November 23, 2014

Skip Budget Gimmicks in Fixing Medicare Payments

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

Since 2003 Congress has enacted temporary “patches” to prevent cuts in Medicare’s physician reimbursements. This is necessary because of the Sustainable Growth Rate (SGR) -- a flawed formula for spending on physician services that requires unrealistically large cuts.

In April, a 24 percent cut is again scheduled. For months, however, momentum has been building in Congress for a permanent fix. Recently key committees in both chambers put forth proposals to create a new payment methodology.

Their general approach is to reward physicians based on their performance relative to like providers and services. This is intended -- with the help of more robust data -- to move away from fee-for-service and toward a value-based system with care-coordination incentives.

Last week the Congressional Budget Office (CBO) released 10-year cost estimates for proposals from the Senate Finance and House Ways and Means committees.

The House version would provide 0.5 percent payment increases through 2016, then freeze payments through 2023. CBO estimated its cost at $121 billion. The Senate bill freezes payments at 2013 levels but extends certain other health care policies. CBO says it would cost $112 billion.

Congress should not turn to accounting gimmicks to pay for the new proposals. There are policy options that could cover the costs and make other improvements as well, reinforcing some of the changes the SGR bills attempt to accomplish.