The Doc Fix: Another Reminder That Congress Can't Stick to its Own Deficit Reduction Plans

Another year, another doc fix—and another reminder of how lobbying pressure and Congressional skittishness can defang measures intended to reduce the deficit.

The fiscal cliff bill passed in the House yesterday includes once again includes a "doc fix"—a provision designed to avert big cuts in Medicare's physician reimbursements called for by the Sustainable Growth Rate (the SGR). The SGR, which ties physician's payment rates to the economy, was put in place as part of a 1997 deficit-reduction deal, and was intended to help restrain the growth of Medicare spending on payments to doctors. But after the SGR resulted in a 4.8 percent reimbursement cut in 2002, doctors put pressure on Congress to never let the cuts go into effect again.

It worked. Since 2002, Congress has never let the cuts go into effect, and some years it's given doctors a small raise. And because the SGR formula is designed to hold physician payments to a growth trend, the distance between what doctors are supposed to be paid under the formula and what they are actually paid has grown ever larger. This year, the formula called for a 26.5 percent cut. The cost of overriding it was about $30 billion.

Last year's doc fix was paid for by slicing money out of ObamaCare's insurance subsidies. This cost of this year's fix is split between hospitals and some Medicaid payments, according to Kaiser Health News. Unsurprisingly, the providers taking a hit aren't happy, especially since the cuts come on top of payment reductions included in ObamaCare. Those providers warn that they won't be able to serve their patients as well with lower payments.

The yearly ritual of the doc fix offers a regular reminder that Congress can't be trusted to stick to its own spending restraint and deficit reduction measures. And it also highlights both the political complications and market distortions caused by centralized price setting. Would access to physician health care decrease if Congress let the doc fix go into effect? Probably. On the other hand, it's quite costly to pay for a yearly doc fix—and increasingly difficult to find offsets. Those offsets, meanwhile, have consequences of their own for the providers who end up taking reduced pay in order to fund the fix.

The problem isn't necessarily that Medicare's physician payment rates are too high or too low, but that the rates are politically determined. The question we should be asking isn't: How high should doctor reimbursements be? It's: Who should be deciding how doctors are reimbursed? And the start of the answer is: not Congress.