Legislative Update: April 2012

Legislative Update: April 2012

Medicare’s Doctor Payment Formula Breeds Uncertainty

By Legislative Analyst, Jessie Gibbons

Fourteen times in the last ten years, lawmakers have voted to override mandated pay cuts to doctors who accept Medicare patients. Just three months ago, a sigh of relief was felt in doctors’ offices and hospitals when Congress voted to defer a harsh twenty-seven percent payment cut. Surely, however, doctors have already begun to fret about what might happen in December, when the temporary fix is set to expire. In previous years, passing a yearly fix was a simple decision for Congress, but these days deficit concerns have taken over and some worry that a scheduled thirty-two percent cut could take effect come December. They’re right to worry since it’s happened before.

In 2010, Congress had to enact five separate short-term fixes, and on two occasions they missed the deadline, allowing the cuts to take effect first for a period of fourteen days and later for twenty-four days. This “unpleasant ritual” breeds uncertainty in the Medicare program, and many physicians are simply fed up. Some doctors have stopped accepting Medicare beneficiaries as patients, and even more are threatening to do so. To preserve Medicare beneficiaries’ access to quality care, Congress must address the physician payment fiasco. Leaders on both sides of the aisle concur that the current payment formula, known as the sustainable growth rate (SGR), is fundamentally flawed. The formula was passed with good intentions in 1997, but with the steady rise in medical costs, it hasn’t worked as planned since 2003. In fact, according to the American Medical Association and a number of other medical societies, Medicare reimbursement rates have increased by 4% over the past ten years, while practice costs have increased six times as fast, by 24%. Plain and simple, the SGR formulates unrealistic reimbursements.

Additionally, the SGR serves as a convenient budget gimmick for score-keepers who assume that the drastic cuts will take place in their reports and projections each year. This obscures the budget picture and prevents the public from understanding the true scope of Medicare’s shortfall. The current formula also keeps seniors in the dark about what they will pay for Part B premiums and deductibles in the future, since they are determined in part by physician reimbursement rates. Replacing the SGR with a permanent fix would grant stability and fairness to both physicians and seniors, but it would come with a daunting price tag. While plenty of options have been laid on the table by outside groups like the Medicare Payment Advisory Commission, President Obama’s Fiscal Commission, and various medical societies, no single plan has garnered a bipartisan following in Congress. It’s probable that the physician payment challenge will not be addressed until the post-election period rolls around, but in the meantime, TSCL will keep a close eye on the evolving negotiations.