Medicare ‘Doc Fix’ Put on Life Support by AMA Lobby
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The Fiscal Times
May 6, 2011

The annual scramble to prevent next year’s scheduled pay cut for doctors who treat Medicare patients kicked off Thursday with physician leaders calling for a five-year program of guaranteed annual raises and a high-ranking House Republican calling for another short-term fix.

The issue – known inside the Beltway as “the doc fix” – is the residue of a law enacted by Congress in the late 1990s that sought to limit the growth of Medicare spending on seniors’ health care. The law limited physician pay increases to same growth levels as the overall economy, which became known as the sustainable growth rate or SGR. Since health care spending over the last decade grew twice as fast as gross domestic product, implementing the SGR would dramatically shrink physician pay as a share of overall Medicare spending.

It never happened. Every year members of the American Medical Association and specialty societies bombard Capitol Hill with demands to restore the old system. And every year, Congress voids the SGR-mandated cuts.

But that means that every year the size of the scheduled pay cut under the original law grows larger. Unless Congress acts before January 1, physician pay next year will be reduced by 29.4 percent. The estimated 10-year cost for the “doc fix,” according to the Congressional Budget Office, is approaching $300 billion.

Rep. David Camp, R-Mich., chair of the House Ways and Means Committee, told a Health Affairs briefing on Thursday that finding $300 billion for a ten-year fix “was untenable in the current situation” When Congress and the White House are struggling to find ways to reduce the $1.5 trillion budget deficit. Rather, he said, the Republican-led House will consider a “several-year fix . . . to get out from under this, and then look to the long-term fix.”

However, even a short-term fix would cost tens of billions of dollars next year, which could wipe out a significant portion of the budget reductions that Republicans are seeking as part of the debt-ceiling negotiations that kicked off yesterday.

Legislators looking for a magic bullet to the physician pay issue received no help from physician lobbying groups who testified on Capitol Hill. At a hearing of the House Energy and Commerce subcommittee on health, the American Medical Association called for scrapping the SGR and instituting a five-year program of regularly scheduled pay increases, during which time the Centers for Medicaid and Medicare Services (CMS) could experiment with alternative payment models like bundled payments  -- a single payment for all services related to a treatment or condition, rather than a series of separate payments --  or special reimbursements for coordinating care.

“The SGR is a failed formula,” said Cecil Wilson, an internist from Winter Park, Florida, who is the current president of AMA. “The longer we wait to cast it aside, the deeper the hole we dig.”

The American Academy of Family Physicians, which represents relatively low-paid primary care physicians, called for higher reimbursement rates for their specialty. The American College of Surgeons, which represents some of the highest paid specialists and would be hurt by a shift in pay toward primary care, also called for SGR’s repeal and setting a “realistic” budget baseline for future payment increases for all specialties, which should reflect the actual cost of providing care.

Mark McClellan, who headed CMS during the George W. Bush administration and now heads the Brookings Institution’s health care policy shop, told the subcommittee “the payment reforms in the Affordable Care Act are a foundation for this.” That was an ironic statement coming from a former high-ranking Republican official, since the House majority, in a vote taken earlier this year, repealed the new health reform act in a largely symbolic gesture. 

The special interest scramble to get Congress to ditch the SGR every year is a cautionary tale about   strategies from both sides of the aisle that can undermine Medicare cost control.  The  health care reform legislation pushed through by President Obama and the Democrats  achieves a half trillion dollars in Medicare savings over the next decade largely by putting a ceiling on the program’s annual growth rate that is one percentage point faster than GDP.

Obama, in his deficit reduction plan announced last month, upped the ante by calling for a ceiling growth rate of GDP plus 0.5 percentage point. The vehicle for achieving these savings in either case will be the reform law’s new Independent Payments Advisory Board, which starting in 2015 is scheduled to send mandatory cuts to Capitol Hill whenever health care grows faster than the target rate. Congress could either approve those cuts, or substitute a package of its own that achieved similar savings.

Camp attacked that approach yesterday, saying it was unacceptable for “a bunch of unelected bureaucrats” to dictate cuts that “will only cut payments to providers.” But the Republican plan for lowering Medicare’s unsustainable growth, which is called premium support because it would give future seniors a voucher to buy private insurance, has a cap of its own. It pegs the growth in the government’s annual contribution of premium support payments to a formula that is one percentage point higher than the consumer price index, which in most years is well below the growth in the economy.

In reality, any such formula could be thrown out the window by future Congresses – just as the SGR will be when Congress passes its next “doc fix” sometime before next January.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.