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  • Vetoing Congress's Medicare Mess

    If the government controls the entire health care system, the recent congressional debate over Medicare is a tart foretaste of what Americans can expect.

    Last week the Senate passed the Medicare Improvement for Patients and Providers Act of 2008 (H.R. 6331) just weeks after the House passed the same bill by lopsided majorities. It could not have happened without congressional Republicans. In the face of the special-interest pressure, the Republican leadership in the House simply collapsed. In the Senate, the Republican leadership was simply abandoned. In his dramatic July 10 entrance on the Senate floor, an ailing Sen. Ted Kennedy (D-Mass.) cast the decisive vote to invoke cloture, which, amidst giddy camaraderie, resulted in the defection of nine Republican senators, thus ending debate and guaranteeing the bill’s final Senate passage. Nonetheless, against all political odds, President Bush is going to veto the legislation, perhaps as quickly as tomorrow.

    The main rationale for the Medicare bill’s enactment is to stop a scheduled 10.6% payment cut for doctors practicing in the Medicare program. Why scheduled? Because Congress mandated a complex Medicare payment system (covering approximately 8,000 medical services delivered by doctors in Medicare), and that payment is annually updated by a formula called the Sustainable Growth Rate (SGR). This bizarre formula ties Medicare payment increases for physicians to the growth of the general economy. In other words, Medicare physician payment would be tied to a variety of external factors utterly unrelated to the supply and demand for medical services, such as, for example, the impact of price fluctuations in the international oil market. In any case, under this congressionally ordained formula, the Medicare doctors are automatically scheduled to get a cut in payment this year of 10.6%, and perhaps twice as much next year.

    It would be hard to find anyone on Capitol Hill who favors a 10.6% cut in Medicare physician payment. But the congressional leadership in the House and the Senate would not allow anyone to offer legislative solution to that problem. For example, Sen. Chuck Grassley (R-Iowa) had proposed a 1.1% increase in Medicare physician payment, but it never got it to the Senate floor for a vote. Likewise, Senate Minority Leader Mitch McConnell (R-Ky.) asked for unanimous consent under Senate rules to pass a 30-day extension of current physician reimbursement in the hope of arriving at a compromise, but Senate Majority Leader Harry Reid (D-Nev.) objected.

    This only makes sense if politics means everything, and policy means nothing. Being unwilling or unable to fix the indisputably broken Medicare physician payment system — this Chinese fire drill is now routine — the Congress instead spends a lot of time and energy and effort to stop its own Medicare payment system from going into effect. Worse, the urgent need to put the brakes on its own Medicare physician payment update becomes a convenient yearly pretext for its latest loading up the must pass Medicare “doc fix” with even more mischief. This bill, for example, includes an 18 month delay of competitive bidding in Medicare for medical equipment and supplies that was supposed to go into effect on July 1, 2008, thus terminating the initial contracts of winning contractors and forcing taxpayers to foot the inevitable legal bills for the litigation to follow.

    This year the “doc fix” bill is the vehicle of choice for ideologically driven cuts in Medicare Advantage, the new system of competing private health plans created under the Medicare Modernization Act of 2003. Never mind that in virtually every category — the breadth of consumer choice, the intensity of health plan competition, the provision of superior benefits, the relative simplicity of an integrated benefit and payment system — Medicare Advantage has been a success. It is routinely claimed that Medicare Advantage plans are overpaid, and that the cuts are cuts to profiteering insurance companies. But, in reality, cuts to Medicare Advantage plans (which account for roughly 14% of all Medicare spending) are cuts to patients’ benefits and a restriction on patient choices. And, if the objective is fiscal restraint in the Medicare entitlement, then there are a wide variety of budget options to contain the growth of overall Medicare spending, including the broad application of income related subsidies beyond Medicare Part B, the part of the program that pays physicians.

    Currently one in five Medicare patients are enrolled in Medicare Advantage plans, almost 10 million enrollees. But the fastest growing of these plans is the Medicare private fee for service plans (PFFS). It is the PFFS that the Congressional leadership has targeted for cuts. This year’s cuts would amount to $12.5 billion in the next five years, and $47.5 billion over the next 10.

    Private fee for service plans are not like traditional managed care, where patients use provider networks. In PFFS, patient can see any doctor they want; and they offer better benefits options than traditional Medicare. These plans are especially strong in rural areas, such as Vermont, North Dakota, New Hampshire, Wyoming and Montana. But these plans are also popular in large industrial states. In Michigan, for example, 253,159 Medicare patients are enrolled in Medicare’s private fee for service plans. In Ohio, there are 174,760 patients; in Wisconsin, 117,888; in North Carolina, 115,822; in Georgia, 79, 441. Interestingly enough, over 500,000 Medicare beneficiaries are also enrolled in employer-based private fee for service plans.

    Overlooked in the “doc fix” debate is the fact that Medicare private fee for service plans — the congressional liberals’ current targets — and other Medicare Advantage plans are an alternative for physicians who intensely dislike the bureaucratic restrictions of Medicare’s payment system. Doctors can negotiate the terms of their own reimbursement with these health plans. The congressional contraction of Medicare Advantage plans would mean a contraction of physicians’ payment alternatives.

    None of the existing Medicare programs is without its flaws — Medicare Advantage, competitive bidding for medical equipment, or Medicare physician payment. It would be much simpler to create a new system for the next generation of seniors, broadly based on the best features of a superior system, the Federal Employees Health Benefits Program. The government would make a defined contribution on behalf of the beneficiary, and the beneficiary would pick the plan of her choice on a level playing field. The Congress could stop micromanaging physician payment, or payment for oxygen equipment, or the myriad of other things it does badly. Meanwhile, President Bush is following a principled course.

    Posted in Obamacare [slideshow_deploy]

    9 Responses to Vetoing Congress's Medicare Mess

    1. Shawn Baca MD says:

      This article misses the point. Medicare HMO's and Medicare PPO's are over paid. The insurance companies get from 110 percent to 120 percent of what the average covered medicare patient costs under traditional medicare. These plans get paid more for fewer services. Doctors can not negotiate with these plans any better than with medicare and they generally pay less than medicare to keep the profits higher for insurance executives. The CEO of united got paid over a billion dollars ( that right with a B for billion) recently. Managed care companies can afford the cut not the doctors which are small businesses with high overheads. Also, micromanaging treatment is what managed care is all about. Doctors are usually a conservative bunch but if the President vetos the bill I think more will start supporting the democrats.

    2. javier says:

      i am unsure where these facts are comming from, i am a physician who participates in both medicare and advantage plans.the reality of these plans that they pay no more than mandated medicare reimbursement rates. to say that u can negotiate pay rates with these plans is blatantly false.these medicare advantage plans increase physician overhead because of needs to approve procedures or complex x-ray diagnostics. how they have been marketing has been outright criminal, signing unknowing patients to plans under false pretences.

      the home health care benefits and physical therapy benefits are severely restricted, hurting the more ill patients.so that they return to traditional medicare effectively selecting out a healthier clientele.

      they as all private health care plans pay either medicare rates

      or a % of medicare approved rates so that soon all health care plans will reduce payments proportionately.

      solo practice will die under these arrangements, i myself have decided to take a medical directorship at an indigent health clinic instead of having my reduced to levels that will bankrupt me.

      in fact these profiteers will change medicine in ways the public does not suspect

    3. Harry Neuwirth, Cali says:

      The question on the table is not whether Medicare is broken, but whether the President's so-called principles serve any practical purpose.

      The nation's doctors have already started to vote with their feet and increasingly decline to care for Medicare patients. If Mr. Bush's veto is sustained, anticipate a rush for the exits by primary care doctors unwilling to put up with another fee decrease and prompt revenge by pensioners upon Republican senators seeking reelection in November. If, as is likely, the veto is overridden; then it will be open season on every past veto as the Republican senators seek to distance themselves from a completely isolated White House.

      Karl Rove would never have stood for this political incompetence.

    4. Dr. K, Michigan says:

      I don't know how you can assert that Medicare advantage is a good thing: it costs more for worse outcomes, and every patient I have who's been on was astounded at the limits it placed on them and felt duped by the insurers that promised them the world to get them to sign up.

      There may be some advantages to it like the competition, but overall it is detrimental to the people who depend on it.

    5. Derek, Utah says:

      Every day I see the effects of Medicare Advantage Plans in the skilled nursing facility where I work as a physical therapist. Advantage Plan contractors constantly hound me to discharge my elderly patients much earlier than they are ready. This means that elderly people go home unprepared to live independently and many of them injure themselves within 6 months are admitted back into the hospital.

      Traditional Medicare, without the meddling of Advantage Plan middlemen, puts the safety of these elderly patients directly in the hands of professionals who have their best interest at heart.

      Why would anyone choose to have a middleman tell them how they can use the Medicare that they have paid for their entire working lives?

      The President is on the wrong track if he vetoes HR 6331. And, it only means delaying the inevitable–because a revote by the House and Senate will overturn the veto and this Act will become law.

    6. Jace, Oklahoma says:

      You poor, poor, underpaid physicians. You blame Medicare Advantage for your high overhead and low reimbursement rates. Bless your hearts. Medicare Advantage is clearly a very strong option for most Medicare beneficiaries, but I can see why you wouldn't like it. I guess the physicians on this particular board are probably returning those "bonus" checks that you receive from the big, bad managed care companies. Right?

    7. javier says:

      bonus check?

      excuse me there is no bonuses that i have heard of, besides its a moot issue for me, i quit private practice, i was a solo practitioner seeing 70% medicare. choice decreases. btw i made less than most nurses and all physician extenders i knew, under this wonderful system.

    8. Don Coleman says:

      I am enrolled in a Medicare Advantage program. I have recently retired and had medical coverage with my company. The Medicare Advantage program seems to mirror the corporate programs. I started,after retirement, with a Medicare Supplemental program. I have found that the Medicare Advantage program gives me more benefits at about one half my cost. It is my understanding that the Advantage programs take government out of the administration of medical benefits. Private industry can find ways to reduce cost if left alone and given proper incentives.

      I am very happy with the program. I deplore congress cutting the funding for the Medicare Advantage programs.

    9. Phil, New York says:

      So let me get this striaght…medicare is one of the listings on my paystub that decreases my bring home pay and I don't get to use it???

      So…now who do i talk to about not paying for it…

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