On Thursday, the House is expected to vote on legislation to make a number of changes to Medicare, the most significant of which would be a repeal of scheduled cuts to doctors’ payments for medical care. Unless Congress acts, on March 31st, the nation’s doctors face a 20 percent cut in reimbursements for treating seniors on Medicare.
Once the legislation clears the House, it will move to the Senate for final approval. That may take longer, as Senate Democrats object to other provisions in the legislation, especially language that would continue to block federal funds from paying for abortions.
There are five key items to keep in mind while this debate rages:
1. Congress created this crisis.
In the 1990s, as part of legislation to reduce the federal deficit, Congress enacted a provision called “sustainable growth rate” to guide Medicare reimbursements to doctors. The plan basically cut payments to doctors by 20 percent. If the federal government had been paying a doctor $100 to provide a medical service to seniors, in the future it would pay just $80, for example.
The mandated cuts as envisioned by Congress were draconian, ridiculous and untenable. By simply decreeing that it will pay less for a service, Congress improves neither the health care of seniors nor the medical business of doctors. The likely result, as any first-year economics student could predict, would be that doctors would simply provide fewer services to Medicare patients.
These cuts have never happened, because virtually every year since they were enacted two decades ago, Congress has passed what it calls a “doc fix” to push off the proposed cuts. The latest “doc fix” expires next week, which has set off this current flurry of activity to potentially permanently “fix” the mandated payment cuts.
2. The annual “doc fix” is a lobbying bonanza
In recent years, Congress has been reduced to a crisis mitigation body. Its inability to deal with long term challenges has created an almost annual list of “must-pass” legislation to avert a government shutdown, reauthorize a program or extend a deadline. Legislation to do these things attracts swarms of lobbyists, looking for legislative vehicles to carry their initiatives or pet projects.
Legislation to reauthorize port security ten years ago also ended up banning on-line poker. The TARP bailout of big banks also required insurance companies to pay for mental health treatments. ObamaCare also carried a restaurant industry proposal to require menu labeling of nutritional information on all restaurants.
Because the planned cuts to doctors are so severe, Congress has always passed legislation putting off these cuts. This guaranteed “fix” attracts a host of small spending and tax items that, on their own, would likely never see the light of day. Permanently retiring the annual “doc fix” would close off one of the lobbyists most trusted methods of enacting special interest favors.
3. Congress boosts immediate spending with mythical future cuts
When first enacted in the mid 1990s, the “sustainable growth rate” provision for Medicare providers was included as an “offset” to immediate spending increases. At the time, it was argued that the “SGR” would more than “pay for” increases in government spending, ultimately lowering the future deficit.
Two decades ago, Congress applauded itself for both immediately boosting government spending while also lowering the future deficit. As is almost always the case with Congressional budgeting, the spending hikes were real and the cuts were a myth. Not a single dollar of the savings promised 20 years ago through the SGR provision have been realized. The boost in spending, however, lives on every year as a permanent increase in the yearly federal budget.
4. The “doc fix” rescues the American Medical Association from its bad decisions.
The American Medical Association, one of the oldest lobbying organizations in the country, is so fixated on permanently eliminating the SGR cuts that it threw its support behind ObamaCare. Congressional Democrats had offered the AMA a permanent “doc fix” as part of ObamaCare. In a classic bait-and-switch, after winning AMA’s support for the legislation, though, the “doc fix” was ultimately dropped from the bill.
It is worth noting that the AMA, which, on paper at least, represents the nation’s doctors, was originally founded in opposition to post World War II proposals to nationalize health care. AMA was for decade a bulwark against government encroachment into health care.
At the height of the ObamaCare debate, however, sources close to the AMA told Breitbart News that the organization suppressed its own poll of its membership showing overwhelming opposition to the plan. The AMA backed the government health care takeover on the chimera of Democrat promises of a permanent “doc fix.”
Republicans delivering a permanent “doc fix” now will save the AMA from its disastrous decision to support ObamaCare.
5. On balance, the proposed “doc fix” is probably a good thing
Even when first passed, the SGR cuts were unrealistic and likely misguided. They weren’t a thought-out policy change, but a blunt variable added to a budgetary equation to justify a spending boost. If implemented, they would cause more harm than good to health care for senior citizens.
The annual scramble to “fix” the SGR provision invites further budgetary fiction and offers special interests a proven vehicle for enacting self-interested provisions. The “offsets” to pay for permanently repealing the SGR cuts primarily involve introducing more “means-testing” to Medicare, i.e. requiring seniors with higher income to pay a larger share of their medical costs.
The problem, though, is that this new “means testing,” which itself is a good policy, is being used to simply more accurately fund the system as it exists. Rather than paying for the annual “doc fix” through general government debt, the Medicare program itself will absorb the costs of paying doctors in full for treatments they provide.
Expanding “means-testing” to more honestly pay for the current program precludes this reform from being used to reduce the future costs of the program.
Medicare is still unsustainable in the current budget blueprint. This current permanent “doc fix” proposal may more accurately align with budget reality, but the myth that Congress can keep funding all its promises without significant reforms remains.