean a patient will qualify. For example, low-income childless adults are not eligible even if their income meets the state’s Medicaid income requirements.

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