Battling Over the Doc Fix

Published March 25, 2015

Consumer Power Report #456

Congress is currently trying to find a path forward on the notorious “doc fix,” whose scheduled expiration on March 31 would result in a 20 percent pay cut for doctors receiving reimbursement from Medicare. Time is short, and while the House is expected to vote Thursday on the issue (more on that in a minute), that would leave little time for the Senate to take up and pass anything (let alone read it). Well, sort of:

The calendar looks pretty tight right now. The House is expected to vote Thursday on the bipartisan doc-fix deal that its leaders have been negotiating. The Senate could then take it up Friday, but only with unanimous consent. It would be a surprise if Senate Majority Leader Mitch McConnell (R-KY) got it. Democrats are opposed to the deal’s abortion language and to the shorter reauthorization of the Children’s Health Insurance Program than they would like. The Senate is scheduled to leave for a two-week recess on March 30, so it wouldn’t be able to return to the doc fix until April 13.

But the Centers for Medicare and Medicaid Services (CMS) has in the past found ways to avoid immediate doctor payments cuts, said Tom Scully, CMS administrator in the second Bush administration, and would likely be able to do so again.

The most obvious move is telling contractors to delay processing Medicare’s physician claims for a short period of time. That’s what CMS did in 2002 and 2010, when Congress wasn’t able to patch the doc fix on time. Last year, as Congress was bumping up against its deadline, CMS sent out a notice to providers that it was ready to delay processing claims, although lawmakers passed a patch at the last minute.

But these contingency plans may not be necessary, because Senate Democrats and Republicans seem to be moving closer on the issue. []Ways and Means Chairman Paul Ryan makes the case for the deal here”> – essentially, it amounts to trading spending for reforms:

Our plan would start to move us to a patient-centered system. We would cancel the cuts and instead give doctors a modest increase for the next five years. Every year after, doctor payments would grow to depend more and more on results. Our plan would set up one streamlined program that would reward doctors who met performance goals and improved seniors’ health. Over time, Medicare would reward quality over quantity, and seniors would get better care because of it.

This reform would be a firm step in the right direction. Our plan would also achieve savings by making two other structural reforms.

First, we’d ask the wealthy to contribute more to their care – something we have called for in the House Republican budget for years. Starting in 2018, seniors who make more than $133,000 a year would pay a higher premium for their doctor and prescription-drug coverage.

Second, our plan would discourage unnecessary doctor visits and give seniors an incentive to seek the most effective care. Many seniors have “Medigap” insurance – that is, a private plan that helps pay for costs Medicare doesn’t cover, like co-payments and deductibles. These plans insulate people from costs and, experts believe, encourage the overuse of healthcare. Beginning in 2020, this agreement would prohibit Medigap plans from covering the first $147 of out-of-pocket spending, so cost is once again a consideration in healthcare decisions.

Jim Capretta disagrees at National Review, arguing it will actually lead to worse outcomes:

Some Republicans are also enthusiastic about the “reforms” the bill would make to Medicare’s physician-payment system. They shouldn’t be. Today’s system is the result of three decades of technocratic good intentions gone terribly awry. In 1989, Congress adopted the “resource-based relative value scale” as the fundamental building block for determining physician fees. The new system was supposed to accurately assess how much time, effort, and training physicians put into taking care of a patient, and pay them accordingly. The result has been arbitrary and irrational payments that have heavily favored procedure-driven medicine over prevention and primary care.

Now we are told that the federal government is going to find a way to pay physicians based on quality and value, using all manner of new technocratic methods to do so. Data will be collected, expert panels convened, and regulations issued, and supposedly that will lead to a better system of physician payments. But there’s no reason to believe the Medicare bureaucracy will be any better in the future than it has been in the past in setting physician fees. The real danger here is that the federal government will use the new authorities provided in the law to become the official arbiter of what constitutes “quality” in physician care. That’s a recipe for getting the exact opposite of what the law’s authors intend.

John R. Graham agrees, and he suggests that in fact, the Sustainable Growth Rate (SGR) is a good thing.

The SGR is not the crisis that people think it is. There are worse things than politicians being forced to revisit how they pay Medicare’s physicians, at least once a year. It is hard to identify what specific harm the SGR has caused, unless it is to force physicians’ lobbyists and politicians to bang their heads together on a regular basis. These physicians are not federal employees, they are privately employed professionals. I cannot think of any other privately employed professional whose payments are guaranteed by Congress to increase for ten years or more. The Founding Fathers had this right: The U.S. Constitution forbids Congress from appropriating funds for the Army for more than two years. If soldiers can’t get a fix for more than two years, why should doctors?

Whatever your position on the best outcome, the doc fix problem may not be resolved in a way that achieves as much reform as we would like. But the pressure is on Congress to do something with this – and getting at least a step toward meaningful reform in return is the aim. We’ll see what happens by March 31.

— Benjamin Domenech



For millions of people this tax season, Obamacare won’t be quite a “50-50” proposition, but it will sure come close.

Half of the households that received federal subsidies to help pay for their health insurance in 2014 will have to repay some money back to the government when they file their tax returns, a new analysis released Tuesday estimates.

The average repayment owed by those people will be $794, the Kaiser Family Foundation study found. The repayments will be owed because those households’ actual incomes ended up being higher for the year than what they had estimated when they applied for the subsidies.

Another 45 percent of households that received such subsidies will be owed a refund, because they should have received more of those tax credits last year based on their final annual incomes. Their estimated average refund will be $773, Kaiser said.

But the Kaiser study also found that a relatively small group of households will owe back a lot more than the average when it comes to refunds, after their actual incomes ended up being too high to qualify for the subsidies they got.

That group of people will have an average repayment of between $2,306 and $3,837 – and some could owe much more. Unlike people who earn below 400 percent of the federal poverty line, higher earners have no limit on the subsidies they must pay back if they were not entitled to them.

And for low-income subsidy recipients who end up owing money back, the tax bite could strain their already-tight budgets. The average repayment that group of people will have to pay back will be $667, according to the study.

Those who earn less than two times the poverty level are also more likely than other income groups to owe a repayment.

“None of these amounts are insignificant,” said Gary Claxton, co-author of the Kaiser analysis, referring to the average amounts all income groups will owe if they face repayments..

SOURCE: Dan Mangan, CNBC


You can hardly blame them though. The health sector employs more than a tenth of all U.S. workers, most of whom are working- and middle-class people who serve as human shields for those who profit most from America’s obscenely high medical prices and an epidemic of overtreatment. If you aim for the crooks responsible for bleeding us dry, you risk hitting the nurses, technicians, and orderlies they employ. This is why politicians are so quick to bash insurers while catering to the powerful hospital systems, which dictate terms to insurers and have mastered the art of gaming Medicare and Medicaid to their advantage. Whether you’re for Obamacare or against it, you can’t afford to ignore the fact that America’s hospitals have become predatory monopolies. We have to break them before they break us.

What do I mean by that? Last fall, Mark Warshawsky and Andrew Biggs made a striking observation: From 1999 to 2013, the cost to employers of an average family health policy increased from $4,200 to $12,000 per year. In an alternative universe in which employer premiums had remained flat, salaries would have been $7,800 higher, a life-changing difference for most low- and middle-income families. To protect these families, many people want the government to pick up a bigger share of our hospital bills. But this just shifts the burden from employers to taxpayers. The Congressional Budget Office expects federal health spending to almost double as a share of GDP between now and 2039. With the exception of interest on the debt, all other federal spending will shrink. What this means in practice is that high medical prices charged by hospitals will gobble up taxpayer dollars that might otherwise have gone to giving poor people more cash assistance, welfare-to-work programs, and Pell grants; fixing potholes; sending missions to Mars; and who knows what else.

When you survey the health systems of other rich countries, you’ll find some that rely a bit more on private insurance markets than ours (like Switzerland) and others that rely a bit more on centralized bureaucracies (like Britain), but what you won’t find is a country where hospitals dare to charge such obscenely high prices. Avik Roy, a senior fellow at the Manhattan Institute and a conservative health reform guru, has observed that although the average hospital stay in the world’s rich countries is $6,222, it costs $18,142 in the U.S. Guess what? Spending three times as much doesn’t appear to yield three times the benefit.

As for why hospitals charge such high prices, it’s fairly simple: They do it because they can. In a competitive market, a provider who jacks up prices risks losing customers to competitors who charge less. But what if incumbent providers have the political muscle to keep competitors out of the market? What if regulators look the other way when incumbent providers buy up the competition, or even help the process along? That, in a nutshell, is the situation with America’s hospitals, as Chris Pope outlines in a recent Heritage Foundation paper on consolidation in the health care market. Because most medical care is purchased not by consumers but by third parties, like Medicare and Medicaid or your insurance company, and because consumers rarely get access to reliable data on quality, they place an extremely high value on convenience. If you’re not saving money by shopping around for a better deal, and if you have no idea if you’re getting better care, you might as well go to the hospital closest to you. Hospitals that don’t face competition from other nearby hospitals thus have a huge amount of power in their local markets. If a private insurer refuses to pay a hospital’s exorbitant prices, a hospital can just walk and wait for the insurer’s customers to scream bloody murder over the fact that they can’t use their local hospital.

SOURCE: Reihan Salam, Slate


A Supreme Court justice wouldn’t use a congressional hearing to signal his vote on Obamacare, would he?

Justice Anthony Kennedy sent a ripple through the universe of court watchers Monday when he told lawmakers that the justices should interpret statutes without worrying about congressional gridlock.

Kennedy didn’t specifically mention the Affordable Care Act, but his comments prompted immediate speculation that he will read the law as barring crucial tax subsidies to insurance purchasers in two-thirds of the country – leaving it to the president and Congress to negotiate what would seem an unlikely fix …

A representative asked Kennedy about his previously expressed concerns that the court handles many politically charged issues. Kennedy answered by saying that a “responsible, efficient, responsive” Congress and president can alleviate some of the pressure on the court.

Kennedy went on: “We routinely decide cases involving federal statutes, and we say, ‘Well, if this is wrong, the Congress will fix it.’ But then we hear that Congress can’t pass a bill one way or another, that there is gridlock.

“Some people say that should affect the way we interpret the statutes. That seems to me a wrong proposition. We have to assume that we have three fully functioning branches of the government.”

SOURCE: Greg Stohr, Bloomberg


The Internet revolution has been disrupting traditional industries for years by enabling online provision of various services. The first industries to convert have been media services that can be digitized, such as journalism, music, and videos. But less obvious candidates for online provision are emerging. One of these is telemedicine, which is the delivery of health care services from one site to another via electronic communications.

Telemedicine is already being used in various ways to provide care to those who could not otherwise receive it. Among others, those benefiting are people in countries with a shortage of doctors, people in rural areas for whom access to medical facilities is difficult, and people who need immediate assistance in an emergency. Recently, online medical care has been expanding to the mainstream, as more routine services are being carried out online.

As medical treatment moves online, the potential for treating patients across borders grows. In the United States, medical treatment has typically been segregated along state lines. With the ease of access between patients and doctors in different jurisdictions, however, this is beginning to change. Regulations will need to be adjusted to allow interstate trade so that consumers can reap the benefits.

Similarly, at the international level, governments should adapt their national regulations to allow trade in these services. This can be done in part through a number of ongoing trade negotiations that address barriers to trade in services, including the Trans Pacific Partnership, the Transatlantic Trade and Investment Partnership, and the Trade in Services Agreement negotiation. By using these trade negotiations to remove barriers and promote more international trade in medical services, governments can bring new competitive forces to a sector that has traditionally been characterized by an oligopolistic structure.

SOURCE: Simon Lester, Cato Institute