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 AMedNews.com 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.”