It’s almost time for spring cleaning. But what if I told you this annual drudgery was unnecessary? I wish I could; we all wish there was a permanent fix to the clutter that inevitably accumulates over the course of the year.
But there’s another annual ritual – a Congressional vote on the so-called “Doc Fix” – that is unnecessary. Instead of putting taxpayers, Medicare patients, and doctors through the redundant rigmarole of a yearly vote to avoid automatic cuts, Congress should permanently fix Medicare’s fiscal problems and make the “Doc Fix” unnecessary forever more.
Many people – even many Medicare patients – aren’t aware that Medicare is in dire financial straits. The Medicare Trustees say the program faces an unfunded liability of $28 – $35 trillion over the next 75 years, meaning the payroll taxes that Medicare takes in (2.9 percent of each worker’s pay) will fall dramatically short of the total expected cost of Medicare benefits.
In an effort to bring the program more into balance, in 1997, lawmakers created a formula intended to reign in Medicare’s costs. This formula, called the Sustainable Growth Rate or SGR, would automatically reduce payments to Medicare doctors, saving the program money over time.
Cutting government spending—particularly spending in a popular entitlement program—isn’t politically popular. So without fail, since 2003, Congress has voted to avoid the SGR cuts. The last time Congress allowed the SGR to automatically take effect, in 2002, Medicare reimbursements decreased by 5.4 percent.
But, like the dust on your windowsills, the avoided SGR reductions have accumulated over time. Now, because Congress is so far behind in terms of scheduled cuts, without the Doc Fix in 2014, doctors would have faced a pay cut of almost 25 percent.
So today, allowing the SGR to reduce Medicare reimbursements would have significant consequences – and not just for doctors.
Medicare already only reimburses doctors 80 percent of what private insurance does. This means doctors have an incentive to see fewer Medicare patients and more privately insured patients. Last year, 28 percent of Medicare patients reported having trouble finding a new primary care doctor.
Dramatically reducing Medicare payments to doctors would only exacerbate this problem. That means that more seniors would have difficulty finding doctors they need and would face longer waiting times, which can create real hardship.
Still, the annual “Doc Fix” avoidance isn’t the right solution. This process has its own set of problems.
Although it’s almost a certainty that Congress will vote to suspend the SGR formula, government budget-scoring agencies can’t take this into account. They essentially have to pretend that the SGR will take effect. This makes budget projections look healthier than reality, and misleads lawmakers and the public into a false sense of financial security.
Furthermore, there are political interests who benefit from the present “Doc Fix” arrangement. Lawmakers can use the Doc Fix vote to push through other deals (that aren’t always in taxpayers’ best interests), and medical special interest groups can scaremonger their M.D. members to drum up cash to support their lobbying efforts.
Rather than continuing this annual ritual, Congress should permanently repeal the Sustainable Growth Rate. Although the cost-cutting formula was well-intentioned, it’s now ineffective and counter-productive.
As part of this permanent SGR repeal, Congress should make structural changes to Medicare for the next generation of retirees. Structural reform, specifically creating a premium-support option, is the only real way to bring Medicare into fiscal balance.
“Premium-support” means seniors could use their Medicare dollars to buy private insurance instead of participating in the government-run model. The competitive nature of the private insurance market would drive prices down without compromising seniors’ access to care. Of course, these reforms could co-exist with the option of traditional Medicare coverage, or could be implemented only for younger workers, giving them plenty notice of those changes.
SGR repeal, paired with a market-driven reform model, would honor individual choice and reduce costs, and if done right, could put Medicare on a permanent track toward solvency.
Spring-cleaning might be an annual chore; “Doc Fix” doesn’t have to be.
Manning is director of health policy at the Independent Women's Forum