A Smarter Way to Pay Doctors
In a welcome break from political stasis, Congress may be on the verge of passing important bipartisan legislation to fix the way Medicare pays doctors. A bill before the Senate this week, which the president is willing to sign, would shift toward paying based on how well doctors care for their patients, rather than on how much care they provide. The fix isn't perfect, but it's far better than most of us expected from a polarized Congress.
Yet much of the commentary about the bill is very negative. Stranger still, it comes in the form of two contradictory arguments -- both wrong.
Every year, to avoid the steep declines in Medicare payments to doctors that would automatically kick in under the existing "sustainable growth rate" formula, Congress provides a temporary "doc fix." It suspends the payment cut one year at a time -- a sure sign of a dysfunctional political system. The legislation that has passed the House and is now before the Senate would permanently end the threatened payment cuts and shift doctor payments to a system in which more emphasis would be placed on quality, value and accountability. This would reinforce the broader movement in health care away from fee-for-service payments, which is crucial to continuing the slow growth in costs we've been enjoying.
At the same time, the legislation would impose higher fees on some high-income Medicare beneficiaries and would restrict a specific type of supplemental insurance that allows beneficiaries to escape deductibles. Such insurance has been shown to raise overall costs, because when people can avoid cost-sharing, they tend to boost their consumption of health care.
The bill would also extend for two years two effective programs: the Children’s Health Insurance Program, which provides crucial benefits for low-income children and their parents, and the Maternal, Infant and Early Childhood Home Visiting Program, which provides for regular home visits to improve maternal and child health. Empirical evidence shows how successful the latter program has been, and we should be doing more to promote such strategies.
So what's not to like about the permanent doc fix? The critiques come in two forms.
The Committee for a Responsible Federal Budget argues that by raising doctor payments above what they would be if the sustainable growth rate were strictly enforced, it would drastically increase the federal deficit. Specifically, the committee says it would add more than $500 billion to the debt by 2035.
Medicare actuaries, on the other hand, argue that doctor payments would fall so much that doctors would leave the program and beneficiaries would lose access to medical care. By 2048, payments to doctors under the proposed legislation would fall beneath those under current law, Paul Spitalnic, Medicare’s chief actuary, projected in a memo earlier this month.
In other words, the Committee for a Responsible Federal Budget is concerned that the doc fix will raise payments (without fully funding them) whereas the Medicare actuaries are concerned that the legislation will cut payments too much. They’re both wrong, for different reasons.
The Committee’s claim is true only compared with an imaginary world in which Congress doesn't patch the system year after year -- or with a somewhat less fanciful, but still pretend world in which the cost of such patches is always fully paid for by other changes in the federal budget. In real life, the annual patches would probably not be paid for, so the legislation to make a permanent fix is roughly budget neutral.
The actuaries’ concern may be somewhat more legitimate, but as the actuaries themselves note, health-care spending projections far into the future are inherently uncertain. I would go so far as to say they're almost useless. The actuaries have also, in this analysis and elsewhere, been much too dismissive of policy changes aimed at shifting incentives toward value; that’s one reason they've largely missed the deceleration in Medicare costs that's happened during the past several years. In any case, if, decades from now, the legislation winds up creating access problems, Congress can easily address them. Right now, it's better to eliminate the patch game and give doctors some certainty about their Medicare income.
That the House has overwhelmingly passed this sensible piece of legislation is a political miracle. The Senate should now do the same.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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