Medicare Pay For Doctors: Why Congress Keeps Punting

A familiar ritual is underway in Washington: A big Medicare pay cut to doctors is looming, and Congress is trying to get its act together to block it.

And in a rare display of bipartisanship, lawmakers will likely swoop in soon and pass a measure to stop the cut — but only temporarily.

This sort of brinkmanship on Medicare payments has been going on for years. In fact, Congress just voted in late December to postpone a 21% cut that was set to take effect on January 1. But lawmakers only postponed the cut by two months — so here we are again.

What gives?

The issue goes back to a law that Congress passed in the 1990s to try to control the growth of Medicare spending. The basic idea was that the amount Medicare spends on doctor fees for each beneficiary shouldn't grow faster than the economy as a whole.

Here's a (wildly oversimplified) example. If the economy grows by 4%, Medicare can only raise the amount it spends on each Medicare patient's total doctor bills by 4%.

If the total bills go up by more than 4% per patient — because doctors perform more exams and procedures for each patient, or because they do more intensive procedures that carry higher reimbursements — then Medicare will cut the amount that it pays doctors for each procedure. (If you want a more thorough explanation, read this.)

Over the past several years, this formula kept calling for cuts to the amount doctors get for each service. Doctors, of course, protested. And Congress, again and again, passed temporary measures that blocked the cuts from taking effect.

Over time, the cuts called for under the spending formula have added up. A few percent here, a few percent there, and suddenly you've got a looming 21% cut. (For more on the extended history of Medicare payments to doctors, check out the story on today's All Things Considered from Chana Joffe-Walt and David Kestenbaum.)

One option now would be for Congress to scrap the old formula and start over with a new formula that gets rid of the planned cuts altogether. That's what the AMA and the AARP would like to see. The AMA likes that because it would get rid the perpetual threat of huge pay cuts; the AARP likes it because it would make it more appealing for doctors to treat elderly Medicare patients.

James Rohack, the president of the AMA, told me this week that AMA used to back Congress's short-term fixes, but not anymore. "A couple years ago ... we'd get our grassroots out and say, 'Lets do a temporary patch,' " he said. "At this point, it's like, 'Enough of the games, you need to get this thing fixed.' "

The House last year actually passed a bill that would have done what the AMA and AARP wanted. It scrapped the payment formula and slightly increased payment rates this year. But it wasn't cheap. The CBO (Congress's nonpartisan scorekeeper for how much things cost) estimated that would have cost extra $210 billion over 10 years.

The short-term fixes, by comparison, look cheap — because they only deal with the short term. A bill to delay the cuts by one-month, approved by the House this week, would have cost about $1 billion, according to the CBO. (A companion bill was blocked in the Senate.)

And passing short-term fixes means the long-term estimates for Medicare costs still include the planned pay cut to doctors — even though it's unlikely such a cut will ever take effect. If Congress passes a new law acknowledging that the cuts will never happen, the long-term estimates for the cost of Medicare will get even uglier than they already are.

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