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  • Time to Clean Up the Medicare Doctor Payment Mess

    Congressional Quarterly is reporting that the United States Senate is going to enact a one-month reprieve for Medicare physicians, saving them once again from a draconian reduction in Medicare payment.

    This entire system is a mess. Under the existing Medicare payment formula (the Sustainable Growth Rate, or SGR) for doctors that the Senate and their House colleagues enacted in 1997, physician reimbursement is tied to the performance of the general economy. If in any given year Medicare physician payment outpaces the growth in the general economy, there is an automatic proportional reduction.

    Routinely, Congress has blocked the annual payment reductions, but then, under the congressional formula, the payment reductions accumulate. Yet another flaw of the Patient Protection and Affordable Care Act is that it did not fix the physician payment problem. The result: This December, Medicare doctors will face a 23 percent cut in pay. A one-month extension of the reprieve would guarantee that the cuts next month would be even greater, requiring another congressional intervention.

    No one on Capitol Hill, Republican or Democrat, wants the congressional formula to be operational. If Congress allowed a 23 percent cut to go into effect now, or a bigger payment cut to take effect later, it would certainly trigger a big—and bad—shakeup in the Medicare program, as more physicians would refuse to take Medicare patients, cut back on Medicare practice, or decide to take no more Medicare patients than they already have. It is not hard to imagine even more overcrowded hospital emergency rooms where senior and disabled citizens are desperately jostling with the uninsured and Medicaid patients to get medical treatments, even for non-urgent care. What a mess!

    Congress should fix the Medicare payment system—but not add one dime to the deficit in doing it. It could do this by sequestering a portion of the projected $575 billion in Medicare savings they just enacted in the Patient Protection and Affordable Care Act to offset the additional costs—well over $200 billion in 10 years. Congress should also extend the fix for longer than one month and require that Congress enact a permanent fix to this problem during this temporary fix.

    To permanently fix the problem, Congress should provide for a predictable and stable payment increase (perhaps based on inflation as measured by the consumer price index) but allow doctors to charge extra over and above the Medicare reimbursement levels. This would return physician payment practice to the standard that existed in Medicare prior to 1989.

    Congress should also allow doctors and patients to go outside of the Medicare program and contract privately for Medicare services without statutory or regulatory obstacles. There was no statutory restriction on this practice until 1997, when the Balanced Budget Act provided for a bizarre statutory restriction on Medicare private contracting (Section 4507 of the Balanced Budget Act), plus the flawed Medicare physician payment update, which no Member of Congress wants to enforce.

    Congress should admit that its Medicare administrative payment process is outdated. Through the Medicare bureaucracy, Congress sets the prices of over 7,000 medical procedures, slaps on a price control regime, and then threatens the imposition of a formula that has little to do with the real market conditions of supply and demand. Routinely, they overpay or underpay doctors and hospitals because of their system of central planning and price regulation. Liberal and conservative analysts alike agree that they can’t get the medical prices exactly right.

    The right answer is to reform the Medicare program itself. A good place to start is the model suggested recently by the Bipartisan Task Force. Or, better yet, the more refined Medicare proposal recently presented by former Congressional Budget Office Director Alice Rivlin and Representative Paul Ryan: Replace the existing Medicare financing system with a premium support system broadly similar to that which exists in the Federal Employees Health Benefits Program (FEHBP). In the FEHBP, Congress doesn’t have to worry about anything like the Medicare RBRVS, DRGs, or the dreadful SGR. Physician payment is handled very nicely in the market. Better still, Congress doesn’t have to perpetually embarrass itself with its periodic Chinese fire drill to stave off Medicare payment crises.

    Posted in Obamacare [slideshow_deploy]

    12 Responses to Time to Clean Up the Medicare Doctor Payment Mess

    1. Dr. Robert Moffit has the correct diagnosis and treatment for the Medicare payment mess. Price-fixing and government control will continue to lead to loss of access to care. Allow balance-billing and private contracting between patients and physicians regardless of what Medicare pays. Australiia does so.

      Imagine if we decided to apply SGR regs to those in Congress and lawyers. These government schemes would vanish. Restore Liberty and eliminate coercion!

      Donald J Palmisano MD
      http://www.onleadership.us

    2. lynn, mansfield,Tx says:

      Unfortunately, our government which has mis- managed Medicare for decades is now poised to embrace another bad idea from Academia, the "ACO." The variables involved in healthcare delivery and individual patient needs will insure that this too will result in a disaster for physicians and patients alike. Doctors continue to be put in an untenable position by being unable to effectively bargain with hospitals or insurers due to anti-trust constraints. Hospitals and Insurers will be in the drivers seats for ACO implementation. These groups through intensive lobbying have been immune from any government cuts what-so-ever.

    3. Michael says:

      I have trouble just following your summary of this tangled web of a bureaucracy. If we could go back to 1965 knowing how these entitlements would play out, wouldn't we have said to them a resounding NO? I'm sure at the time it looked like utopia, but look at the mess we have now! It's political suicide to even debate much less tinker with them.

      How much more now should Obamacare be repealed to stave off a financial disaster surely to come in less than 45 years if we even make it that long? Even if the elites are right when they say it's political suicide to repeal it, our kids will thank us. The Constitution seeks to secure liberty also for our posterity. While we are not guaranteed our next breath, let us do our best every day to ensure their liberty.

      Fool me once (Medicare/Medicaid), shame on you; fool me twice (Obamacare), shame on me.

    4. Innocenzio Danna New says:

      Why Does OUR,Leaders Keep,Take Away Most Of Medicare. Why Can't We(SENIORS)Get The Same As All Our LEDER'S???? All THey Can Do It TAKE TAKE Away,Never GIVE!!!!! Isn't About Time To HELP,US SENIORS. How About Our COLA???????? That Would Help Some???????

    5. Innocenzio Danna New says:

      I Just Made A Comment

    6. George Colgrove, VA says:

      Two words will solve this:

      - – - > P r i v a t e S e c t o r < – - -

      It worked before – it will work again.

      Capitalism without government works everytime it is tried.

    7. Thomas Chambers, Sal says:

      Perhaps the greatest failure of our "reform" efforts is their inability to allow great ideas like these to flourish. Rather, we are told, we must give in to system wide reforms that do not address the fundemental failures, but perpetuates them further.

      A simple solution to forcing consideration of such ideas would be for physicians to resign from Medicare in overwhelming numbers.

    8. Larry Lawson Little says:

      Dr. Palmisano is absolutely correct. Allow the patient to negotiate with the physician if necessary with out any type of penalty to either party. Medicare should decide what they can afford for a service and then the patient and the physician can make their own decisions. All physicians have a fee schedule so the patient only pays the difference between the medicare payment and his/her fee or an understood reduction. If the occasional gouging takes place, the state medical boards know how to handle that.

    9. Alfred N. Carr, M.D. says:

      I agree with all of the above. This may be the one and only time we can achieve real, effective and complete tort reform. I suggest that we physicians willingly accept the 23% cuts as mandated by current law in exchange for such tort reform. This would necessarily be combined with all of the above excellent ideas and reforms you have outlined. In the name of fiscal recovery one could also suggest a similar but less severe reduction in all federal payroll expenditures top to bottom (military excepted), perhaps 50%. That would show a greater physician commitment to fiscal sanity. It would sure help this very sick federal budget.

    10. Pingback: Doctors Avoid Medicare Pay Cut for Another Year—but Then What? | The Foundry: Conservative Policy News.

    11. Pingback: Doctors Need a Permanent Fix to the Medicare Payment Mess | The Foundry

    12. Carol says:

      Get government out of the health care business! Since when have things gotten better when the government gets involved?
      I also like the suggestion that members of congress get to have the same kind of health (dis) advantages that they give to us.
      The only positive thing that has come out of the Obama administration is that people have awakened.

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