Tuesday, May 4, 2010

CBO Report Shows Cost of “Doc Fix” Skyrockets

The below piece from this morning’s CongressDaily examines a CBO table released last week that shows the cost of fixing the Medicare sustainable growth rate (SGR) mechanism “just got a lot more expensive.”  Specifically, a 10 year freeze on Medicare physician payment rates would cost $275.8 billion – up 33 percent in just one year.  A five year freeze costing “only” $88.5 billion would necessitate a 30 percent cut in Medicare payments in 2015 – another unrealistic funding “cliff” intended to mask the long-term costs of SGR reform.

Amidst Democrat discussions about adding the cost of the SGR fix to the deficit, it’s important to remember that, because seniors pay one-quarter of the cost of Medicare physician spending in the form of their Part B premiums, a portion of any unpaid-for “doc fix” will ultimately be financed by seniors themselves.  For instance, the five-year unpaid for “doc fix” would raise Medicare premiums by more than $20 billion.  So at a time when the federal government faces record budget deficits, an unpaid for SGR bill would add to the debt burden faced by America’s children and grandchildren – even while raising premiums for seniors.  This doubly unpalatable scenario leaves many to wonder: How does either course represent true reform?

 

Latest CBO Figures Show Higher ‘Doc Fix’ Price Tag

Tuesday, May 4, 2010

A solution for lawmakers’ annual ritual of applying a Band-Aid to Medicare physician payment cuts just got a lot more expensive, according to new estimates from congressional budget scorekeepers.

That will make it more difficult to comply with the demands for a permanent fix by physicians — who have barely begun to spend in advance of the midterm elections. Democrats are already laying backup plans to provide payment boosts for a shorter period, perhaps five years, but they need to act soon before scheduled cuts take effect June 1.

To get a sense of the increased costs, the cleanest comparison is probably an option outlined Friday by CBO to freeze Medicare payment rates, which under the new figures would cost $275.8 billion through 2020. That is a 33 percent increase from legislation that would accomplish that goal introduced late last year by Sen. Debbie Stabenow, D-Mich., estimated to cost $207 billion at the time. That bill did not advance in the Senate, nor did a House-passed bill with a different formula but a similar price tag.

Aides on both sides of the aisle attributed the cost increase to assumptions of an improved economy, which tends to add more to the cost of health services, as well as demographic changes that foresee increased numbers of retirees in 2020 over the previous year. The new estimates also take into account Medicare changes approved as part of the healthcare overhaul law, which may have produced some interactions that held back the “doc fix” cost from rising further.

The new numbers from CBO could be the final nail in the coffin for the influential physician lobby’s effort to repeal the Sustainable Growth Rate formula, which triggers automatic Medicare payment cuts if spending rises above a certain level. Simply keeping scheduled cuts at bay for five years would cost $88.5 billion, CBO said, and that is as far as February’s pay/go law will allow Congress to go without offsets. Aides said lawmakers are evaluating options that would patch the formula for a lesser amount of time but provide higher fees to physicians; they also said Democratic leaders haven’t ruled out a longer-term solution, provided they find offsets.

The measure could hitch a ride on a package of tax breaks and extensions of unemployment insurance, health subsidies for laid-off workers and other items that Democratic leaders want to enact before Memorial Day. If there is no action, Medicare physician payments would be cut 21 percent on June 1.

The American Medical Association is continuing to lobby hard for a permanent fix, despite the cost. In a statement Monday in response to the new CBO numbers, AMA President James Rohack said the cost would keep rising the more Congress resorts to short-term fixes. For example, the five-year $88.5 billion estimate factors in a “cliff” that assumes a 30 percent cut to Medicare physician fees beginning in 2015.

“It’s well known that the budgetary gimmicks used by Congress to delay Medicare physician payment cuts increase the cost of reform and the size of the cuts, so these new CBO projections are not surprising,” said Rohack. “It’s time for Congress to put aside the short-term actions that have more than quadrupled the price of a solution for American taxpayers and fix the problem once and for all for seniors, military families and their physicians.”

Based on the most recent FEC filings, the AMA’s PAC has contributed about $157,000 to lawmakers for the 2010 election cycle, according to the Center for Responsive Politics. The AMA is sitting on PAC contributions totaling $2.1 million, however, meaning they have plenty more to spend. The physicians’ lobby has been more or less even-handed, delivering about 53 percent to Democrats and 47 percent to Republicans this cycle.

by Peter Cohn