The House Busts The Budget By Passing a "Doc Fix"

Last Updated Nov 20, 2009 5:42 PM EST

Sliding in under the radar, the House has followed up its passage of health reform legislation by passing another bill that would restore nearly $200 billion in projected Medicare payment cuts to physicians over 10 years. The Senate recently defeated a similar proposal, and it's doubtful that the upper chamber will reverse itself, especially in the midst of a fierce battle over healthcare reform. Yet it is still appalling that, after claiming its reform bill was revenue-neutral (which it wasn't, even before this), the House would slip in this budget-busting bribe of physicians to maintain their support for reform.

H.R. 3961, which passed the House Nov. 19 by a vote of 243-183, would repeal the "sustainable growth rate" (SGR) formula that threatened to cut Medicare payments to physicians by 21 percent next year and more later on. The reason for the payment reductions is this: A number of years ago, the SGR was adopted in an effort to contain Medicare spending by cutting physician fees when their volume of services rose. But when the time came to actually make the cuts, Congress balked; in fact, it balked for several years, each time giving doctors a small pay hike. But the original legislation remained in place, resulting in the 21 percent cut for 2010.

The new legislation would repeal the SGR law. In its place, the House would base Medicare payments to physicians in 2010 on a formula that takes into account their costs for producing services. As a result, they would receive a 1.2 percent increase. In 2011 and subsequent years, Medicare would base its computation of the cumulative increase in volume on the 2009 spending level; starting in 2014, it would use the level for the previous five years. Moreover, only payments for services provided by physicians, and not those provided incident to physician services, such as lab tests, would be limited by this new SGR formula. There would be only two categories of spending targets and conversion factor updates; the first would be for evaluation and management services and preventive care, and the second would be for all other services.

According to the Congressional Budget Office (CB0), the bill would increase the fees that Medicare pays to physicians by about $195 billion over the next decade. It would also result in higher spending for the Medicare Advantage program and the Department of Defense's TRICARE program, totaling about $64 billion. By law, Part B Medicare recipients have to pay 25 percent of physician payment increases in the form of higher premiums. From 2011-2019, the additional premiums would cost seniors about $49 billion, the CBO says. After subtracting that from the additional costs of the program described in the House bill, it would cost the government about $210 billion.

Both the AMA and the Medical Group Management Association lauded the repeal of the old SGR formula, saying it was the first step toward preventing draconian pay cuts to physicians. Interestingly, however, neither statement mentioned the dollar figure involved. The downplaying of this consequential bill's passage seems calculated to avoid drawing attention to its implications for the cost of health reform. Yet as I've pointed out before, the extra payments to physicians must be considered in the context of reform, just as the costs that would be borne by hospitals, pharmaceutical firms, and device makers are. One could also argue that if other industry sectors are willing to give up something in return for increased business from newly insured patients, physicians should also accept some cutbacks.

This is not an issue that the Democrats guiding the Senate reform legislation wish to face, but they must if they are to provide an honest accounting to the public. Better to deal with it now than have it blow up in their faces later.

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.