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Lawmakers try to end Medicare ‘doc fix’ that ain’t necessarily broken

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(Bloomberg) — Maybe the “doc fix” shouldn’t be fixed.

Pressured by the health care industry, Congress is rushing to permanently raise pay for doctors who participate in Medicare. A new bill would replace the decade-long practice of funding periodic pay increases for physicians by cutting spending in other parts of the $622 billion program. This Washington rite is known as the doc fix.

Overlooked, though, is the benefit of the regular legislative exercise to taxpayers. Each raise has to be paid for, forcing doctors, health care lobbyists and patients to the table to negotiate ways to keep Medicare spending in check.

Over the years, that process has resulted in lower expenses for ambulance services, dialysis and advanced imaging such as CT scans — costs that add up. The 17 doc fixes passed since 2003 have reduced the deficit by $165 billion, offsetting much of doctors’ pay raises, according to calculations by the Committee for a Responsible Federal Budget, a nonprofit that advocates for lower national debt.

“It always gets derided because it’s annoying and it’s flawed,” said Loren Adler, the group’s research director, who has studied the doc fix. “It doesn’t work as intended, it’s a little bit silly in some ways and it’s a lobbying bonanza. That being said, it’s accomplished what was intended — it’s controlled the cost of Medicare.”

In 1997, as part of legislation to bring the federal budget into balance, Congress created a formula to control Medicare spending on physicians. Called the “Sustainable Growth Rate,” or SGR, the formula triggered cuts in payments to doctors if spending exceeded targets — something that first happened in 2002.

After taking a 4.8 percent cut that year, outraged physicians mobilized a lobbying effort that hasn’t relented since. Never again was pay reduced.

Modest raises

Annual raises, though, have been modest at best. And adjusted for medical inflation, physician pay under Medicare has fallen 18 percent since 2001, according to the American Medical Association, for whom repeal of the SGR is priority No. 1. Almost all of those increases have been accompanied with reductions in spending for other parts of Medicare, cuts that often responded to concerns about fraud and waste in the program, according to Adler’s analysis.

“There are all sorts of inefficiencies, waste and overpayments,” he said. For example, past cuts have cracked down on doctors and other health care providers in Medicare who are delinquent on their taxes.

The new legislation would repeal the current payment formula, give doctors a 0.5 percent raise annually for five years and then award bonuses for performing well in tests of the quality of their care. Those tests have yet to be designed. House leaders released their complete bill Tuesday, and it’s expected to get a vote Thursday.

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Automatic increase

If the bill is passed, Congress would no longer be forced to regularly examine Medicare, the insurance plan for the elderly and disabled. As an entitlement, Medicare can run without congressional intervention, its budget rising automatically in response to growing enrollment and health care costs.

The American Medical Association, the largest organization for doctors in the U.S., argues that repealing the SGR, while costly on paper, would improve the U.S. health care system by easing changes in the way physicians are compensated.

The 1997 cost-cutting formula is built on, and reinforces, Medicare’s outdated system of paying physicians, hospitals and other health care providers based on how many services they provide, with little regard to the value of those services or whether patients get better.

New systems?

“The SGR is a huge impediment to the implementation of innovative new models,” Robert Wah, the president of the association, said in a statement. “The reforms in this bill will move Medicare to value-based delivery and payment models that are proving to be successful in improving health outcomes and cutting costs in the private sector.”

Most of the new payment systems that Wah expects to contain costs aren’t yet developed. In any case, ditching the doc fix is proving to be even more difficult than the annual patches themselves. While lawmakers from both parties have backed the bill, Senate Democratic leaders haven’t endorsed the legislation, and an April 1 deadline for a fix will probably come and go without a deal.

See also:

Senate budget sets up clash with U.S. House on Defense, Medicare

House Republicans seek Medicare cuts