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Last Updated: 3 April 2014
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Perryman: Time for a Real 'Doc Fix'

By M. Ray Perryman
M. Ray Perryman

WACO, April 3 - At the last minute, the problem of finding a reasonable way to set Medicare reimbursement rates for doctors was punted, leaving the issue to be dealt with next year.

Without the temporary measure (commonly known as the “doc fix”), a sudden, 24 percent drop in Medicare reimbursement rates would have kicked in this week. Needless to say, the fallout from such a decline would have been severe for both doctors and patients.

Parts of the process were somewhat reminiscent of junior high (with all due respect to our hard-working members of Congress – and junior high students), complete with blame games, grandstanding, and a general reluctance to simply be reasonable. In the House, the bill was passed by a voice vote, surprising some members and ensuring that there can be no way to later dissect who voted for what. The Senate left no time to spare, but finally did pass it on to the President.

The root of the reimbursement problem is the “sustainable growth rate” (SGR) set forth in deficit reduction legislation in the late 1990s. The SGR pegs annual increases in Medicare payment rates to economic growth and some other factors. In 2002, the formula would have resulted in a decrease in reimbursement rates for doctors, and the strong negative reaction by physicians led to the first “doc fix.” Over time and through subsequent temporary patches, the size of the problem has continued to grow, making it even more difficult to solve. No one ever expected it to be implemented in a way that would reduce payments; from the beginning, it was political chicanery to act like something was being balanced.

The frustrating part is that it looked like there would be real progress this time. A bipartisan committee hammered out an agreement to overhaul the system earlier this year, with some common aspects of a proposal that gained some traction last summer. Doctors would get a small annual increase over the next few years and the SGR would be repealed. Moreover, payments would shift toward a more results-based system, which would be aimed at rewarding doctors for better, more effective care. The current fee-for-service system, by contrast, may tend to encourage more tests, procedures, and visits.

While the bill to replace the SGR might not be perfect, it would have at least been a step toward something more sustainable. It also included options for physicians to weigh in on the reimbursement issue. However, when it came time to work out funding for the proposal, the process broke down. The Congressional Budget Office estimated that the bill (S. 1871) would cost $150.4 billion over the next ten years, and lawmakers couldn’t agree on where to come up with the cash. (Of course, they also didn’t find the cash for the temporary fix.)

Demographic trends are increasing the urgency of finding a permanent solution. Currently, there are about 49.4 million Medicare beneficiaries in the United States, almost 3.2 million of them in Texas. The number of beneficiaries has been rising over time, up by more than ten million since 1999. Spending has risen even faster. With longer lifespans and the aging of the large Baby Boomer age group, beneficiaries are set to increase sharply. Clearly, the sooner we solve this problem, the less it threatens the well-being of seniors, stability of the health care provision system, and prosperity in general. Moreover, the ongoing uncertainty makes it more difficult for physicians to justify long-term investments which could lead to better care. A little clarity is sorely needed.

The scenario with Medicare reimbursements is all too familiar. Once again, Congress failed to take real action to solve a problem that it created in the first place until the only options remaining were “bad” and “worse.” Letting Medicare reimbursement rates drop by 24 percent this week would have caused a major disruption to health care providers, patients, and the economy as a whole. I’m certainly glad that we avoided that debacle, but it’s long past time for a real solution.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

Write M. Ray Perryman

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