Legislation heavily promoted by the AMA and passed by the House of Representatives, H.R. 3961, would eliminate the 21% scheduled Medicare pay cut for doctors required by the sustained growth rate (SGR) formula. Yearly last-minute reprieves have postponed the cuts year after year; the accumulated 21% is now coming due.

H.R. 3961, the Medicare Physician Payment Reform Act of 2009, the “doc fix,” would repeal the SGR and provide a Medicare Economic Index (MEI) update for 2010; eliminate all SGR debt; and establish new updates for 2011 and beyond. The target for evaluation and management (E&M) and preventive services would be GDP + 2%, and for other services GDP + 1%.

Republican Study Committee chairman Tom Price, M.D., (R-GA) calls the “doc fix” a “doc trick” used as a political tool to buy support for the Pelosi bill. The “fix” would “add more than $200 billion to our already unprecedented debt” and “has no chance of becoming law.”

The CBO estimates that combining H.R. 3962, Pelosi’s Affordable Health Care for America Act, with the doc fix would add $89 billion to the budget deficit between 2010 and 2019, according to Nina Owcharenko.

Ralph Weber, C.L.U., points out that the doc fix means a pay cut. If the GDP grows by 1%, Medicare funding grows by 2%. But as baby boomers retire, the number of people covered could increase by 8% each year. This means a theoretical decrease in physicians’ payments of 6% per enrollee. It is not clear why the AMA is applauding this.

The Senate bill would avert the 21% cut without permanent SGR reform, according to AMA CEO Michael Maves, M.D. In determining the price tag for this bill, the Congressional Budget Office (CBO) assumed that Medicare participating providers would get a 23% pay cut in 2011, according to the California Association of Health Underwriters (CAHU).

The CBO “projects extracting $436 billion in cost savings in Medicare over the next 10 years, mainly by changing the way doctors and hospitals are paid,” write James Oliphant and Kim Geiger (LA Times 11/22/09).

CAHU states that $464 billion in Medicare cuts include the following: $192 billion from permanent reductions in annual payment updates for most services in the fee-for-service sector; $118 billion in cuts to Medicare Advantage; $43 billion in disproportionate share hospital (DSH) payment cuts; and $23 billion in unspecified cuts by the Medicare Advisory Board. Enrollment in Medicare Advantage is expected to drop by 64%.

One of the changes in payment methodology that is already occurring, according to a webinar sponsored by the American Academy of Neurology, is that consultation codes will no longer be reimbursed.

As John Goodman points out, Medicare’s method for paying physicians is totally dysfunctional. This is the reason, for example, that we are discussing whether Medicare should pay doctors for end-of-life counseling. Medicare has 7,500 tasks that it will pay physicians to perform, with an approved fee for each task; end-of-life counseling is not among them. Nor are services such as telephone consultations, helping a patient shop for low-cost procedures, care coordination, or education on use of the internet.

Goodman asks what would happen if you paid your defense attorney by task: say $20 per hour for jury selection, and $500 per hour for preparing the final summation.

Allowing patients to contract privately outside the rigid Medicare fee structure is an urgently needed reform that is not even being considered.

Additional information:

• Myth 24. Medicare is a model of efficiency and fairness.
• The Resource-Based Relative Value Scale: a Threat to Private Medicine by Jane M. Orient, M.D., AAPS pamphlet.