- - Wednesday, November 26, 2014

Washington is primed for Medicare reform. If nothing is done, the trust fund that covers the hospital bills for nearly 50 million Americans will run out in less than two decades.

It is imperative that congressional leaders take action because it would be immoral for the government to break its promise to millions of seniors across the country who rely on this program. But before Congress can even think about reforming Medicare, it needs to fix a phony spending formula that has been broken for more than 10 years and hides the true cost of Medicare.

The spending formula I am referring to is the Sustainable Growth Rate (SGR) that was instituted in 1997. Congress, in an effort to keep costs down, created the SGR to provide for physician reimbursement rate cuts. It was done to make sure Medicare spending did not outpace the rate of economic growth.

This idea would save taxpayers billions of dollars over the years and that is exactly what would have happened if it had been in effect. Instead, Congress passed a temporary delay in 2003 to keep the cuts from going into place. Since 2003, Congress has passed a temporary delay 17 times.

In Washington, these “temporary” patches to the Medicare spending formula are known as “doc fixes.” The most recent doc fix happened in March of this year. To date, the 17 doc fixes have resulted in extra spending of about $170 billion. At the end of the day, there has never been a temporary doc fix. Policy-makers and lobbyists alike both know that the doc fix will pass every time. It is effectively permanent.

It is time to end the charade, however, and pass a genuinely permanent doc fix to let Congress move onto more important issues like actually reforming the Medicare program.

Without a permanent fix, the Congressional Budget Office (CBO) is required to assume a doc fix will not be passed. This clearly underestimates the amount that will be spent on Medicare each year, covering up the real problems the program is facing.

A more political problem is also caused by the doc fix. Since the CBO is required to assume the SGR will go into effect, a permanent doc fix would be scored as an increase in spending. To sound fiscal conservatives, that may be a non-starter. But in reality, a permanent doc fix would just keep the law the way it is – essentially causing an increase in spending of $0.

Even Medicare’s actuaries have accepted that if nothing changes, a temporary doc fix will always get passed.

They wrote in their 2014 annual report:

“Current law requires CMS to implement a reduction in Medicare payment rates for physician services of almost 21 percent in April 2015. However, it is a virtual certainty that lawmakers will override this reduction as they have every year beginning with 2003. For this reason, the income, expenditures, and assets for Part B shown throughout the report reflect a projected baseline, which includes an override of the provisions of the SGR and an assumed annual increase in the physician fee schedule equal to the average SGR override over the 10-year period ending with March 31, 2015.”

So if it is so obvious that the SGR will never go into effect and a temporary doc fix will always be passed, why can’t Congress pass a permanent doc fix?

It takes valuable time from key staffers to pass this temporary repeal of the SGR every few months, and that is unacceptable. Staffers and policy-makers should be working on more important issues like reforms to the federal tax code, drafting a patient-centered replacement for the Affordable Care Act and finding ways to dramatically reduce government spending.

The lame duck session provides a great opportunity to put a stop to the doc fix scam once and for all. If Congress can’t get it done before the New Year, the new majorities in the House and Senate should demand to take it up right away in January.

It is time for truth in Medicare accounting. C’mon Washington, get this done once and for all.

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