A similar version of this Health Alert appeared at Forbes.
Congressional leaders from both parties have agreed on a long-term, so-called “doc fix” that claims to solve the problem of how the federal government pays doctors who treat Medicare patients.
Currently, Congress has a certain amount of money every year to pay doctors. This amount of money increases according to a formula called the Sustainable Growth Rate (SGR), which was established in 1997. The SGR is comprised of four factors that (by the standards of federal health policy) are fairly easy to understand. Most importantly, the SGR depends on the change in real Gross Domestic Product (GDP) per capita.
The Medicare Part B program, which pays for physicians, is an explicit “pay as you go” system. Seniors pay one quarter of the costs through premiums, and taxpayers (and their children and grandchildren) pay the rest through the U.S. Treasury. Therefore, it is appropriate taxpayers’ ability to pay (as measured by real GDP per capita) be an input into the amount.
The problem is the amount is not enough. If growth in Medicare’s payments to doctors were limited by the SGR, the payments would drop by about one-fifth, and they would stop seeing Medicare patients. So, at least once a year, Congress increases the payments for a few months. The latest patch (H.R. 4302) was passed in March 2014 and runs through March 31, 2015. It costs $15.8 billion.
This has happened 17 times since 1997. Congress has never allowed Medicare’s physician fees to drop. So, why not pass a long-term fix? This would finally free politicians from having to grub around every year finding money to pay doctors, and they could turn their attention to loftier matters.
Actually, there are plenty of reasons to be skeptical of any “doc fix”, and certainly this one.
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