While America relaxed through the Independence Day weekend, the year's most important health care issue sat stalled in Congress, way past due. It is no longer five minutes to midnight, it is past midnight, and the contestto fix Medicare is now in overtime. The issue is an automatic budget cut that will reduce Medicare payments to doctors by 10.6%. If Congress doesn't fix the problem quickly, hundreds of thousands of patients could find themselves without physicians. Worse, as the ripples from this pay cut work their way through the system, the cuts will affect millions more not even insured by Medicare.
The root of the problem is something called the Sustainable Growth Rate, or SGR, a formula attached to Medicare law in 1997 to keep spending at or below certain growth targets. The formula controls costs by automatically slashing doctors' fees if spending limits are overrun in other areas. The SGR was originally intended as a carrot-and-stick measure that punished doctors with salary cuts if they overused services and rewarded them with modest increases if they ordered fewer tests and procedures. Unfortunately the SGR has never worked. Medicare costs continue to skyrocket, triggering the stick -- annual cuts in physician fees. Each year, outraged doctors lobby Congress to get the cuts reversed, and each year since 2002, Congress has complied. Thus, the SGR has proven useless -- not only does it fail to control costs, but Congress cancels its mandated penalties each fiscal year, eliminating any hope that it could change physician behavior.
But SGR is not simply an idea that has not been allowed to work. It is a badly flawed formula that cannot ever work. Congress has been doing half of a good thing by canceling its cuts, though it would be much better if it simply did away with the SGR entirely.
SGR fails for two reasons. First, it is a poorly thought out psychological tool, and secondly, it is technically obsolete. Disciplining doctors as a group is not an effective way to modify individual behavior. As a doctor, why would I reconsider ordering an expensive MRI on a patient simply because skipping the test would help satisfy the SGR? The Medicare budget is in the hundreds of billions. Any savings I might incur for the system could only translate into pennies in my pocket at the end of the year. Since there is no discernible connection between what I order and what I collect, there is no incentive for me to pay any attention to the SGR. As I read once in a fortune cookie, in an avalanche no snowflake ever feels responsible.
Secondly, the formula is obsolete, since it represents the medical state of affairs in 1997, not in 2008. Since 1997 many new standard-of-practice guidelines have been adopted, and these guidelines have changed the way doctors think and practice. For example, the recommendation that all adults over the age of 50 have a screening colonoscopy has greatly increased the number of colonoscopies ordered for Medicare patients. This guideline alone adds hundreds of millions in expenses to the formula, and ultimately, the formula strips that money out of doctors' fees. So when doctors order colonoscopies as they are supposed to, the SGR punishes them by stripping the cost of the exams from physician fees. Updating the formula will not help -- as new practice guidelines emerge in the future, the revised SGR will again fall behind the times, placing the Medicare right back in the current dilemma.
Congress was supposed to enact a fix last December, but instead of correcting the problem it merely froze the current fee schedule until July 1. July 1 has, obviously, come and gone, and still no bill. In a last ditch effort, President Bush has ordered Medicare to cease processing any new claims until July 15, but at some point something has to be done. The calendar year is more than half over, and Congress has failed to properly budget one of its largest and most popular public programs.
Why doesn't Congress do the reasonable thing and do away with the SGR? This would eliminate the annual end-of-year scrum between doctors and politicians, and could place Medicare on more secure financial footing. The problem is that there is a political advantage hiding in the SGR. As long as the SGR is in place, the Medicare spending curve appears to rise slowly and affordably in all long term projections. Everyone in Washington knows Congress will never slash doctors' fees the 40% necessary to maintain that beautiful, gently upsloping curve -- everyone except voters, that is. So SGR will stay, because it means the average Congressman can semi-truthfully tell his constituents that Medicare is not projected to not break the federal budget. An expedient budgetary lie.
On the other side of this issue are physicians, who are increasingly disgruntled over Medicare. With over 44 million enrollees, Medicare is America's largest health care carrier. Its physician re-imbursement rates are on the low side of the payment spectrum, but because there are so many Medicare patients doctors have trouble living without them. Some specialties that deal extensively with problems of the elderly, such as orthopedics, nephrology, and oncology, can't do without Medicare patients. For them, what the government decides to give out will heavily influence their bottom line. Making matters worse, in the health insurance business physicians' fees behave a lot like airline ticket prices: when one big carrier makes a price move, all the others quickly follow. Many insurers strictly tie their payments to Medicare, stipulating in their contracts that doctors are paid a flat percentage of Medicare, ranging from 80% for some HMOs to 130% for some of the better private plans. When Medicare fees move, most health plans move along with it.
Thus, the stakes in this 10.6% cut are enormous. According to AMA surveys, 60% of doctors plan to cut back on the new Medicare patients they will see if the cuts go through. If the SGR remains in place through 2015, that number increases to 77%. The New York Times has reported that this process has started already. Critics argue that this is just AMA bluster, that doctors make more than enough money to absorb a pay cut. But it is foolhardy to assume that such a large cut will not significantly alter doctors' behavior. Some experts opine that large numbers of physicians will retire early or move into other professions. I worry about a more insidious loss -- doctors refocusing their practices on treatments that yield cash, such as wrinkle removal, Lasik surgery, or so-called concierge medicine, where doctors limit their practices to a small number of patients in exchange for hefty membership fees. A quick look at the yellow pages for any major city will support this concern -- more and larger ads for plastic surgeons and beauty clinics, fewer and smaller ads for primary care physicians.
Given the popularity of Medicare, and the size and political clout of the over-65 voting bloc, the politics of fixing the cuts should be straightforward. Leave it to Congress to screw it up. To pay for the increased doctors' fees, the bill pending in Congress slashes the Medicare Advantage program, a branch of Medicare that allows private companies set up the equivalent of HMOs under the Medicare program. The Advantage programs make a profit, but some politicians think they make too much of a profit and want to cut them back. The insurance carriers are fighting hard to keep their own payments up.
President Bush supports the Medicare Advantage companies, and has threatened to veto any Medicare bill that cuts Advantage funding. This has stalled the bill in the Senate, where Republicans have initiated a filibuster to block its passage. Supporters of the payment fix only have 58 votes, 2 short of the 60 needed to override the filibuster. So here we sit.
I am sorry to say that both senators from my home state of Mississippi voted against the bill. At this very moment the AMA is running TV ads in Mississippi calling out the two senators, Thad Cochran and Roger Wicker, for voting to support the Advantage insurance lobby and against the retirees of Mississippi.
Though I do not often side with the AMA on political matters, I am with them here. Medicare patients are not particularly profitable patients to have, and a 10.6% cut will only make matters worse. Medicare patients are older and on average sicker than the general population, and making this vulnerable group less attractive than ever to physicians is reckless. The way to save money in health care is to help doctors treat patients more effectively, thus avoiding the expensive, catastrophic illnesses that are sucking the life out of Medicare. Drastic pay cuts will only make doctors angrier and less receptive to cost-saving change.
It is easy to fault the obstructionist methods of Republicans and the President for our current situation, but, even after slathering it on the GOP, there is more than enough blame left over for the Democrats. This bill would have passed a long time ago if the Democrats did not insist on slashing Medicare Advantage in the same legislation. Democrats seem to think the private companies under the Advantage program are making too much money, and they are using this popular and urgent bill as an opportunity to gut it. I am not saying Medicare Advantage is a good program or a bad one, but its merits can be considered at a later time. The fix is already way, way overdue. The Democrats couldn't get the Advantage cuts through in December, and they failed again in June. Enough is enough. There will be time to go after the Advantage program again after the November elections.
Congress continues to authorize billions for Iraq without cuts elsewhere in the Pentagon, so it is unclear why the Democrats, who have been pitifully complaint with the President's budget requests in every other area, have suddenly found religion with Medicare. Ordinarily I do not espouse increased government spending without proper financing, but Congress has had more than enough time to work this out. It is time to get this done, before patients get hurt.
One thing that bothers me about this stalemate is the Democrats' obvious mistrust of the Medicare Advantage program. Medicare Advantage is a miniature version of the huge public-private partnership that Barack Obama and other key Democratic leaders are alluding to when they talk about single-payer universal health care. Single-payer is intended to be a government entity that will contract with and coordinate hundreds of private health insurers to bring affordable health care to every American. This model is very similar to the arrangement Medicare has with its Advantage programs -- Medicare collects the money, or at least oversees its collection, and pays the private carriers to manage the medical care of its customers. If the Democrats can't stand it that Advantage companies are making a nice profit off Medicare, how do they ever expect to make peace with the private plans that service 58% of all Americans? Private companies are in the business of making profits, and they won't cooperate with government initiatives if they think Congress will prune away their profits at will. For single-payer to work, there has to be cooperation between the public and private sectors. This attitude towards Advantage is not cooperation -- it is bullying, and it will destroy the goodwill necessary to make health care reform a reality.
Stupidly, Democrats think if they win control of Congress and the presidency, they can simply force large scale reform through. They have no idea how wrong they are. Private interests picked off the 1994 Clinton plan like target practice, and these same people will meet any reform plan that is not in their interest with a ferocious fight. Health care is a two trillion dollar business, and there is no way a trillion dollars goes quietly into the night.
Yes, we are in overtime. Sudden death overtime.
The root of the problem is something called the Sustainable Growth Rate, or SGR, a formula attached to Medicare law in 1997 to keep spending at or below certain growth targets. The formula controls costs by automatically slashing doctors' fees if spending limits are overrun in other areas. The SGR was originally intended as a carrot-and-stick measure that punished doctors with salary cuts if they overused services and rewarded them with modest increases if they ordered fewer tests and procedures. Unfortunately the SGR has never worked. Medicare costs continue to skyrocket, triggering the stick -- annual cuts in physician fees. Each year, outraged doctors lobby Congress to get the cuts reversed, and each year since 2002, Congress has complied. Thus, the SGR has proven useless -- not only does it fail to control costs, but Congress cancels its mandated penalties each fiscal year, eliminating any hope that it could change physician behavior.
But SGR is not simply an idea that has not been allowed to work. It is a badly flawed formula that cannot ever work. Congress has been doing half of a good thing by canceling its cuts, though it would be much better if it simply did away with the SGR entirely.
SGR fails for two reasons. First, it is a poorly thought out psychological tool, and secondly, it is technically obsolete. Disciplining doctors as a group is not an effective way to modify individual behavior. As a doctor, why would I reconsider ordering an expensive MRI on a patient simply because skipping the test would help satisfy the SGR? The Medicare budget is in the hundreds of billions. Any savings I might incur for the system could only translate into pennies in my pocket at the end of the year. Since there is no discernible connection between what I order and what I collect, there is no incentive for me to pay any attention to the SGR. As I read once in a fortune cookie, in an avalanche no snowflake ever feels responsible.
Secondly, the formula is obsolete, since it represents the medical state of affairs in 1997, not in 2008. Since 1997 many new standard-of-practice guidelines have been adopted, and these guidelines have changed the way doctors think and practice. For example, the recommendation that all adults over the age of 50 have a screening colonoscopy has greatly increased the number of colonoscopies ordered for Medicare patients. This guideline alone adds hundreds of millions in expenses to the formula, and ultimately, the formula strips that money out of doctors' fees. So when doctors order colonoscopies as they are supposed to, the SGR punishes them by stripping the cost of the exams from physician fees. Updating the formula will not help -- as new practice guidelines emerge in the future, the revised SGR will again fall behind the times, placing the Medicare right back in the current dilemma.
Congress was supposed to enact a fix last December, but instead of correcting the problem it merely froze the current fee schedule until July 1. July 1 has, obviously, come and gone, and still no bill. In a last ditch effort, President Bush has ordered Medicare to cease processing any new claims until July 15, but at some point something has to be done. The calendar year is more than half over, and Congress has failed to properly budget one of its largest and most popular public programs.
Why doesn't Congress do the reasonable thing and do away with the SGR? This would eliminate the annual end-of-year scrum between doctors and politicians, and could place Medicare on more secure financial footing. The problem is that there is a political advantage hiding in the SGR. As long as the SGR is in place, the Medicare spending curve appears to rise slowly and affordably in all long term projections. Everyone in Washington knows Congress will never slash doctors' fees the 40% necessary to maintain that beautiful, gently upsloping curve -- everyone except voters, that is. So SGR will stay, because it means the average Congressman can semi-truthfully tell his constituents that Medicare is not projected to not break the federal budget. An expedient budgetary lie.
On the other side of this issue are physicians, who are increasingly disgruntled over Medicare. With over 44 million enrollees, Medicare is America's largest health care carrier. Its physician re-imbursement rates are on the low side of the payment spectrum, but because there are so many Medicare patients doctors have trouble living without them. Some specialties that deal extensively with problems of the elderly, such as orthopedics, nephrology, and oncology, can't do without Medicare patients. For them, what the government decides to give out will heavily influence their bottom line. Making matters worse, in the health insurance business physicians' fees behave a lot like airline ticket prices: when one big carrier makes a price move, all the others quickly follow. Many insurers strictly tie their payments to Medicare, stipulating in their contracts that doctors are paid a flat percentage of Medicare, ranging from 80% for some HMOs to 130% for some of the better private plans. When Medicare fees move, most health plans move along with it.
Thus, the stakes in this 10.6% cut are enormous. According to AMA surveys, 60% of doctors plan to cut back on the new Medicare patients they will see if the cuts go through. If the SGR remains in place through 2015, that number increases to 77%. The New York Times has reported that this process has started already. Critics argue that this is just AMA bluster, that doctors make more than enough money to absorb a pay cut. But it is foolhardy to assume that such a large cut will not significantly alter doctors' behavior. Some experts opine that large numbers of physicians will retire early or move into other professions. I worry about a more insidious loss -- doctors refocusing their practices on treatments that yield cash, such as wrinkle removal, Lasik surgery, or so-called concierge medicine, where doctors limit their practices to a small number of patients in exchange for hefty membership fees. A quick look at the yellow pages for any major city will support this concern -- more and larger ads for plastic surgeons and beauty clinics, fewer and smaller ads for primary care physicians.
Given the popularity of Medicare, and the size and political clout of the over-65 voting bloc, the politics of fixing the cuts should be straightforward. Leave it to Congress to screw it up. To pay for the increased doctors' fees, the bill pending in Congress slashes the Medicare Advantage program, a branch of Medicare that allows private companies set up the equivalent of HMOs under the Medicare program. The Advantage programs make a profit, but some politicians think they make too much of a profit and want to cut them back. The insurance carriers are fighting hard to keep their own payments up.
President Bush supports the Medicare Advantage companies, and has threatened to veto any Medicare bill that cuts Advantage funding. This has stalled the bill in the Senate, where Republicans have initiated a filibuster to block its passage. Supporters of the payment fix only have 58 votes, 2 short of the 60 needed to override the filibuster. So here we sit.
I am sorry to say that both senators from my home state of Mississippi voted against the bill. At this very moment the AMA is running TV ads in Mississippi calling out the two senators, Thad Cochran and Roger Wicker, for voting to support the Advantage insurance lobby and against the retirees of Mississippi.
Though I do not often side with the AMA on political matters, I am with them here. Medicare patients are not particularly profitable patients to have, and a 10.6% cut will only make matters worse. Medicare patients are older and on average sicker than the general population, and making this vulnerable group less attractive than ever to physicians is reckless. The way to save money in health care is to help doctors treat patients more effectively, thus avoiding the expensive, catastrophic illnesses that are sucking the life out of Medicare. Drastic pay cuts will only make doctors angrier and less receptive to cost-saving change.
It is easy to fault the obstructionist methods of Republicans and the President for our current situation, but, even after slathering it on the GOP, there is more than enough blame left over for the Democrats. This bill would have passed a long time ago if the Democrats did not insist on slashing Medicare Advantage in the same legislation. Democrats seem to think the private companies under the Advantage program are making too much money, and they are using this popular and urgent bill as an opportunity to gut it. I am not saying Medicare Advantage is a good program or a bad one, but its merits can be considered at a later time. The fix is already way, way overdue. The Democrats couldn't get the Advantage cuts through in December, and they failed again in June. Enough is enough. There will be time to go after the Advantage program again after the November elections.
Congress continues to authorize billions for Iraq without cuts elsewhere in the Pentagon, so it is unclear why the Democrats, who have been pitifully complaint with the President's budget requests in every other area, have suddenly found religion with Medicare. Ordinarily I do not espouse increased government spending without proper financing, but Congress has had more than enough time to work this out. It is time to get this done, before patients get hurt.
One thing that bothers me about this stalemate is the Democrats' obvious mistrust of the Medicare Advantage program. Medicare Advantage is a miniature version of the huge public-private partnership that Barack Obama and other key Democratic leaders are alluding to when they talk about single-payer universal health care. Single-payer is intended to be a government entity that will contract with and coordinate hundreds of private health insurers to bring affordable health care to every American. This model is very similar to the arrangement Medicare has with its Advantage programs -- Medicare collects the money, or at least oversees its collection, and pays the private carriers to manage the medical care of its customers. If the Democrats can't stand it that Advantage companies are making a nice profit off Medicare, how do they ever expect to make peace with the private plans that service 58% of all Americans? Private companies are in the business of making profits, and they won't cooperate with government initiatives if they think Congress will prune away their profits at will. For single-payer to work, there has to be cooperation between the public and private sectors. This attitude towards Advantage is not cooperation -- it is bullying, and it will destroy the goodwill necessary to make health care reform a reality.
Stupidly, Democrats think if they win control of Congress and the presidency, they can simply force large scale reform through. They have no idea how wrong they are. Private interests picked off the 1994 Clinton plan like target practice, and these same people will meet any reform plan that is not in their interest with a ferocious fight. Health care is a two trillion dollar business, and there is no way a trillion dollars goes quietly into the night.
Yes, we are in overtime. Sudden death overtime.