21 June 2006

Medicare cuts redux

It looks as if there is an early consensus to freeze the scheduled 5.4% cut in professional reimbursements for 2007. Nothing for sure yet -- no Senate bill, no "legislative vehicle," by which they mean another bill they can tack this on to as an amendment, but at least it's getting attention early this time. They will probably tack it onto the budget again, one would expect. Hopefully, things will move more expeditiously this time around.

Better yet, Ways & Means has started listening to the voices calling for re-thinking the Sustainable Growth Rate (SGR). The SGR is a formula which, based on GDP, determines the amount of money available for reimbursement for services to Medicare beneficiaries. This was initially intended to ensure that the total cost of the Medicare program did not exceed a certain fraction of the GDP, which, on the face of it, seems like a good idea. The unintended consequence, though, is that reimbursements fluctuate on the basis of larger macroeconomic factors, and that in an era of expanded services provided (i.e. more retirees who are sicker, with more chronic illnesses, requiring more services), the payment per service must necessarily go down.

And how. Physicians have already absorbed a 5.4% cut in reimbursement in 2002, and reimbursements are scheduled to decline a further 37% over the next nine years. That's not a typo -- thirty-seven percent. Bearing in mind that medicare already reimburses at pathetically low levels (thirty to forty cents on the dollar), is it any wonder that medicare patients have a hard time finding doctors who will take care of them? I wonder how long it will be before doctors start declining to take any medicare patients (as has already happened with medicaid)?

It's pretty obvious to all involved that the SGR is broken beyond repair and needs to be overhauled. I don't think that Congress has the ability to take it on now, in an election year. It's just too big a project (due to its size and complexity, some have likened a SGR fix to a complete overhaul of the US income tax code). So the best we can hope for is another temporizing measure -- a freeze in the cut, maybe a small increase (the AMA is pushing for a 2.8% increase -- good luck there, guys).

Further updates as events warrant.


  1. What does this mean for government sponsored single payer health care system? Right now, we pay less for the medicine provided to the needing than for the medicine provided to the fortunate. That is, my money reaches the medical industry through two paths. Primarily, my employer pays me less and sends the money to an insurance company that in turn sends some of the money to the medical industry in return for providing services. The secondary route is to state and federal government that does the same thing, although for needy people rather than people who have the same insurance my employer uses.

    If the government path is not getting enough money to doctors now, is there any hope that the government path would get enough money to doctors if it assumed the primary path now provided by private insurance companies?

  2. Great Question. I've been thinking about this a lot, and I will promote the answer to a separate post (when I have time).


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