The New Health Dialogue

As the summer heat sets in, schools will let out, America’s beaches will grow more crowded (if they are out of the way of the oil spill), bars will be populated with football (aka soccer) fans around the globe watching an African nation hold the World Cup for the first time -- and office managers in physician practices across the land will face a big question mark when it comes to estimating revenue from Medicare.

That is because as May 31 approached, the Centers for Medicare and Medicaid Services (CMS) had to hold processing claims to Medicare providers -- part of the lovely activity known as the “doc fix” which has essentially become an annual or sometimes even a semiannual headache for Hill staffers across the aisle.

A bit of historical context: the sustainable growth rate, or SGR, is only the latest iteration in a number of payment methods that have been used to determine how much health care services are worth since Medicare’s inception. (The dates that follow are approximate.)

1965-1975: Physicians were reimbursed for all covered services, and were allowed to bill patients for costs that were not covered.

1975-1983: Medicare payments were still linked to physicians charges, but the annual increase in fees could not exceed the increase in what was known as the Medicare Economic Index (MEI) -- a rough precursor to the SGR.

1983-1992: Reasonable cost transitioned to the prospective payment system largely based on diagnostically related groups (DRGs) and Congress started to pass yearly changes in fees.

1992-1998: The physician fee schedule replaced the charge-based system; it bases payment for individual services on measures of the relative resources used to provide them. The schedule was not intended to control spending but to redistribute spending among various physician specialties.

1998-present: The sustainable growth rate (SGR) was created to control spending by setting annual targets. Physician payments are reduced if spending exceeds these limits.

The problem with the SGR (one of many, as you can certainly tell) is that it did not consider the proliferation of outpatient services (Part B of Medicare) and therefore actual Medicare expenditure has consistently exceeded the established formula. The proposed cuts were higher than many had intended or anticipated; the anticipated cuts get deeper each time Congress makes a short term fix, only pushing the problem further down the road.

While valid criticisms have been made regarding the Faustian bargains supporting the series of short-term doc fixes and their implications on unemployment benefits, Medicaid funding, etc (see Steve Pearlstein's recent Washington Post take on the doc fix here), we still need to address this absolutely flawed funding mechanism. Not because doctors are greedy and would like higher salaries, but because it is a disservice to the health care system which has effectively become stalled by inaction. As processing of claims comes to a screeching halt, providers and patients are left confused and the peril of unintended consequences is great. When this happened in the past, doctors did NOT stop accepting Medicare in droves, but as physician practices are forced to play health care psychic and guess when a solution is imminent, more providers might become more risk averse, and change behavior. Having physicians leave Medicare is not in the interest of patients, or the overall health care system.

So a few things remain certain in Washington D.C. Cherry blossoms will bloom. Politicians will face scandals. And there will be a doc fix. It is a sad statement on our inability to do hard work that we have long known we need to do. The House last fall passed a health reform bill that contained a permanent doc fix. The Senate bill, the basis for the final law, did not. So we're back with a series of short-term and inadequate fixes. So while we like many of our annual rituals -- the cherry blossoms, the beaches -- we would prefer not to keep repeating the doc fix saga. We need bold action to forge a real, viable, long-term solution so that in 19 months, 36 months, etc, we do not find ourselves in the same old situation.