Fixing the Doc Fix


At the end of this year, Medicare's physician reimbursement formula calls for doctors to face a 29.5 percent fee cut. Needless to say, it's a near certainty that this won't happen. Since 2003, Congress has consistently passed overrides to the cuts dictated by the formula, known as the Sustainable Growth Rate. Last year alone, Congress passed five short-term extensions, including a 13-month extension that keeps rates from dropping until 2012.

This problem has become known as the "doc fix," and in his most recent budget proposal, President Obama called for a permanent fix. But his ten-year proposal only pays to keep physician's rates from dropping for two years (and it does so with cuts that are spread out over a complete decade, meaning we'll have spent the money before the cuts pay off).

Neither Democrats nor Republicans are terribly interested in letting doctors' Medicare payment rates fall, hence the regular overrides. Doing so would anger two powerful interest groups: physicians and seniors. Given that the president and both parties want to ensure that the fees don't drop, one has to operate under the assumption that they won't. Somehow, reimbursement rates will be kept at (or at least near) current levels.

But that means coming up with money to pay for those higher fees. How much money? According to the Congressional Budget Office, the cost, which continues to grow the longer Congress delays a fix, is now about $380 billion. The problem is that these days, pay-fors—revenue raisers or spending offsets that could be used to fund the fix—are hard to come by. That's why the president proposed a decade-long series of snips in order to pay for extending current rates by just two years. And why are pay-fors so hard to come by? Because the biggest, most obvious Medicare cuts—about $500 billion worth—were used to fund last year's health care overhaul. (And it should be noted that even those cuts are far from certain to go through and actually pay off as projected.)

If you presume that the doc fix will be funded somehow—even if it means more short-term extensions and deficit spending—then you have to think of this as irresponsible on the part of President Obama and the Democratic members of Congress who voted for the health care overhaul. They had a $380 billion problem to fix within Medicare, their existing system. But after coming up with changes that they believed would reduce the cost of that system by about $500 billion, they ignored the problem they already had and spent the money on a new entitlement instead.