Let the Rationing Begin

03/29/2010 12:03 pm EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

Health care reform is a fact, and the outlines are clear. More than 32 million Americans will have affordable health coverage by the time the program gets going in 2014. In fact, they will be required to purchase insurance.

Many people will be covered even sooner. The government is going to set up a $5-billion insurance subsidy program within the next 90 days to cover those who currently are uninsurable because of a previously existing medical condition.

Immediately, children under age 19 will receive coverage because they cannot be disqualified from insurance coverage as a result of a pre-existing condition. And young adults can stay on their parents’ policy until age 26.

State Medicaid-funded programs will now be told to cover an additional 16 million low-income people—a mandate that does not come with federal funding and that will have a huge impact on states currently struggling with budget deficits.

The obvious question is: Where will we get the money? The Congressional Budget Office finagled the numbers, subtracting money from payments to doctors who see Medicare patients, and making deep cuts in the Medicare Advantage program, a successful HMO for seniors.

Congress has promised to raise taxes on those who currently have good health care plans, which will result in higher premiums. Plus, they’ll increase taxes on everything from earned income to investment income to come up with money to subsidize this new health care reform.

But ultimately, the government will resort to “printing” the money—creating new credit to pay off on all these promises.

As obvious and frightening as that prospect is—perhaps leading to inflation and higher interest rates—it’s still not the scariest question.

The really challenging question is: Will there be enough physicians, clinics, and hospitals to meet all this new demand for medical care?

In a free market society, higher prices would certainly be an incentive to create more neighborhood health care clinics. The chance to serve profitably all these new patients would create incentives for more people to go into the medical profession.

But remember, most of these new patients will be covered by programs created by the government—programs that set limits on reimbursement for services.

Already, seniors are learning that physicians are simply “not taking on any more Medicare patients at this time.” Quite simply, the current Medicare program doesn’t pay enough to cover the cost of care, plus the administrative costs. 

On Friday, the American Medical Association released a statement that foreshadows this problem:

“On April 1st, a 21% Medicare cut to physicians begins. Congress’s failure to act on permanent repeal of the broken Medicare physician payment formula has put access to health care…in jeopardy. Physicians will be forced to limit the care they can provide to Medicare patients when payments fall steeply below the cost of providing care in a few days. ”

The problem is upon us in the medical community. And states that are expected to provide Medicaid coverage are already in dire straits. Hospitals, physicians, and clinics are waiting months for states to pay their bills. Are these health care providers willing or able to accept more Medicaid patients? 

Soon, reality will set in. It’s not the cost of care; it’s the access to it. 

We aren’t rationing health care. But we’re surely going to be rationing access to physicians and medical services unless we create some incentives to increase the supply of health care providers. And that’s not in the health care reform bill Congress passed and the president signed.

What do you think? Please join the conversation and have your say.

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