At the beginning of this month, the Centers for Medicare and Medicaid Services made history by making all of its Medicare data public. This event was unprecedented because, for the first time ever, the public could now have free access to information that described which physicians received Medicare payments and, more importantly, how much each received. For decades, information on the individuals who received payments was kept under lock and key, but a federal judge subsequently ruled that the information could be made freely available. The data is significant because it clarifies total Medicare spending—in 2012 just under $600 billion, with payments to individual physicians roughly $75 billion. The numbers immediately drew scrutiny because a miniscule portion (about 2%) of over 850,000 practitioners who received payments took in nearly 20% (roughly $15 billion) of the income. In fact, the 100 doctors at the top of the payment pyramid cumulatively received more than $600 million. And of the 100 physicians who received the largest payments, almost half are ophthalmologists (eye doctors). Finally, only roughly 25% of the physicians in the data set were responsible for 75% of the spending.

Some specific treatments drew extra attention. Take, for example, the drug Lucentis, which costs nearly $2,000 per injection. The medicine is used to treat a very common age-related disorder of the eye (macular degeneration) that is prevalent among the elderly. Because Medicare covers this drug, doctors could bill for it for each injection given to a patient. Note that there are more cost-effective treatments available.

The degree of scrutiny is expected because when it comes to health care billing, those who look for fraud never glance at those who hover around the middle or those who tend to bill about the same amount for the same treatment as their peers. They always seek out the persistent outliers that distinguish themselves from the rest of the pack. In the world of health care billing, there is a certain security in mediocrity.

The Medicare data proves most useful in that it publicizes which doctors are the most experienced in certain procedures. Let’s face it, unless you’re a hand model, for that inch-long cut, even an inexperienced physician can sew up your finger. But if you’re going to have open-heart or brain surgery, you may find much-needed mental comfort knowing that your surgeon has done the procedure thousands of times before. On the same token but in a more perverse sense, the raw data also tells us who tends to do what and how often. For example, if you live near an orthopedic surgeon who performs more total knee replacements than anyone else in the country, don’t be surprised when he schedules you for surgery when you walk into his office with what you thought was a sprained knee.

The most glaring omission that the numbers do not reflect is value. There will always be unscrupulous physicians who will bait the system and act immorally. But there are also many other physicians who may bill higher than others but have better patient outcomes—a desired end that a billing scale cannot gauge. After all, if you regain your eyesight or no longer have chest pain when you walk to the fridge, it’s because a physician provided the service that improved your quality of life. In many noble cases, their salary is high because they did something for their patients. Would you want to scrutinize the income, even if well into the seven figures, of a warm, caring oncologist (cancer doctor) who brought you from near death to health?

Additionally, the data in and of itself cannot be taken at face value without further examination into the money’s utilization. There are physicians, for example, who are the head of large groups, and although they “billed” for tons of cash, the money pool will eventually be distributed among many more doctors. Also, one cannot assume that monies paid from Medicare billing went directly into the pockets of a doctor. In many practices, for instance, the physician bills represent total gross revenue from which personnel, equipment, medication, operating room fees, and many other expenditures are deducted.

Let’s us all not forget that Medicare reimbursement policies are written by bureaucrats in the government, which means that at some point in time, someone (or a committee) approved reimbursement for physicians to bill for use of Lucentis at $2,000 per bottle (or whatever the adjusted rate would be). Alternatively, the pharmaceutical manufacturer of such drugs would also have an interest in having their medication reimbursed, so they may increase sales. The physicians then would be incentivized to use this drug to treat macular degeneration because—let’s face it—given the option of treating a patient with a less-expensive versus a more-expensive treatment, what would the average person choose to do? It comes as no surprise then that some of the largest billers of Medicare also have political ties and have made generous campaign contributions.

I think what this entire charade highlights is that the astronomical prices of medication, which drugs are actually approved for insurance reimbursement, and the salaries of individual physicians are all the end results of a perverse system designed to work in this exact way. Further, this paradigm, often touted as the “natural” result of a “free” market health care system, is actually a rigged market designed to burden the patients while economically benefitting all those who are not ill. The real culprit is our current system of insurance which mandates its own existence for routine access to care, in turn driving up costs and setting the power to set prices in the hands on the suppliers. To place blame or point fingers at someone would be to simply ignore the source of the entire evil system.


Dr. C. H. E. Sadaphal

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Posted in Current Events, Medical, Opinion, Politics
  1. Gordon. says:

    Although it disgusts me that some top execs. make billions, I can’t really get upset at the docs who actually help to save lives and end up making a lot of coin in the process. If those docs do upset you, then either you place a low value on life, or you’re just jealous.

    • Neil says:

      i AM jealous, which always sounds more benign than coveting.

    • W.W. says:

      just like the post said, some of those execs make billions exactly because they create value for people’s lives. If that value is really worth $100 million vs $10 billion is beyond me. that’s a battle for the egalitarians to fight so they can decide how much to take away.

  2. Christy Noel says:

    to really understand the problem, you have to also know that medicare billing itself is easy to manipulate. as long as you have a legitimate patient ID card, there’s nothing stopping you from either doing tons of extra unnecessary stuff or throwing in an extra procedure or two that wasn’t done. turn the paperwork in, and within the month you have a medicare check. the govt won’t look for suspicious activity until after the fact assuming they do catch up with you.

    • CHE Sadaphal says:

      In the world of billing, maximizing your numbers is an art itself. Oftentimes, it doesn’t matter what you’ve done but how you frame what you did, and searching for “codes” that make it seem as if a more comprehensive patient encounter occurred. In this sense, medical billing is like politics: the most creative story tellers usually come out on top.

  3. Dr. Johns says:

    The codes used to bill for medical procedures are a two-edged sword: it standardizes billing so Dr. X can’t charge $25K for the same procedure that Dr. Y does for $2K. It also turns all doctors into billing drones who instead of practicing medicine 100% of the time, need to consume their energy in order to carve out a path toward maximum profitability. Switching to a no-insurance practice was one of the greatest liberating experiences of my career. Once patients are made responsible for payment, they quickly learn exactly what they get for how much. There’s an incentive for them to seek out care wisely, practice preventative maintenance, and not fill their time with excessive medical consultation just because it costs them close to nothing.

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