Is What I Hear True?

I heard that...

...the government is cutting Medicare payments to doctors. Is this true?

The answer to this question is complicated, but there may be cuts in Medicare payments to some doctors. There are two issues related to this. The first is the formula Medicare is supposed to use to determine how much to pay doctors. The second is the healthcare reform proposals, which include changes that would result in Medicare paying some doctors more and other doctors less.

Problem #1: Medicare’s physician payment formula.

In 1998, Congress adopted the Sustainable Growth Rate (SGR) formula to determine how much Medicare will pay doctors. Since 2002, this complicated formula has called for annual reductions in payments to doctors of about 2% per year. Every year, at the last minute, Congress has decided to override the cut in the next year’s budget, and the President has not vetoed the bill that included this override. Therefore, the called-for cuts have not been made. Each time this happened, Congress did not find a way to pay for it out of that year’s budget, instead “borrowing” from physician payments budgeted for future years in order to balance the current year’s budget. This has resulted in a now large and rapidly growing budget problem in Medicare, the “SGR formula problem.”

Since the July CBO analysis, the Centers for Medicare and Medicaid Services have made changes to the definitions used to calculate the SGR and new healthcare bills have emerged, including one that specifically addresses the SGR. These have affected the CBO’s estimates of what it will cost to fix the SGR problem and how much, if at all, physician’s payments will be cut. The new healthcare bills deal with the SGR formula problem in these ways:

• H.R. 3962, the healthcare reform bill passed by the House, does not address the SGR problem, unlike the earlier House bill, H.R. 3200.
• The House of Representatives passed H.R. 3961, the Medicare Physicians Payment Reform Act of 2009, on November 19, 2009. H.R. 3961 resolves the SGR formula in 2010 and all future years. If approved by the Senate, it would increase physician payment rates by 1.2% in 2010, and restructure the SGR formula beginning in 2011. H.R. 3961 would provide for two types of physician payments: 1) evaluation, management, and preventive services; and 2) all other services. The CBO's analysis of H.R. 3961 scored the standalone cost of H.R. 3961's SGR corrections at $210 billion over 10 years (CBO, November 4, 2009).
• If H.R. 3961 and H.R. 3962 are enacted at the same time, the two bills will cost $12 billion less than if the bills are enacted separately. If enacted together, the two bills will result in a net $89 billion increase to the federal debt unless other pay-as-you-go funds are found.
• The current Senate healthcare reform bill, Substitute H.R. 3590, raises the 2010 physician payments to provide a 0.5% increase, but keeps the problematic SGR formula in the future. If the Senate also passes H.R. 3961, provider payments would go up in 2010, and the SGR formula would be changed in all years starting in 2011.

In summary, if the Senate passes H.R. 3961, the Medicare Physicians Payment Reform Act of 2009, there will be no payment cuts to doctors caused by the SGR formula. If it - or an alternative - is not passed, doctors are scheduled to see a 21% cut in Medicare payments in 2010.

Problem #2: Healthcare reform proposals will pay some doctors more and others less.

The House and Senate healthcare reform proposals will restructure how Medicare pays for healthcare services. Currently, Medicare pays most medical providers, including doctors, separately for each service performed. This creates incentives to order more services for patients. Each new service results in a payment to the provider, increasing the provider's revenue.

If passed, the main healthcare reform proposals in both the House of Representatives (H.R. 3962) and the Senate (Substitute H.R. 3590) direct Medicare and Medicaid to reorganize their payment systems to pay more for primary care and higher quality of care. This is expected to result in higher payments to some providers, particularly those in primary care, and lower payments to others, particularly specialists who are more procedure-intensive.

In addition to paying for higher quality of care, the healthcare reform proposals include conducting several studies to see how well the new payment systems work, as well as to determine the cost effectiveness of certain medical procedures. These studies will inform the Department of Health & Human Services, the Centers for Medicare and Medicaid Services, and Congress about better ways of providing and paying for care.

Sources

Congressional Budget Office Cost Estimate, (2009, November 4). H.R.3961 Medicare Physician Payment Reform Act of 2009. Available at: http://www.cbo.gov/ftpdocs/107xx/doc10704/hr3961.pdf

Elmendorf, D. (2009, November 19). Letter to Paul Ryan. Congressional Budget Office. Available at: http://www.cbo.gov/ftpdocs/107xx/doc10732/HR3961_HonRyan.pdf

Elmendorf, D. (2009, July 17) Letter to Charles B. Rangel. Congressional Budget Office. Available at: http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf

 

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