This Doc Fix Is an Outrage

Yesterday’s Health Alert warned against the so-called Medicare doc fix that is being jammed through the Congress this week. More voices are rising up against this flawed legislation.

The Health Alert was written and published before the Congressional Budget Office published its estimate of the bill’s effect on the deficit. Here it is:

Over the 2015–2025 period, CBO estimates, enacting H.R. 2 would increase both direct spending (by about $145 billion) and revenues (by about $4 billion), resulting in a $141 billion increase in federal budget deficits (see table on page 2). Although the legislation would affect direct spending and revenues, it would waive the pay-as-you-go procedures that otherwise apply.

That is, less than three percent of this spending binge is paid for. Over 97 percent is deficit financed. This is how Republicans are showing how they can govern, especially on health reform?

As they say in America: “You gotta be kidding me!”

Any politician who votes for this will surely not be considered a serious voice in the debate over post-Obamacare reform.

What is the big deal, anyway? Currently, Congress has a certain amount of money every year to pay doctors. This amount of money increases according to a formula called the Sustainable Growth Rate (SGR), which was established in 1997. The SGR is comprised of four factors that (by the standards of federal health policy) are fairly easy to understand. Most importantly, the SGR depends on the change in real Gross Domestic Product (GDP) per capita.

The Medicare Part B program, which pays for physicians, is an explicit “pay as you go” system. Seniors pay one-quarter of the costs through premiums, and taxpayers (and their children and grandchildren) pay the rest through the U.S. Treasury. Therefore, it is appropriate that taxpayers’ ability to pay (as measured by real GDP per capita) be an input into the amount.

The problem is, the amount is not enough. If growth in Medicare’s payments to doctors were limited by the SGR, the payments would drop by about one-fifth, and they would stop seeing Medicare patients. So, at least once a year, Congress increases the payments for a few months. The latest patch was passed in March 2014 and runs through March 31, 2015. It costs $15.8 billion.

This has happened 17 times since 1997. Congress has never allowed Medicare’s physician fees to drop. Nevertheless, many believe that this has to be fixed at any cost – as demonstrated by the current, budget-busting bill.

Actually, the SGR is not the disaster that everyone thinks it is. There are worse things than politicians being forced to regularly re-visit how they pay Medicare’s physicians. It is hard to identify what specific harm the SGR has caused, unless it is to force physicians’ lobbyists and politicians to bang their heads together on a regular basis.

I cannot think of any other privately employed professional whose payments are guaranteed by Congress to increase for ten years or more. The Founding Fathers had this right: The U.S. Constitution forbids Congress from appropriating funds for the Army for more than two years. If soldiers can’t get a fix for more than two years, why should doctors?

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

John R. Graham is a Senior Fellow at the Independent Institute.
Posts by John R. Graham | Full Biography and Publications
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