Short-Term Fix for Physican Pay from Medicare Health Insurance

30 June 2010 |

As predicted in my preceding post, the U.S. Congress passed and President Obama signed into law an amendment to the federal health insurance overhaul bill that halts the mandatory 21 percent reduction in the fees paid by Medicare to physicians who provide care to Medicare patients. Both parties supported the “doc fix” as the legislation is known: the Senate passed the bill on a voice vote and the House voted 471 to 1 to pass the bill. The law is retroactive to June 1, ensuring that there will be no disruption in payment amounts.

This was the tenth occasion in the past eight years that Congress has stepped in to prevent the payment reductions scheduled in 1997. Like the preceding measures, this is a stop-gap fix, preserving the health care insurance payment amounts only through the end of November. Unless another doc fix is passed, Medicare physician payments will automatically be cut by 23% in December and another 7% in January 2011.

Although the need for long-term reform is obvious, Congress was reluctant to permanently modify the calculation of Medicare payments to doctors. President Obama expressed frustration with the temporary doctor fix. “Kicking these cuts down the road just isn’t an adequate solution to the problem,” declared Obama. Nancy Pelosi, the Speaker of the House, agreed, criticizing the bill as “totally inadequate.”

The reason Congress did not address the long-term structural problem of Medicare payments is simple:  It does not want to add to the unprecedented deficits it has already created through the unfunded economic stimulus package and the healthcare reform package that the Congressional Budget Office (CBO) has recently admitted is underfunded by $127 billion. Last year, the CBO estimated that a permanent fix of physician payments would cost $245 billion over ten years. With voters exasperated by deficit spending, Congress was in no position to add to the deficit in an election year. Instead, congressional leaders postponed long-term action until after the November elections and actually raised taxes and cut Medicare payments to hospitals to offset the cost of the stop-gap measure.

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Increasing Federal Health Insurance Spending by Another $245 Billion

18 June 2010 |

In my prior post, I talked about the two upward revisions the Congressional Budget Office (CBO) made in its estimate of the cost of  the Patient Protection and Affordable Care Act—the health insurance reform bill passed by Congress and signed by President Obama. Now, the chief executive is asking Congress to spend even more on healthcare programs.

In his weekly radio address to the nation, President Obama urged Congress to remove the automatic cuts in the Medicare Part B payments to physicians scheduled to go into effect  this month.

The scheduled reductions in Medicare Part B payments were part of a legislative packaged Congress passed in 1997 to help slow the growth of the taxpayer funded health care insurance program for seniors. Congress linked physician payments to the Sustainable Growth Rate (SGR), an index that has lagged behind the increasing Gross Domestic Product (GDP). Because of this lag, sustainable “growth” actually amounts to reductions in physician payments. Presidents and the Congress have stepped in before to prevent the called-for reductions in Medicare payments, as the CBO noted in its analysis of the overall cost of the healthcare reform proposals:

The sustainable growth rate mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration by the Congress.

To attract the support of the medical establishment for comprehensive healthcare reform, the Democratic majority said it would include a permanent change to Medicare Part B payments as part of the legislation. The Democratic leadership dropped the idea of a permanent “doc fix” when the CBO reported it would add $245 billion to the cost of the legislation over ten years, resulting “in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period.” Adding to the federal deficit would endanger passage of the controversial bill and violate a pledge President Obama made to the nation on September 2009:

I will not sign a plan that adds one dime to our deficits—either now or in the future.  (Applause.)  I will not sign it if it adds one dime to the deficit, now or in the future, period.  And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize.

[My emphasis.]

To maintain support for the bill from the American Medical Association and other groups, congressional Democrats promised to eliminate the Medicare payment cuts in separate legislation, creating the appearance that the comprehensive healthcare overhaul was paid for by the $420 billion in new taxes and more than $500 billion in Medicare cuts.

As it turned out, the Patient Protection and Affordable Care Act ending up adding more than a dime to the deficits after all, according to the Congressional Budget Office. In March, the CBO added $152 billion to its estimate of the cost of the healthcare bill, wiping out the $140 billion in deficit reductions it had originally forecast and adding $12 billion to the federal deficit. Then, as I discussed in my last post, in May the CBO revised its calculations again, stating that start-up costs for the various bureaucracies called for in the legislation would cost another $115 billion, bringing the deficit to $127 billion. Putting the $245 billion “doc fix” back into federal healthcare budget, would bring the total deficit for healthcare spending to $372 billion.

President Obama has not indicated what he plans to cut to avoid adding 3.7 trillion dimes to our deficits.