The Medicare Doc Fix Will Never Get Fixed Like This

Earlier this month, the Congressional Budget Office (CBO) scored the cost of a Republican-led bill to permanently “fix” the Medicare fee schedule for physicians. The cost to taxpayers? $175 billion over ten years. To put that in perspective, according to the Congressional Budget Office’s May 2013 budget outlook, the ObamaCare’s effect on health spending is that it will cost $1.8 trillion over ten years. So, this so-called permanent doc fix would cost almost one tenth the entire cost of ObamaCare.

How can anyone possibly call that a “fix?

This blog has addressed the doc fix before. To recap: Medicare pays most doctors fee for service. However, the fees are drawn out of an aggregate spending estimate that is supposed to increase annually by the Sustainable Growth Rate (SGR). For many years now, the SGR has not kept pace with physicians’ practice costs. So, at least once (and usually two or three times) a year Congress has to pass a short term “fix” that blows the cap off the SGR, restoring physicians’ fees. Without another “fix”, physicians’ fees will drop by 24 percent on January 1.

Congress has never seriously entertained a permanent fix, and the CBO score of H.R. 2810 tells us why. Although Republican-led, the bill also has some Democratic co-sponsors. It carries all the fingerprints of physicians’ lobbyists who simply want fees raised to whatever they think they need, without any concern for the taxpayer.

First, the bill would simply increase the fee schedule by 0.5 percent annually, from 2014 through 2018. How the sponsors arrived at 0.5 percent is unexplained. Undoubtedly, it reflects many hours of representation by physicians’ lobbyists claiming that this is the minimum they need to survive. Starting in 2019, a newly contrived Quality Update Incentive Program (QUIP) or an Alternative Payment Model (APM) would be added to the fee-schedule updates.

Besides bringing us two questionable new acronyms, these two payment methods are far enough in the future to give physicians’ lobbyists enough time to figure out how ensure maximum profitability from them. Most importantly, the QUIP would be the default. The QUIP would give bonuses to physicians who perform above a quality threshold, and claw back payments from physicians who perform below a quality threshold. These quality thresholds are not yet defined. So, the physicians’ lobbyists have five years to define thresholds to ensure that almost all physicians surpass them.

The APMs potentially entail more risk-bearing by physicians, but APMs will not be adopted until the gamut of pilot programs designed to figure them out have run their course. We can safely anticipate that no physician will voluntarily choose to be paid through an APM if the QUIP is likely to pay all physicians as if they were above average.

Even worse, the legislation would add more billing codes to the already overly complex system. These codes would be for services like case management to co-ordinate care, which are virtually impossible for a Medicare contractor to observe properly. More billing codes do not lead to better coordinated care. Only a system that would allow physicians to bundle and re-bundle their services within a budget constraint would do that.

In sum, this Republican-led alternative to the SGR maintains the conceit of the status quo: The belief that government-appointed bureaucracies can figure out how much to pay physicians. Physicians are ill-served by reforms that perpetuate this fallacy. A better reform would allocate a budget for physicians’ services, allow physicians to bundle and re-bundle services in competition for it, and permit those physicians who convince patients that they provide superior service to balance bill them directly.

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