Hooray! The Medicare “Doc Fix” Is Fixed Until March 31

Once again, Congress pretends to have fixed the unfixable: The way Medicare pays doctors. An earlier blog entry describes how Medicare pays physicians by using a method that puts the old Soviet Gosplan to shame.

The simplest description is that a government-authorized committee determines how much time it takes a doctor to do a procedure. For example, a session of psychotherapy for a patient with panic attacks takes 45 minutes. A hysterectomy takes about twice as much time as the session of psychotherapy, plus 3.8 times as much mental effort, and 4.47 times as much technical skill and physical effort, as well as 4.24 times as much risk. Needless to say, negotiation over these estimates consumes a lot of energy in a zero-sum game between specialist medical associations.

The outcome is a “relative value” for every single thing doctors get paid for by Medicare. A highly complex and time consuming procedure earns a high relative value. Each relative value is adjusted for geography (e.g., Manhattan is more expensive than Dallas) and multiplied by a conversion factor to determine how much Medicare will pay a doctor.

For 2013, the conversion factor is $34.023. This figure is the target of the so-called “doc fix” which Congress implements every year. The figure is supposed to grow no faster than the rate of growth of national income, by way of a calculation called the Sustainable Growth Rate (SGR). Since health care costs have historically grown at about twice the rate of natural income, the SGR restriction acts to keep doctors’ fees growing more slowly than health care costs in general. However, the SGR never kicks in, because organized medicine lobbies against it very effectively. Organized medicine is probably correct that implementing the SGR would cause physicians to limit access to Medicare patients. If Congress did not override it, the SGR would cause Medicare payments to physicians to drop by about one quarter at the end of 2013.

However, Congress is not able to “fix” the SGR, because of the “cake and eat it too” approach of organized medicine’s lobbyists. They want effectively unlimited access to taxpayers’ money without political control, as I have discussed earlier in this blog.

So, Congress keeps delaying implementation of the SGR in a series of short-term fixes. The latest kicks the can down the road until the end of March. Instead of dropping by one quarter, the conversion factor will increase by 0.5 percent. However, it is supposed to revert to the SGR level three months later. That is, if the “fix” is not fixed again next spring, the conversion factor will drop by about 25.5 percent.

One consequence of this ridiculous procedure is that it makes a mockery of all Congressional Medicare budget scoring. ObamaCare and all other legislation that addresses Medicare assumes that the SGR will kick in, when everyone know the politicians in Congress will panic every year and give the doctors more money.

The Congressional Budget Office’s score of the latest doc fix is exemplary. The three-month fix will increase Medicare spending by $7.3 billion versus previous scores of Medicare spending. But, politicians assert that this will not increase government spending, because all increases in spending have to be “paid for” under Congress’ rules.

And this $7.3 billion will be paid for by reducing certain payments to hospitals — in 2023, the last year of the Congressional Budget Offices’s scoring window. Almost zero savings take place in earlier years.

Nobody can take this game seriously. Both doctors and taxpayers will continue to suffer as long as they accept the notion that politicians should decide how much to pay for our medical care.

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