Blue Cross Cutting Payments to PPO Doctors

The largest private health care insurance provider is cutting payments to its PPO doctors:

Blue Cross of California's latest antidote to rising healthcare costs isn't going down very well with physicians.

The state's largest for-profit health plan is set to roll back its payments for about half the services and procedures provided by physicians next month.

And many of the 53,408 physicians in Blue Cross' preferred provider organization (PPO) networks say that's a prescription for disaster.

Doctors say the health plan imposed the new rates unilaterally. In most cases, they say, Blue Cross will get its way because it controls the lion's share of their patient base.

But other physicians say they've had it with Blue Cross. More than 300 of them have sent notices threatening to dump the insurer if the rates take effect as scheduled Aug. 6. Some say the new rates won't even cover the cost of supplies.

"I don't know how anybody can afford to stay in practice and accept Blue Cross rates," said Dr. Charles Fishman, a San Luis Obispo dermatologist who sent a letter telling Blue Cross he would drop its contract if his rates were not improved.

A spokeswoman for the insurer described the level of complaints over the new rates as routine, and she said the number of termination notices from physicians over the issue was negligible — less than 1% of the doctors in its PPO networks.

Health care costs are out of control for one reason - lack of competition. If you make something cheap, which is what the net cost to most insured members is, they are more likely to use the service, and since they are paying very little, they don't complain when doctors order a bunch of tests, many of which are done simply to provide malpractice protection more than diagnostic services. If health care becomes more expensive, they are less likely to use it and are more likely to shop around for a better deal, if that's possible.

Back when my kids were small we were covered by a Blue Cross HMO that had only a $5 co-pay for office visits. So, what do you think we did when a kid got the sniffles? Hey, it's only 5 bucks - take them to the doctor. Had the co-pay been $50 or $100, we would probably have been a little more discriminating about our office visits, and the cost to the health care system as a whole would have declined. If there had been no health insurance, we would have shopped around for a good rate, just like we do for other services. That competition would have reduced the cost to all consumers.

More and more doctors are likely to opt out of Blue Cross, or quit ordering certain tests and services that are poorly compensated by Blue Cross. Will the patient's health suffer as a result? Probably not since doctors are still in the business of trying to get people well and when pressed, will find a way to do it. However, patients are going to have to come to grips with the fact that they will have to pay more for their services if they want to keep the same level of coverage. Until real competition is introduced into the health care system, rates can't help but go up.