That’s a big assumption. Poviders are stretched to the limit with insurers cutting reimbursement rates and to further assume a decline in unreimbursed expenses is another leap. http://www.healthinsuranceshopper.com

Because of the robust financial information provided, all of which is in the public domain, an analysis of cost shfit can be performed as part of the annual review. The report for 2006-2007 is posted on their website: http://www.bishca.state.vt.us/HcaDiv/CostShiftTaskForceReport_linked_120106.pdf
The report describes the method used to estimate the cost shift. The author is an analyst for the department and you could direct any quesitons to him: Mike Davis mdavis@bishca.state.vt.us

Just to make this clear: I was referring to hospital cost shift only; we don’t have data on incomes and expenses of physicians, by payer, which is what is needed to estimate cost shift. My comments earlier reflect the relative ease with which some providers — in this case, hospitals, can cost shift any provider tax. In Vermont, at least, physicians aren’t in a position to negotiate their rates with insurers, and so even if they have a large panel of privately insured patients they just can’t do much cost shifting. A provider tax on hospitals would be cost shifted to private insurance, just like Medicaid and Medicare shortfalls are.

My biggest problem with these “recapture the cost shift” schemes, as someone who works for employers who are the current payers of the cost shift, is that the underlying theory is that only those who are currently paying for health insurance would continue to be the only ones paying for health insurance. Wick says “payers would continue to pay what they are currently paying,” because the provider tax would “recapture” from providers the funds that had been cost shifted, but aren’t needed by providers any more because there won’t be any more uncompensated care. Can you see the basic unfairness of this? Those employers good enough to provide insurance all along, and who have been overpaying via the cost shift, will continue in perpetuity to overpay, in other words, to finance the care for the uninsured. IF covering the uninsured is a social good, then everyone should contribute. We shouldn’t only charge those with insurance to cover everyone, including the currently uninsured. the provider tax would take away any “windfall” from the providers, but provides no relief whatsoever for the payers who are overpaying. It institutionalizes the overpayment.

When faced with financial problems, most potential patients do NOT seek medical care until they are so sick they have no other choice. Consequently, the patients are sicker, take longer to get better, and are more work for their physician; but they often can’t meet their financial obligations to their doctor. And what doctor is going to try to wring the last dollar from the patient they’ve just saved? And the government health insurance plans don’t even cover the basic costs of most medical practice expenses, much less pay extra for the doctor’s paycheck!

Contrary to Mr. Wicks’ opinion, during a recession physician practices are NOT recession-proof!

In his analysis of inflation in medical costs, Mr. Wicks incorrectly assumes that physician incomes have risen as fast as the 20 to 25% per year increase in health insurance premiums over the last five years. The unfortunate reality for most California physicians has been that they have NOT seen even a cost-of-living increase in their incomes over the last five years.

Mr. Wicks assumes that commercial health insurance programs add into the physician’s fee “an amount to cover what would otherwise be uncompensated care”. Sadly, nothing could be further from the truth! In fact, over the last fifteen or more years commercial health insurance programs have developed their physician fee schedules unilaterally and presented them (along with their non-negotiable contract) to physicians with take-it-or-leave-it ultimatums. Consequently, commercial health insurance physician fee schedules are bare bones propositions for the doctors taking care of their patients—there is nothing left over to help cover uncompensated care.

As a result, fewer and fewer physicians can afford to provide charity care in their practice unlike the physicians of 1965 when Medicare was first developed. If uncompensated care was somehow covered by a government-sponsored health insurance program such as Medicare or Medi-Cal (California’s version of Medicaid), the physician can only anticipate greater financial difficulties in their practice because as the workload in the physician practice rises, practice expenses will become harder to pay and the physician will be unable to recruit another physician to help with the increase workload.

If a physician must also pay a provider tax on top of their other practice expenses, many California physicians will see their small business sink into bankruptcy. In the underserved areas of California such as the San Joaquin Valley, too many physician practices are already close to closing their doors—that’s why too few physicians live and work in underserved areas! A provider tax will be sadly self-defeating as it supports health insurance reform, but drives physicians our of business in California.

In the Q & A portion of the article Mr. Wicks and others imply that physicians are somehow overpaid or expect an income that is too high. This is untrue! The average physician expects to earn a fair wage for their care of patients. The average physician also works between 60 to 80 hours a week, is up half the night with a patient at times, is available for their patients 24 hours a day, seven days a week, or has another physician cover their patients for those emergencies. But most importantly, the average physician expects to earn enough from their practice to bring in another physician to replace themselves when they retire or to join their practice when too many patients make a physician’s day too long. In essence, every California physician practice must be able to compete effectively with every physician practice across the United States or the number of physicians in California will dwindle away. The real question should be: are Californian’s willing to pay enough to bring new physicians to California when California develops universal health care for Californians?

If we have to compare, we should compare comparable professionals (having equivalent educational qualifications) and then see if it would be acceptable to tax all such professionals similarly. For examples, say we tax lawyers 2% of their revenue so that poor people can be given adequate representation; or architects a similar amount so that we can provide affordable housing to the poor, and so on. I wonder how Mr. Wicks would rationalise that!

Secondly, Mr. Wicks’ contention that private medical practices should go out of business if the costs of care are inadequately compensated seems very immature – something that a student of Economy would probably ask. The reasons why practices aren’t broke is because physicians have quietly accepted lower and lower take-home salaries over the years in order to maintain viablility of their practices, and some have increased their workload to compensate for lower reimbursements. If the rest of America was as hard-working as physicians, a lot of our problems would be long gone. By the way, who hasen’t heard the concept of taking a profit from your business? If the aim of a business was to provide service at cost basis, it would be called a “non-profit” institution. That’s where Mr. Wicks finally loses concept of what the whole issue is about.

Perhaps Harold Nelson can enlighten us with median income data per specialty per setting and employment status.

A physician practice is a business and economic arrangement. Many businesses in all kinds of industries take losses all the time in order to lower their taxes, especially if they don’t have to answer to shareholders. In addition, businesses have many tax deductions that lower the appearance of their actual income. Anecdotal “evidence” by a practice management consultant is not proof of anything and doesn’t invalidate the argument made.

The point is whether a provider tax would be a burden on providers (that category includes all care settings, all categories of practitioners, insurance companies, medical technology companies, etc., etc., not just physicians). The answer may depend on what state you are talking about and how the “tax” is designed. A “tax” could also be imposed by disallowing “business” deductions, or something like an Alternative Minimum Tax so that providers pay at least some taxes, etc., etc. The point is also whether a provider tax would encourage cost shifting to other patient groups such as self-pay, uninsured, Medicaid and Medicare populations, etc. Certainly, by definition, universal coverage would eliminate the need–or opportunity–to cost shift any more.

Wicks’ argument that taxing without lowering actual provider income, and using that tax revenue to ensure universal coverage, is interesting. The next argument would be about whether the current level of reimbursement is reasonable and supportable. The latest figures (2005) show that health care costs increased by 6.9% in the past year, while general inflation in 2005 increased by 3.4%, based on a report by CMS’s National Health Statistics Group (I don’t know if these figures apply just to CMS’s costs or to all U.S. health care spending. Can someone clarify this?) Their figures also show that in 2005, health insurance premiums cost $694.4 billion, while Medicare and Medicaid together cost only $521 billion, and hospital services cost $611.6 billion. Since insurance premiums take the largest chunk of the health care expenditure pie, which is unsustainable going forward, perhaps the insurance industry, with their high administrative costs, lobbying expenses, high management compensation packages, advertising costs, etc. (all of which are deducted as “business expenses” and none of which are mission-oriented), is the first place to look at. No wonder other financial services companies like banks and credit card companies are trying to poke their fingers in the health care spending pie: that’s where all the gravy is!

How can we reconcile this with the frequently heard comment that physician practices are “losing money?”

Interestingly, the high physician incomes are quite consistent with the loss of money by physician practices. If the cost of the practice includes the money paid by the practice to the physician, then the practice can be losing money even though the physician is earning personally a reasonable income. I attended a presentation by a practice management consultation about a year ago and found out that this really is how practice costs are constructed for many purposes. In laymans language, the loss of money by the practice means that on a personal level, the physician is earning less than hoped for.

But if we somehow were able to give everyone an insurance card so that there was no uncompensated care, there would be no reason to have the payers who were paying for the cost shift to pay as much as they previously did, since those rates included an amount for uncompensated care. If we could impose a tax on hospitals and physicians that was exactly equal to the amount that previously was needed to cover uncompensated care, providers would be paid the same in total and payers would be paying the same in total. The tax could be one source of funding for the coverage that would be newly available to people who previously did not have it.

On a related issue, several commenters made an issue of the adequacy of payments to physicians, I thought some data might be of interest. The median wage for all workers in the U.S. in 2004 was $23,356, and the average was $34,198, according to the Social Security Administration. The paragraphs below give details on physician income for the same year. It shows that median physician income for those in practice for more than a year varied by specialty from $156,010 to $321,686. The material is quoted from the Bureau of Labor Statistics (http://www.bls.gov/oco/ocos074.htm#earnings).

Earnings

Earnings of physicians and surgeons are among the highest of any occupation. According to the Medical Group Management Association’s Physician Compensation and Production Survey, median total compensation for physicians in 2004 varied by specialty, as shown in table 2. Total compensation for physicians reflects the amount reported as direct compensation for tax purposes, plus all voluntary salary reductions. Salary, bonus and/or incentive payments, research stipends, honoraria, and distribution of profits were included in total compensation.

Self-employed physicians—those who own or are part owners of their medical practice—generally have higher median incomes than salaried physicians. Earnings vary according to number of years in practice, geographic region, hours worked, and skill, personality, and professional reputation. Self-employed physicians and surgeons must provide for their own health insurance and retirement.