Fixing the Medicare Doc Fix Fiasco
On March 26, an overwhelming bipartisan House majority voted for H.R. 2, the Medicare Access and CHIP Reauthorization Act (MACRA), by 392-37. This bill is the so-called Medicare “doc fix,” a prize that has been chased for many years but never caught by politicians eager to break out of the fiscal discipline a previous Congress had imposed on them.
In 1997, similarly large bipartisan majorities passed the Balanced Budget Act, which introduced the way Medicare pays doctors today. Payments are supposed to be based on the Sustainable Growth Rate (SGR). The SGR was designed to contribute to a balanced budget by linking Medicare’s payments to physicians with a measurement of the nation’s ability to pay for the entitlement: Real Gross Domestic Product (GDP) per capita.
Unfortunately, the rate of growth indicated by the SGR was not adequate to pay physicians enough to see Medicare beneficiaries. So, within a few years, Congress had to find more money. Importantly, Congress always paid for these increased payments by cutting spending in other areas.
This has become increasingly painful for politicians, who now revile the SGR as “broken” and “unworkable.” They act as though the fiscal discipline brought about by the SGR was imposed on them by alien invaders instead of Congress itself.
So, last month, the House of Representatives decided to throw any pretense of fiscal discipline out the window, passing an unfunded “doc fix” that will add half a trillion dollars of debt to the nation’s balance sheet. Further, it increases federal control of the practice of medicine, thereby reinforcing the changes to Medicare introduced five years ago in Obamacare (which explains why President Obama has pledged to sign the bill).
The Senate reconvenes on April 13, and will have the opportunity to fix the bill. There are a number of options to get good public policy into the doc fix.
First: Medicare’s increases to physicians’ payments above the amount indicated by the SGR have always been short-term patches, rather than a long-term fix. The first one passed in 2003, and they have never lasted more than a year. (In fact, the current one already expired on March 31, necessitating immediate action when the Senate reconvenes.)
MACRA also extends funding for the Children’s Health Insurance Program (CHIP) by two years to September 30, 2017. If the doc fix were similarly limited to a two-year extension, instead of perpetually locking in spending, the gross cost of the change would drop from $175 billion to about $26 billion – easily paid for within the bill as written. (Indeed, the Congressional Budget Office’s score of the bill would likely turn revenue positive.)
Another advantage of a limited doc fix that parallels the CHIP extension is that by the time it would expire a new President and Congress will have had plenty of time to debate both a replacement for Obamacare and real Medicare reform as proposed in the House’s budget resolution.
A disadvantage is that the physicians’ lobbyists who prodded Speaker John Boehner and Minority Leader Nancy Pelosi to secretly negotiate this budget busting doc fix will resist having their handiwork rolled back from a so-called permanent fix to a two-year one.
Second: Find offsets to pay for the $145 billion of unfunded spending in MACRA. Previous doc fixes have been funded with reforms that increased Medicare’s efficiency, adding up to $165 billion in savings over the years, and slowing the rate of growth of Medicare spending. An advantage of finding $145 billion of savings to pay for a permanent doc fix is that physicians’ lobbyists will be more tolerant of such an approach.
A disadvantage is that every last dollar of government spending is a dollar of revenue to someone, and they will resist such cuts mightily. During the House’s debate on MACRA, politicians bragged that 800 organizations supported the bill, which led to the overwhelming majority vote. These included healthcare interests who were happy to sign on as long as they would not lose government revenue.
Third: Include MACRA spending in the PAYGO scorecard (as described in a forthcoming proposal by Paul Winfree of The Heritage Foundation). MACRA explicitly excludes its spending from the provisions of the 2010 law that requires the President to sequester enough funding to ensure budget neutrality if new legislation increases the deficit. An advantage of this approach is that it requires the simple change of removing one short section of MACRA, which means the Senate can do so quickly. A disadvantage is that sequestration truly kicks the can down the road, postponing thoughtful reform.
The pressure to simply pass the House bill as written will be intense. Doing so would significantly harm both the federal budget and the chances of real Medicare reform.
The bigger problem with this SGR repeal is the Trojan Horse elements added to the 263 page bill. It will:
1) Make doctors agents of the federal government, following the bidding of the HHS Secretary.
2) Give the HHS Secretary the right to revoke any physician’s National Provider ID (NPI) number
3) Alternate Payment Models (APMs) will be developed so that physicians will no longer be paid directly by Medicare. Payments will flow through “entities” to be determined.
4) These entities will collect patient data to be available to many government agencies. All privacy will be gone.
5) Merit Based Incentive Program will replace EHR Meaningful Use and PQRS penalties– Using “quality,” resource use, clinical practice improvement (MOC)and full documentation in the EHR.
What ever happened to a patient walking into the office and paying a fair fee for a value service? Doctors will figure out how to skirt the system and do what is best for their patients– and the government will work hard to find ways to stop them.
Can you opt out of Medicare, sign private pay agreement with your patients and charge them that fair fee? Posting fees visibly and treating patients rather than referring them to specialists could have great market appeal.
A doctor can, but it is tougher than it sounds. Because Medicare pays 75% of the cost of Part B and the premium only one quarter, passing few seniors would not sign up for Medicare Part B.
Even if you opt out of Medicare you are not allowed to charge Medicare eligible patients more than 115% of the Medicare allowable fee schedule
Are you sure? I thought that applied to to providers who participated in MC, but did not accept assignment. I know of Docs who require a signed contract with the patient which precludes the patient filing a claim with MC. They then charge their standard fee.
Doctors have three options on Medicare participation:
Sign a participation (PAR) agreement and accept Medicare’s allowed charge as payment in full for all Medicare covered services for your Medicare patients.
Elect nonparticipation (non-PAR), which permits you to make assignment decisions on a case-by-case basis and to bill patients up to the Medicare limiting charge for unassigned claims.
Opt out and become a private contracting physician, agreeing to bill patients directly and forego any payments from Medicare. To become a private contractor, PAR physicians must give 30 days’ notice before the first day of the quarter the contract takes effect. For non-PAR physicians, the opt-out effective date is the date the affidavit is signed, provided it is filed within 10 days after you sign your first private contract with a Medicare beneficiary.
One provision that organized medicine negotiated to be in the bill helps physicians who opt out: They would no longer have to renew their status every two years.
Thank you for taking the time to give a concise and clear explanation.
Thank you, Dr. Eck. I agree. This article focuses on the fiscal (as does the one to be published on Wednesday).
The SGR could work if we were in an age stable society where the number of retiring members equalled the number of new entries into the workforce and productivity with spending remained stable.
Unfortunately we have an aging population that requires more and more medical services.Therefore the physician is penalized with reduced reimbursement simply because the population is aging.
” and the government will work hard to find ways to stop them.”
Absolutely.
John, thank you for keeping this issue central in the debate this week. There are many parts following the repeal of SGR which concern American physicians. The fact that MOC and MU are entrenched in this “fix” are likely the most major concern as well as the unproven P4P reporting requirements as well as the Rube Goldberg methodology required of the APM section. Personally, I am convinced that the only thing bipartisan about HR 2 was the willful ignorance on the part of members of Congress who believed the lobbying from traditional organized medicine, who…on deeper analysis, is intimately involved.
Is the “Medicare Doc Fix” perfect? By no means. We’ve worked with the authors for several years to improve it, and it’s better than it started out. But no piece of legislation is perfect.
Is it a fiasco? By no means. It removes the annual albatross of threatened pay cuts from around the necks of physicians and the Medicare patients they serve. No other business could function with the constant threat of 20-percent or larger cuts to their revenues. Written in terms even a devout free-marketer can understand – uncertainty is decidedly bad for business.
Arguing against the fix means arguing for an immediate 20-percent cut in all physician Medicare fees and more cuts to come as the provisions of the Affordable Care Act, take effect over the next two years: up to 6-percent cuts in 2016 and 9-percent in 2017, mostly from the ACA-mandated Value-Based Payment Modifier. And remember this, if we allow 20-percent cuts to all Medicare physicians right now, patients will be hurt. For many physicians, as much as they want to see longtime patients on Medicare, the losses may just be too large to continue.
HR 2 actually reduces the data collection and bureaucratic intrusion into a physician’s practice. We would love to see them removed entirely. Congress could have done that any time since they were created in 2010 and can still do it any time in the future. This bill just buys some time without driving every physician out of the Medicare program.
Finally, consider how the sustainable growth rate (SGR) formula was supposed work. Per that law, when patients want more services from physicians, all physician fees are cut. Patients get more services from physicians now because better outpatient care reduces hospital admissions, which has been on the decline since 2008 in spite of overall population increases. (Source: AHA Fact Book 2014) Cutting fees to physicians who are helping to reduce hospital spending makes absolutely no sense.
Thank you. I actually do not know of any other private business where Congress guarantees their payments – nor any individual.
I myself have been in situations where my income dropped to almost zero overnight. It is called being laid off or working for a business that went bankrupt.
Look at people in the oil business today. They are completely subject to the rapid drop in the price of oil, and suffering badly.
When I was self employed, I had contracts not renewed, or renegotiated at lower rates, subject to market conditions. Lawyers, architects, plumbers, and truck drivers all live in similar environments.
But let’s concede that doctors – uniquely in any profession – have an entitlement such that Congress should guarantee payments for a decade or more. I note the historical fact that Congress has never let the SGR take effect. There is no crisis.
But Steve, has hospital spending gone down by one nickel?
My gut feeling (I have made limited studies of Medicare) is that the fee schedule for primary physicians has a very small impact on Medicare spending.
The big costs are the dollars shoveled out to hospitals and specialists for transplants, cancer treatments, and similar “hail Mary” end of life procedures.
Medicare has decided to pay hospitals FIVE times more for the SAME procedure in the SAME location if the hospital owns and controls the physician practice. Why is the taxpayer on the hook for 5x more?
There is an obvious concerted effort for the federal government to destroy private practice, the last bastion of a private patient-physician relationship and one where the welfare of the patient can be the utmost priority of the physician. An employed physician must obey his superiors lest he lose his job.
The federal government prefers to support the huge bureaucratic hospital that it can more easily control– than a rogue physician who might put the best interests of his patients first.
Thank you again Dr. Eck. That is an obvious offset that would have bipartisan support if not for the workforce employed by hospitals. It is a scandal.
It is not gut feeling. The data is readily available. In fact, it is the subject of tomorrow’s Health Alert! Yes, physician payments is a small part of Medicare spending. Which is why they should be able to find offsets to pay for this fix.
There are all sorts of ways to find offsets including cuts to other spending, increases in beneficiary cost sharing, tax increases and lots more but each of these have vocal opponents that could kill the bill. There’s nothing new or sudden about this problem – negotiations have been going on for years. anybody who wanted to volunteer some cuts or revenues could have done it at any time over the past many many months. And we are out of time. The cuts TOOK EFFECT 7 days ago, and more are coming.
Right. So WHY do we continue to pay hospitals MORE to do less while we cut physician fees by 20% plus penalties to up to 9%? While physicians do more for patients because we have more effective treatments to keep patients well and out of the hospital? Hospitals should get NO MORE increases in pay until physicians get comparable ones!!!!
As Dr Eck and Donna Kinney suggest, it is time for Medicare to adopt a “site-neutral’ payment policy for outpatient procedures. The same procedure should not net $78 in a doctor’s office vs. $650 in a hospital.
This will not be easy to enforce. A lot of hospital jobs do depend on what is basically a form of price gouging. As the need for inpatient care has diminished, hospitals have survived and even thrived by dumping their fixed costs onto innately cheap outpatient procedures.
Congress has been afraid of hospitals, and not just because of campaign contributions. Hospitals provide high-paying, non-exportable, non-automatable jobs at a time when other new industries create relatively few jobs. In the small town where I live, I can instantly identify numerous families where one spouse lost a blue collar job, but the family stayed in the middle class because the other spouse got an overpaid medical job.
Hospitals have been kind of a nonviolent World War II for many cities in America, with billions in spending for construction and then staffing,
Ironically, many economists feared a new depression in 1946 when defense spending dried up — instead the country got an all-time boom. So maybe there will be no ill effects if hospitals also shrink. But I can understand why a legislator is afraid of the gamble.
The average hospital CEO makes $2.2 million. A recent hospital merger, presumably because the smaller one was struggling, resulted in a $5 million golden parachute for the CEO who was being let go.
I wonder if anyone has scrutinized the campaign contributions made by these highly paid leaders of these “non-profit” institutions. The is crony capitalism on steroids. The patients, taxpayers, and physicians all are taking the hit.
Thank you. That information is readily available. See http://www.opensecrets.org/industries/recips.php?ind=H02++
I agree. Site neutral payments is at the top of my list of offsets for a doc fix. It has been circulating for years. I think you have absolutely correctly diagnosed why it hasn’t happened.