Physician Fees under the Knife

January 20, 1995

The old adage about the pot and the kettle comes to mind when surveying the accusations traded at state hearings on a plan by Blue Cross and Blue Shield to sharply reduce fees the insurer pays to medical specialists.

Both the state's largest insurer and the state's physicians -- now at loggerheads in the hearings -- share responsibility for driving up the cost of health care to Marylanders, through a mutually agreeable arrangement over the years. The process of cost inflation has been delayed by this Blue Cross fee formula, but prices have soared far beyond the average cost of living rises.

That escalating cost pattern encouraged other insurance companies to compete more aggressively on holding down costs, thus grabbing customers of the Blues. That development, in turn, has prompted the Blues to seek drastic cuts in doctor fees, as well as to create a for-profit subsidiary. And the state's physicians' group in turn is looking into setting up a competing insurance company.

The Blues' plan would reduce fees for highly paid specialists, producing an estimated $50 million in annual savings to be shared by Blues subscribers and by primary-care physicians whose fees would rise.

There is a risk, though, that many specialist doctors will no longer participate with Blue Cross, leaving 1.5 million subscribers without their services. Subscribers would have to find new doctors or pay high out-of-pocket bills to see non-Blue Cross doctors. That might make Blue Cross insurance, although cheaper, less attractive to consumers.

There is a big surplus of specialists nationwide, especially in Maryland. The best of these specialists, however, may decide there is sufficient demand for their services without treating Blue Cross subscribers.

Insurance Commissioner Dwight K. Bartlett III asked the Blues for more information before he makes a decision. While cost reductions in health care are most welcome, the state must ensure that Blue Cross remains a strong and viable option for health-care subscribers in Maryland.

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