Maggie On Lou Dobb’s last night—the Doctor’s “Fix, ” and the Boy in the Balloon

I appeared on Lou Dobbs last night, debating Douglas Holtz-Eakin, a former director of the Congressional Budget Office, and a fellow at the Manhattan Institute. You’ll find the video here.  It actually turned out to be fun. (My children tell me that the segment was very funny. Then again, they are my children.)

Here I would like to expand on just one point that came up at the beginning of the show regarding the so-called “doctor’s fix.” Yesterday and today, newspapers have been filled with the news: in an effort to assure that physicians support health care reform, they claim that Democrats have promised to nix a plan to cut the fees that Medicare pays doctors by 21%. The cuts were scheduled for this January.  Over a ten-year period this “doctor’s fix” will cost $247 billion, the opponents of healthcare reform charge.

Today, the Washington Post’s Dana Milbank, argued that by making a “deal” with the doctors, the President is reneging on his pledge that the health care plan will not add a dime to the deficit: “Senate Democrats want to protect doctors from scheduled cuts in Medicare payments over the next 10 years, but there [is] a problem,” Milbank explained: “Doing so would add a quarter of a trillion dollars to the federal deficit, making mincemeat of Obama's promise. So Democrats hatched a novel scheme: They would pass the legislation separately, so the $250 billion cost wouldn't be part of the main reform ‘plan,’ thereby allowing the president to claim that [the health care reform] bill wouldn't increase the deficit.”

As I said as the beginning of the Lou Dobbs show last night: this is a non-story. I compared it to the Boy-in-the-Balloon piece which also grabbed headlines—even though there was no basis in fact.

There was no boy in the basket. There was no plan to slash Medicare fees to doctors by 21 percent in January. The “scheduled cut” existed only on paper. What Milbank, along with many other observers completely ignore is that everyone knew that it would never happen.

Back in February President Obama made this clear when he refused to factor Draconian cuts in reimbursements to all physicians into his budget. As reported: “President Obama on Feb. 26 offered a $3.56 trillion fiscal 2010 budget outline calling for sweeping changes to health spending and tax policy, including a recognition that Medicare's physician pay cuts mandated by law are not practical.  . .  The president estimated that repealing the [cuts] would cost $330 billion over the next decade.”

To say that slicing Medicare reimbursements to all physicians by 21% is “not practical” is an understatement. Think about it. How many primary care doctors do you think would continue taking Medicare? How many geriatricians would simply retire?  (Mid-career, after years of practice, median income for geriatricians is roughly $155,000.)

What would happen to palliative care (another group that is not well paid)? Hospitals often don’t have palliative care because CEOs say that it does not bring in enough income.

The idea of letting Medicare blindly trim physicians fees—across the board – goes back to 1997 when Congress created what it called the “sustainable growth rate” (SGR) based  on a complex formula which would determine how much Medicare spending on physicians’ fees could rise in a given year. If payments to all doctors exceeded the limit, Medicare would reduce reimbursements the following year.

As time progressed, growth in Medicare spending on physician fees continued to outstrip the SGR, not so much because fees for particular services were rising, but because doctors were doing more: more tests, more procedures, more volume. But Congress was loath to whack all doctors’ fees by a fixed amount; a sufficient number of legislators had the common sense to realize that this would be an extremely crude response to a very complicated problem.

Sure, certain specialists’ fees for certain services may well be excessive—but other doctors were having a hard time just keeping the lights on.  Throughout most of this century, rents, the cost of labor, and the cost of malpractice insurance climbed, while Medicare fees remained flat. Some doctors were being underpaid, while others were no doubt over-paid, at least for some tests and procedures.

As I have said in the past, we need to adjust Medicare payments to physicians with a scalpel, not an axe. We should slice fees in cases where patients are receiving little benefit. For example, many observers suggest that patients are undergoing too many unnecessary diagnostic tests. And in the case of CT scans, they are being exposed to large doses of radiation. This year, Medicare has decided to reduce what it pays for CT scans. Those dollars could be used to encourage better management of chronic diseases, rewarding doctors who manage to keep their patients stable, and out of the hospital.

Meanwhile, each year that Congress refused to reduce reimbursements, it “postponed” the cuts to the next year. Thus the amount grew—to 21% in 2010.It was a given that in 2010, Congress would once again do what it has done in the past: it would vote to defer the reduction in payments.

Nevertheless, in the past the Bush administration figured those cuts into its budget—year after year. The assumed savings made Bush’s free-spending budgets look less extravagant.

But when President Obama took office, he decided that enough is enough. The budget would be honest. And so he did not include an across-the-board reduction of how much Medicare pays doctors in his budget. This means that he acknowledged that the “fix” (if you want to call it that) was already in. He was not making a “deal” with physicians. He was simply acknowledging what had happened in the past each year, when Congress kicked the can down the road. And as the amount of the deferred cuts rose, it became obvious that no one was going to slash Medicare payments to physicians by 15% or 20%.

Many conservatives agree that we can’t downsize doctors by the amount the SGR formula dictates. But in their effort to block reform, they have tried to insist that liberals must find another $247 billion of savings in the Senate’s health care reform plan before going forward.

Of course the $247 billion is long gone. As Jon Chait explains over at TNR, it continued to exist only as an “accounting gimmick” in the Bush budgets.

And the $247 billion is not part of the cost of reform. Indeed, whether or not the president attempted reform this year, in January Congress would have once again gone through the motions, considered the proposed cuts, and decided, “No we’ll have to find the money somewhere else.”

16 thoughts on “Maggie On Lou Dobb’s last night—the Doctor’s “Fix, ” and the Boy in the Balloon

  1. Jenga–
    After conservatives fed a non-story filled with half-truths to the media, Democrats just couldn’t get the votes to pass the legislation that would repeal the cuts.
    The REpublican who co-sponosred the bill told Democrats that he couldn’t vote for it.
    The fact that Obama (and White House budget director Orszag) took a stand at the very beginning of his administration, saying “these across-the-board cuts are not going to happen”–this is a farce, and I’m not going to try to make my budget look better my including them, is testimony to the fact that the administration was sincere.

  2. Hell yea that’s what I’m talking about Maggie Mahar on CNN!! It’s about time. I have to watch it again I could barely hear it, but you got to talk more, Lou Dobbs took a cheap shot at you, and that other guy the only thing he said that made any sense was “Reality is expensive” he left himself wide open.

  3. Enjoyed seeing you on the show
    Credit to Obama for trying to budget “correctly
    No credit to Dems for including this phantom cost reduction in any of these bills and then trying to remove

  4. Maggie, maybe you can help me understand something. I know you probably won’t say anything negative about colleagues, but both Joe Paduda and Bob Laszewski, two very knowledgeable people, have both been all over the doctor “fix” as if it were some outrageous thing the Democrats were trying to do.
    I just can’t see the validity in their point. How is it possible that people who generally know what they’re talking about could think this doctor fix is such a big deal?
    Also great job on Lou Dobbs… it was a little jarring at first to hear someone on TV who actually knew what he/she was talking about, but I got over it after the first two minutes of you talking 🙂

  5. Wonderful to see you on CNN Maggie! Thanks for sharing. I really love your analogy of needing to take out a scalpel to really get at what’s unnecessary and not take out things that are important. A lot of doctors say Medicare doesn’t pay enough. It’s true that it doesn’t pay enough for primary care and “thinking” services, but it seems to pay quite well for medical equipment, imaging studies, and some surgeries. Rather than blindly cutting Medicare spending, we need to spend what we have more wisely.

  6. Sharon MD, Mike C, Dave and Lisa–
    Sharon MD–
    thanks very much. I really appreciate the support.
    Mike C–
    Bob Laszewski is a business consultant who has offered some excellent analysis on the economics of health care.
    In recent months, I have found his
    post skewed against reform, and haven’t agreed with him.
    Joe Paduda is, in my view, generally excellent. This doesn’t mean that I agree with everything he writes.
    Politically, he’s more of a centrist than I am. (Many people who I respect are.)
    But, in my experience Joe doesn’t distort the facts. Though we might well disagree on how we interpret them.
    In his most recent post on the doctor “fix” Joe acknoowleges that tha sustaintainable growth rate formula that would slash docs fees across the board is “dysfunctional.”
    He and I seem to disagree,however, on how much we could save with healthhcare reform proposals that wuuld change how we pay for health care, what we pay for and how it is delivered.
    Dave –Thanks–
    And yes, Obama does deserve credit for not trying to include these phantom savings in his budget.
    Lisa –Thanks.

  7. It’s a shame you had to appear on the Lou Dobbs show Maggie. He is an arrogant SOB. You did a little “bitch-slapping” on him though. And the other guest was slapped too!
    As for Medicare not paying enough. Congress didn’t want the Medicare program to be totally administered by the federal government. Instead, it devised a public program run by many competing private Medigap plans to supplement the 20%. That is a very antiquated design.

  8. Maggie … MRI’s don’t involve radiation. I think you meant to say CT’s. Also, the Finance Bill used the term Medical Device very loosely, including some very curious items. Obviously, that won’t be part of the final package either. With the country’s facing a deficit involving Carl Sagan numbers, passage of this White Elephant, no matter how shimmering, seems fiscally irresponsible.

  9. Yes, I agree with your analysis completely. I just have been perplexed a little by the tack both have been taking recently in the reform discussion.
    Thankfully you’re here to reassure me that I have at least a basic idea about what matters and what doesn’t in all this mess.

  10. Maggie, one thing that Medicare does NOT cover (administration of antibiotics through home health care) shows that prices do go out of sight when unregulated. My father (98) was on 24-7 antibiotics at home for 10 days for a post-op infections. We were shocked when the almost $7K bill came in (rental of an IV machine, the meds, and nursing & PT visits 3 times a week). My wife and I actually administered all of the meds. I wonder what Dr and hospital bills would be like now without Medicare’s controls?

  11. Doc 99–
    Yes, I meant CT scans, not MRIs.
    Medicare is cutting fees for both–I had just written about this– and the fact that many are worried that that many CT scans are exposing people to too much radiation.
    I have to disagree, though about the bill being a white elephant.
    The cuts that Medicare has already begun making–in fees for CT scans, MRIs, tests done by doctors who own or lease the equipment, refusing to pay for an excessive number of readmissions– will continue.
    There is still so much waste in the system–due to inefficiencies in hospitals, lack of collaboration among docs and hospitals, over-priced medications that are no better than older products they are trying to replace, unnecessary angioplasties, by-passes and back surgeries that provide no benefit to the patient . . .
    There is much money to be saved within the healthcare system, and now it appears more likely that we will have a public insurance option. Together, Medicare and the public option will realign financial incentives to pay for truly effective care, rather than volume of care.
    Private insurers have already said that if Medicare provides political cover, they will follow it lead.

  12. Harry, Gregory, Mike C.
    I think you misunderstood the post. Congress never enforced the formula that would have slashed Medicare fees across the board.
    So today Medicare “controls” on doctors’fees are the same as they have always been: Medicare sets the fees for specific services, one by one.
    Administration of antibiotics through home health care is a separate issue. Medicare does not cover this–and if you father was recovering from post-op infectoins, I have to wonder why he wasn’t in the hospital (which was responsible for those post-op infections).
    He should have been readmitted to the hospital (or he should never have been discharged.
    I am also wondering if he was receiving more anti-biotics than he needed . .
    Unfortunately, MedPAC has discovered that, in many cases, Home Health Care has become a racket– much fraud, abuse and over-treatment with Home Health Care Companies profiteering.
    Finally, I’m guessing that if he had had a MediGAP policy (supplementary insurance to cover what Medicare doesn’t cover ) the Home Health Care woldl have been covered–or even better, that the insurer would have told you the anti-biotics wouldn’t be covered unless he stayed inthe hospital where the treatment could be monitored properly–and would have insisted that he be readmitted to the hospital.
    Bottom line: the hospital should have taken responsibility for post-op complications.
    Actually, I enjoyed being on Dobbs! (Though I don’t agree with his politics.)
    As for Medigap, from what I can see it works quite well. I just think that we need to provide subsidies for people who can’t afford it. And pricing needs to be regulated.
    But it’s a good example of private sector and public sector insurance existing side by side–as in most of Europe.
    Mike C– Thanks

  13. Karen–
    Most of the people who listen to Lou Dobbs rarely have a chance to hear from someone like me.
    By appearing on Dobbs, I could reach an audience that I don’t usually reach.
    If progressive commentators only appeared on Rachel Maddow,we would only be preaching to the choir.