- - Wednesday, February 12, 2014


For more than a decade, Congress has danced around the need to make critical reforms to Medicare’s payment system for doctors, but finally there is real talk that a serious replacement could be coming that would end Washington’s endless “doc-fix” measures.

Lawmakers who since 2003 have resorted to stopgap measures to postpone accruing pay cuts to Medicare physicians are working behind the scenes to permanently reform Medicare’s physician payment system before the latest “doc fix” runs out on March 31.

It’s a welcome change, as a permanent solution would assure America’s doctors they won’t face draconian cuts in any given year and assure seniors that their access to care isn’t threatened.

Medicare’s complex payment system for doctors — known as the “Sustainable Growth Rate” (SGR) — was Washington’s attempt to limit health care costs, but it has proved unworkable for most of its existence.

While real reform to SGR is a great opportunity to help seniors, taxpayers and doctors, it must be done right. Any long-term replacement of Medicare’s payment formula must accomplish three things:

permanently repeal the flawed SGR system while protecting the doctor-patient relationship;

begin to reverse government micromanagement of medical practice authorized by Obamacare;

be fiscally responsible, securing long-term savings through structural improvements in Medicare that do not add to the deficit.

As a fiscal matter, this is all doable. The Congressional Budget Office estimates the 10-year net cost to taxpayers of freezing the physician payment levels would be $116.5 billion, down from an earlier estimate of $139.1 billion.

The success of this effort — as in any health policy measure — will be dependent on the crucial details. Congress in the past has paid for its short-term “doc fixes” by tightening Medicare price controls, manipulating administrative payments and shifting costs from one part of the program to another.

The better approach to offset the cost of scrapping the SGR formula is making common-sense structural changes to the Medicare program itself. Some of the bipartisan options available not only improve the program’s efficiency, but also are beneficial for Medicare patients.

One approach is modernizing Medicare’s benefit structure by combining Part A (hospital payments for Medicare patients) and Part B (physician payments for Medicare patients) into one plan with a uniform deductible. This would cut excessive costs generated by the current Medicare-Medigap arrangement while providing seniors protection from catastrophic health costs. A combined deductible would not only simplify Medicare’s payment system, it would also secure serious savings for taxpayers and give seniors more peace of mind that they won’t be bankrupted by a catastrophic illness or injury.

Other structural changes with a history of bipartisan support include a further reduction of taxpayer subsidies to wealthy seniors and a gradual increase of Medicare’s eligibility age to 68, which are both estimated to result in additional savings.

These savings could finance changing Medicare’s current physician payment system to one that ensures doctors receive a predictable reimbursement for their services, while enhancing the financial status of Medicare and reducing its long-term obligations for American taxpayers.

Ideally, abolishing Medicare’s SGR formula presents Congress with the chance to advance the doctor-patient relationship, guarantee better transparency in medical pricing and performance, inspire clinical innovation, and promote patient-centered medicine.

Unfortunately, the bills being developed in the House and Senate are not quite there, particularly in securing the professional independence of physicians from government control or supervision in treating patients. That, after all, was the intent of the original Medicare statute enacted in 1965.

Congress has a great opportunity here. Now is not the time for another fake “doc fix.”

Robert Moffit is a senior fellow in the Center for Health Policy Studies at The Heritage Foundation (www.heritage.org).

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