After 17 temporary fixes over the past 11 years, Congress has approved legislation permanently blocking perennial cuts in physicians’ Medicare fees. In a rare show of genuine bipartisanship, the House and Senate both overwhelmingly passed the bill. It should become easier for doctors to make a living while taking Medicare patients and help seniors keep their doctors who accept Medicare.
In a 1997 budget agreement, Congress set up a formula, known as the Sustainable Growth Rate, or the SGR, which called for annual cuts in Medicare physician payments. But every time the cuts have been scheduled, heavy lobbying by doctors and health groups, and seniors associations have pushed Congress to come through with some short-term patches, known on Capitol Hill as “the doc fix.”
Without a change in the law, doctors came within hours of doctors facing dramatically smaller paychecks from Medicare – a 21 percent cut in Medicare fees, which was scheduled to go into effect April 1, but had been postponed to allow Congress to finish with the pending legislation. What it will mean to seniors is increased premiums for those with incomes of more than $85,000 a year, starting in 2018.
What is also at stake for doctors is bigger than a simple short-term or long-term fix: without a deal, doctors fear their pay will continue to be reduced or not grow sufficiently. Many doctors have threatened to stop treating Medicare patients altogether. The new payment formula would help doctors get out from under the constant threat of payment cuts while shifting to a new payment system based on quality, value and accountability.
A Final Stop to Repeating Uncertainty: The New Deal
The House voted 392-37 approving legislation that would stop the cuts, and the Senate voted 92-8. Some of the most conservative Senate Republicans were unhappy about the House’s failure to fully pay for the cost of the doc fix. Roughly two thirds of the bill’s $214 billion 10-year costs were financed by simply making federal deficits even bigger. But efforts to force full financing were rebuffed. Liberals wanted additional money for children’s and women’s programs and those too were shot down.
The legislation scraps the old Medicare payment system and phases in a new one designed to reward doctors who provide high-value care, not just high volumes of care. It increases payments to physicians by 0.5% annually for the next four years. After that rates will remain flat for six years. Then payments for most physicians will increase by 0.25% annually. But don’t be surprised if doctors continue to flee the Medicare program as their reimbursement levels haven’t come close to staying even with current costs.
What is new and innovative in the agreement is the establishment of a two-track payment system, designed to push doctors toward value-based payments models such as accountable care organizations and bundled payments. Doctors who have at least 25 percent of their Medicare revenue tied to these kinds of payment models in 2019 will be eligible for 5 percent bonuses.
Earlier this year, Health and Human Services Secretary Sylvia Burwell set a goal of having half of all spending in traditional Medicare to contracts with incentives to manage quality and costs – a big shift from fee-for-services to value and quality of services. The Congressional Budget Office projects the doc fix shift could save $900 million over the next 10 years compared with keeping doctor payments flat, which is how their fees have been since Congress started passing temporary fixes back in 2003.
The doc fix bill also provides money for health care programs for children and low-income people and will be partly financed with higher premiums for wealthy Medicare recipients – a cost that bothers many Democrats and senior advocates. These additional costs to higher-income Medicare beneficiaries will raise nearly $35 billion through 2025 but could potentially set a precedent for future program restructuring and benefit reductions backed by Republicans. Democrats also were worried about barring medigap policies without deductibles. But those concerns were partly mitigated by a provision in the legislation making permanent a program that provides premium assistance to low-income Medicare beneficiaries.
The Congressional Budget Office estimates it will add $141 billion to the federal deficit with costs rising more sharply after that – adding over $500 billion to the deficit over two decades. These costs are somewhat offset by pushing costs on to higher-end Medicare customers. Those deficit projects may be its biggest problem in the Senate. Its total cost is $214 billion, of which only $73 billion is paid for, mostly through the structural reforms being implemented by Medicare.
But conservative deficit hawks, like Sen. Mike Lee, R-Ut, tried to amend the House bill to require Congress to make offsetting budget cuts that would pay for the entire plan without increasing the federal deficit. That effort lost 58-42.
Will You Be Affected?
This legislation will have a direct effect on many seniors, in particular, wealthy ones, who will see Medicare premiums increase.
Before the House passed its bill, AARP argued against increasing fees for seniors, saying it places “unfair burdens on beneficiaries.” AARP and other consumer and aging organizations remain concerned that beneficiaries account for the largest portion of budget offsets (roughly $35 billion) through greater out-of-pocket expenses” on top of higher Part B premiums that beneficiaries will pay to prevent the scheduled cut in Medicare physician payments.
The legislation requires patients to take a larger percentage of the costs of their insurance starting in 2018. Those with a modified adjusted gross income of $133,500-$160,000 for individuals and $267,000-$320,000 for couples, per year would pay 65 percent of their premium costs for Part B (outpatient services) and Part D (prescription drugs) up from 50 percent now. Those earning $160,000-$214,000 per year for individuals and $320,000-$428,000 for couples would see their premiums increase from 65 percent to 75 percent.
The Kaiser Family Foundation estimates this change would affect two percent of current enrollees. Right now, those individuals making between $133,500-$160,000 currently pay $272.20 per month while those making $320,000-$428,000 pay $313.90.
But even those making less than $133,500 annually will see their premiums rise slightly. Since all beneficiaries pay a set percentage of premiums as doctor fees rise, those premiums are expected to increase as well. The Congressional Budget Office estimates those premiums will increase by about $10 by 2025 to $181 per month.
The new law also will make changes to medigap policies. Roughly 20 percent of seniors buy a supplemental medigap plan, which helps cover out-of-pocket costs and usually pays the deductible for outpatient services. But now the doc fix would block medigap plans from paying that deductible, currently capped at $147 per year, beginning in 2020. Why? The idea, Kaiser Family Foundation’s Neuman told Fiscal Times, is “for people to have some exposure to healthcare expenditures when they’re making treatment decisions.”
As for those with Medicare Advantage plans, the idea is to bring more competition to companies that provide these plans. Right now, most people who don’t add a medigap policy usually have a Medicare Advantage (Part C) plan, which is typically either an HMO or a PPO and provides extra coverage for things like vision, dental or prescriptions. These plans offer the convenience of having just one plan, and sometimes cost less than combining a medigap plan with Part D coverage. But as consumers know, they often have more limited doctor networks and require co-payments.
Some Medicare Advantage plans may see the doc fix changes as a way to grab market share by offering prices that can beat the higher premiums in traditional Medicare plans.
Another little-noticed provision in the House bill would provide doctors new protections against medical malpractice lawsuits. As the New York Times reported, the bill, which requires the government to measure the quality of care that doctors provide and rate their performance on a scale of zero to 100, protects doctors by stipulating that the quality-of-care standards used in federal health programs – Medicare, Medicaid and the Affordable Care Act – cannot be used in malpractice cases. They argue that federal standards and guidelines do not accurately reflect the standard of care and as a result they should not be used to show negligence by a doctor or a hospital.
Medicare, Medicaid and private insurers increasingly require doctors to report data that can be used to assess the quality of care. They evaluate and pay them based on their performance. Doctors are very concerned that the increased use of quality metrics will pose unintended legal risks to them and that lawyers will try to use this data in court to show that providers were negligent. The bill protects doctors against these kinds of lawsuits.
Assessing the final legislation after it’s overwhelmingly bipartisan approval in the House and Senate, Utah Republican Sen. Orrin Hatch said “This can serve as a template of how things should work around here.”
With the Congressional budget fight completely partisan and in step with Washington’s usual gridlock, that is a nice theory, but not very likely. At least one bipartisan piece of legislation has now moved through Congress.
Also contributing to this story were: Fiscal Times, Kaiser Health News, the Hill, and Modern Healthcare.
A Compromise Deal?
The Congressionally-approved bill came out of years of frustration by the two key House leaders. After repeated unsuccessful attempts to pass a long-term doc fix, Republican leader, Speaker John Boehner, R-Oh., went over to the office of Democratic leader Nancy Pelosi, D-Calif., in the U.S. Capitol early in March and asked if a compromise was workable. The central question that had thwarted a deal between the two parties – whether to raise taxes – was the major stumbling block from the Democratic side and how to pay for it was the stumbling block on the Republican side. An effort to solve the problem in 2014 stalled over the question of how to pay for the changes.
So Democrats would have to give on taxes and Republicans would have to insist on not having the entire change paid for completely. The vast majority of House lawmakers were unaware that a compromise was in the works and even the lobbyists who lobby on the bill were intentionally kept in the dark.
Boehner asked Pelosi if Democrats would continue to insist on tax hikes in the legislation ending the Medicare formula. Pelosi said if it got a long-term deal, she could live without the tax hikes. “That was, from our point of view, the breakthrough,” Michael Steel, a Boehner spokesman, told The Hill, a Capitol Hill newspaper.
Boehner agreed to not require that the entire deal be paid for – usually a mandatory provision these days –and he also was okay with the legislation including funding for the Children’s Health Insurance Program (CHIPs), a top Democratic priority, to increase Democrats support. Boehner also did not insist on cuts to health programs that Democrats thought would be harmful. And a deal was in the works.
That was until the abortion fight came to light. What’s abortion got to do with Medicare?
When the House compromise idea was talked about with members of the Senate, who also need to sign off on such a deal, Sen. Ron Wyden, D-Ore., said he found “an abortion policy rider” in the House package objectionable. The House package includes an additional $7.2 billion for community health centers over the next two years. But Wyden and pro-choice groups like Planned Parenthood and NARAL Pro-Choice America denounced the deal because the health center funding would be subject to the Hyde Amendment, a common legislative provision that says federal money can be used for abortions only when a pregnancy is the result of rape, incest or to save the life of the mother. The language in the bill already bars federal funding for abortions at these community health centers.
That put Pelosi, a long-time pro-choice advocate, in a hard place. But she worked it out so that funding would occur, in her words, “under the same terms that Members have previously supported and voted on almost every year since 1979.” The National Association of Community Health Centers reiterated that the House bill would not change anything about how Health Centers operate today.
That put the issue to rest and the House bill was overwhelmingly approved.
Alan Schlein runs DeadlineOnline.com, an internet training and consulting firm. He is the author of the bestselling “Find It Online” books.
John Stinger Cartoon
