A Huge Pay Cut For Doctors Is Hiding In The Fiscal Cliff : Planet Money On Jan. 1, Medicare is set to cut payments to doctors by nearly 30 percent. Lawmakers of both parties want to prevent this. So why is it imminent?

A Huge Pay Cut For Doctors Is Hiding In The Fiscal Cliff

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Not as straightforward as it might seem. That applies to one other idea for health care savings. Part of the automatic cuts that will take place of Congress doesn't act by the end of the year is a huge pay cut for doctors who see Medicare patients. On January 1, Medicare is set to cut those payments by nearly 30 percent. It's actually part of plan Congress put in place 15 years ago, and then proceeded to postpone year after year.

Chana Joffe-Walt with our Planet Money team explains.

CHANA JOFFE-WALT, BYLINE: The way doctors get paid - the way a regular check-up or a surgery gets turned into money - most of us never see that side. And actually doctors don't really always understand that side. For instance, yesterday in the Bronx, in New York, Chris Veres took his grandfather to see Dr. Bob Murrow. And Veres told the doctor his grandfather has dementia, hasn't spoken a word to anyone for a year - and then just the other day...

CHRIS VERES: He actually held his hand to his chest. We asked him if his heart hurt, because he kept holding it. And he kept nodding yes. And now I'm almost sure that he's either got some kind of pain over there. So we just want to make sure everything is fine.

JOFFE-WALT: Dr. Morrow listens, asks a bunch of questions, the grandson answers them to the best of his ability. Dr. Morrow orders a cardiogram, leaves the room, comes back...

DR. BOB MORROW: You guys all dressed?

UNIDENTIFIED MAN: OK. You can come in.

MORROW: So the cardiogram is normal, OK. And so that's good.

JOFFE-WALT: But the doctor says the grandfather should still see a cardiologist. There's some more discussion and then it's over. Dr. Morrow and I stand in the hall as the patients leave the office. So what happens now?

MORROW: In what way?

JOFFE-WALT: With the money. How does the money work from here?

MORROW: Well, I fill out this form.

JOFFE-WALT: Dr. Morrow fills in what he did on the form and then sends it to his billing guy - a guy named Rocko Ungaro, who turns the form into codes, which get turned into money. First visit with a new patient: code number 99204.

ROCKO UNGARO: A hundred and 44 dollars and 96 cents.

JOFFE-WALT: And then there's the cardiogram.

UNGARO: With Medicare the payment is roughly around $17.

JOFFE-WALT: So about $160 for the whole thing. A very specific, very contested number. Hundreds of thousands of doctors, like Dr. Morrow, bill Medicare for everything they do - every service and procedure. And every year doctors bill for more and more things. So back in 1997, Congress said, look, if doctors keep sending more bills every year for visits and cardiograms, Medicare will pay less for things like visits and cardiograms. There will be a formula, keep costs in check. Professor Joseph Newhouse teaches health policy at Harvard University, and he says in 2002 the formula was clear: cut doctor fees by four percent.

JOSEPH NEWHOUSE: Doctors, of course, were somewhat grumpy about this. Some of them started to talk about maybe we won't be happy about taking Medicare patients.

JOFFE-WALT: People on Medicare didn't like the sound of that and people in Congress didn't like to hear their senior voters upset. And so the next year, in 2003, when the same thing happened - the formula said again to cut doctor fees...

NEWHOUSE: And the Congress said, ehh, we don't really want to go home and tell our constituents that - or have their doctors tell them that we cut their fees another four percent.

JOFFE-WALT: So instead ignore the formula, raise fees just a little bit, just this year, and then the next year and then the next. And the formula is cumulative, which means that right now the $160 Dr. Morrow made, the formula says it should be a lot less.

NEWHOUSE: If we were going to fix the whole thing and make up for all of the cuts that the formula said we should have made, we would cut his fee 30 percent.

JOFFE-WALT: Are we going to do that?


JOFFE-WALT: So why do we have the formula?

NEWHOUSE: I think the answer is that it allows us to pretend the deficit is less than it really is.

JOFFE-WALT: Because the deficit lives by this fiction too, that we will cut doctor fees by 30 percent, even though everyone knows that is very, very unlikely to actually happen. Chana Joffe-Walt, NPR News.

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