Doc Fix Problem Still Not Fixed

Yesterday, I wrote about the messy business of pricing medical services—a business made messier by the government’s bureaucratic payment systems. Now, the AP provides a handy real-world example of some of the headaches caused by those systems and technocratic attempts to tweak and sustain them:

Breast cancer surgeon Kathryn Wagner has posted a warning in her waiting room about a different sort of risk to patients' health: She'll stop taking new Medicare cases if Congress allows looming cuts in doctors' pay to go through

The scheduled cuts — the result of a failed system set up years ago to control costs — have raised alarms that real damage to Medicare could result if the lame-duck Congress winds up in a partisan standoff and fails to act by Dec. 1. That's when an initial 23 percent reduction would hit.

Neither Democrats nor newly empowered Republicans want the sudden cuts, but there's no consensus on how to stave them off. The debate over high deficits complicates matters, since every penny going to make doctors whole will probably have to come from cuts elsewhere. A reprieve of a few months may be the likeliest outcome. That may not reassure doctors.

...The cuts have nothing to do with President Barack Obama's health care overhaul. They're the consequence of a 1990s budget-balancing law whose requirements Congress has routinely postponed. But these cuts don't go away; they come back for a bigger bite.

Doctors have muddled through with temporary reprieves for years. This time, medical groups estimate that as many as two-thirds of doctors would stop taking new Medicare patients, throwing the health program for 46 million older and disabled people into turmoil just when the first baby boomers will become eligible.

When I wrote yesterday about how business-side innovation in the health care market is hampered by technocratic meddling, this is the type of thing I was talking about. These sorts of problems are what you get when the government sets universal pay rates and then attempts to control costs through bureaucratic payment mechanisms. The sustainable growth rate formula, which governs Medicare payment rates (at least when Congress doesn’t override it) was instituted to keep doctor payment rates from rising too quickly. But that only worked as long as the rates were going up. Pretty much as soon as the formula called for reimbursements to go down, doctors complained. And it didn’t take too long before Congress acquiesced. Since the early part of the 00’s, the scheduled cuts have been overridden repeatedly.

It’s also worth adding a bit of context to the report's statment that cuts having “nothing to do” with the health care overhaul. That’s true in the sense that new law didn’t call for the cuts, or override them. But it did prove instrumental in other ways.

First, Democrats reportedly promised to wipe out the scheduled payment cuts if the AMA supported the health care law. A payment-schedule fix was included in one early version of the bill, but it proved too expensive. So Democrats pulled it out of the bill and promised doctors that they’d get a fix eventually in exchange for standing by the new law. But that fix obviously still hasn't arrived yet, in large part because there’s no consensus on how to come up with the $200 billion or so it's projected to cost.

Second, because cost estimates for the law assumed that current law would stay in effect, the law was scored using the assumption that doctors would be hit by the full 23 percent reduction. Now, a fix may not go through on schedule here, which would cause some temporary havoc in Medicare. And it’s at least possible that doctors might eventually settle the issue by negotiating a slightly less expensive version of the fix than what’s been proposed in the past. But I don’t think that anyone believes that a permanent 23 percent cut to physician reimbursements, with no adjustments to the SGR formula, is in really what's in order. Yet that’s what the law’s score assumed.

More on the sustainable growth rate here

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  • Jeff P||

    The face of House looking down on you is the second worse thing you could wake up to. It means at some point in the near future he will drill a hole in your head.
    The worse thing, of course, would be waking up to the sight of Nancy Grace slowly unbuttoning her blouse...

  • ||

    No kidding. That picture is going to give me nightmares for weeks.

    I'm not sure which medical procedure requires defibrilators, a flashlight, and whatever that vibrator-shaped thing Chase is holding, but I don't want to undergo it whatever it is.

  • ||

    It's for Lupus.

  • ||

    It's never lupus.

  • ||

    Could be Wilson's.

  • ||


  • ||

    That's absurd. I love it.

  • ||

    I like the original team. Those other people annoy me.

  • ||

    13 was smokin' hot, though.

  • ||

    Keeping the doc fix out of the health care bill was about the most dishonest thing I've ever seen out of government.

  • ||

    She'll stop taking new Medicare cases if Congress allows looming cuts in doctors' pay to go through

    Price controls don't work?

    When did that ever happen before?

  • ||

    These sorts of problems are what you get when the government sets universal pay rates and then attempts to control costs through bureaucratic payment mechanisms.

    While, at the same time, placing onerous restrictions on any attempt to make innovative changes to the supply side.

  • ||

    If Medicare keeps to the House Schedule, they'll find the correct solution with 8-10 minutes left to go. Of course, they'll nearly kill the patient a few times before that, sometimes succeeding.

    I've got a hunch that they'll never connect the dots to "reform the private insurance market to allow actual competition and voucherize Medicare."

  • Slut Bunwalla||

    But in order to find the solution, someone else will have to say something unrelated to the actual problem that nevertheless causes Medicare's brain to make the important connection between the symptoms or whatever and realize what's actually happening.

  • creech||

    Death panels, anyone?

  • Fiscal Meth||

    If they don't centrally control all prices and compensation, Doctors will chop off children's feet and hands because insurance companies want Doctors to cut off children's feet and hands because the CEOs use little tiny feet and hands as paper weights on their big corporate desks. You guys are just shilling for the baby foot paper weight industry.

  • ||

    the CEOs use little tiny feet and hands as paper weights on their big corporate desks.

    But not as ashtrays. See how far we have progressed, as a society?

  • ||

    I truly hope they let the cuts go through so that the physicians actually leave Medicare. Medicare price controls influence the entire healthcare industry. Couple that with heavy licensing regulations, monopolistic competition promoted by protectionist physician policies, and you still might not get that far to finally bringing costs down, but you start. The government already foots the bill for over half the healthcare in the country, so of course it makes sense to let it have more control!

  • Dan Lavatan||

    I agree. Physicians should follow other professions and be part of the indisutry at a 1:600 ratio with general care providers. There are a lot more aircraft mechanics than PhD aeronautical engineers, and planes don't fall out of the sky very often.

  • prolefeed||

    I'm married to a doctor, and I'd be delighted if they cut the compensation by 100%, so she and every other doctor could drop all those patients.

    A 23% cut would have a somewhat lesser effect than a total shutdown of pay, since paying you rates that cause you to lose money for each patient aren't as bad as turning you into unpaid slaves, but if it went on for very long, you could forget about new Medicare patients (and the more ornery old Medicare patients) actually finding a doctor to treat them under their illusory "coverage".

  • ||

    I'm an MD. About twenty percent of my practice is Medicare. Cut their reimbursement by 25%, and now I make only 95% of what I used to make. I think I'll still be able to eat.

    Most docs fear that Medicare cuts will lead to proportional private insurance cuts. I'll still survive if my overall revenue is cut by 25%, but many Medical Practices (not docs, but the businesses themselves) are bringing in less than that in profit. Cut out the profits, and who knows what will happen next.

    It's the second, third, fourth, fifth, etc. consequences that have people running scared.

  • Valhawk||

    I have a friend whose whole practice could be shuttered due to these cuts.

    As a radiation oncologist, you have to live with the other negative effect of the Medicare system, that since old people(who most often get cancer) generally pay through Medicare, it has driven everyone else out of the market in our region. The problem is such an overwhelming number of patients already pay with Medicare, and since medicare was already barely paying at cost, this cut could drive her out of business completely.


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