Barack Obama hailed the Mayo Clinic system as a model for health-care reform last summer — until Mayo opposed ObamaCare as a reform solution.  They warned at the time that the bill passing through Congress would make Medicare and Medicaid reimbursements too low to pay for the costs of service and that providers would stop treating patients in those systems.  Last week, that became a self-fulfilling prophecy of sorts:

The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.

More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. The decision, which Yardley called a two-year pilot project, won’t affect other Mayo facilities in Arizona, Florida and Minnesota.

Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering “the highest quality care at costs well below the national norm.” Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday.

“Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.”

How bad has it gotten for Mayo?  The clinics in question lost $120 million on treating Medicare patients.  The Mayo system overall lost close to a billion dollars the year before, dropping $840 million on patients from government-funded treatment plans.

Overall, Bloomberg reports that providers receive 20% less from Medicare than from private insurers.  Part of that disparity comes from charging higher rates to patients whose insurance will cover services in order to cover their losses — and to patients who pay cash.  The dirty little secret in the health-care industry is that these insurance companies subsidize Medicare through these cost transfers, which allow providers to remain in business but which amount to a hidden tax on everyone who buys private insurance.

One cannot expand Medicare while cutting payments to providers and expect that services will not be degraded and benefits curtailed.  Providers will start opting out of the system altogether, as Mayo will do in Arizona and as they are contemplating doing altogether.  A decreasing availability of providers for Medicare and Medicaid will mean fewer resources, longer waiting times, and poorer health care for people covered by those plans.