Fixing the Formula

In a stunning demonstration of bipartisanship, the Senate on April 14 approved an overhaul of Medicare payments to doctors. The Senate approved the measure by a vote of 92 to 8, acting with blinding speed three weeks after the House passed the measure by a vote of 392 to 37. President Obama signed the bill on April 16. The bill replaces the complex fee system known as the “Sustainable Growth Rate Formula” that Congress created in 1997 and that has never kept pace with the actual cost of health care. The SGR formula, designed to limit the growth of Medicare spending based on the growth of the economy, was all fine and dandy except when it came to reducing what doctors would get paid for services rendered to Medicare beneficiaries. Congress responded—not by changing the formula—but by passing short-term “doc fix” bills to protect physicians from the automatic reductions that the SGR formula demanded. Since 2003, Congress has done this 17 times.

The Senate action this week is momentous, coming a day before the formula would have forced a 21-percent reduction in payments to doctors. Under the bill, doctors will get an annual 0.5-percent raise for the next five years while Medicare moves toward a payment program that pays doctors more if they meet quality of care criteria. In addition, the bill extends the Children’s Health Insurance Program for two years and extends funding for thousands of health clinics around the country that provide health services to low- and middle-income patients (subject to a long-standing prohibition of federal funding for abortion services). The cost of the package is $211 billion over ten years, partially offset by increases in cost-sharing for Medicare beneficiaries and new restrictions on Medigap plans that cover medical expenses not covered by Medicare. The net cost will add an estimated $141 billion to the federal deficit over the next ten years.

Majority Leader Mitch McConnell described the Senate action as “another reminder of a new Republican Congress that’s back to work.” Although it is not clear what other “reminders” preceded this one, some members of the New Republican Congress did not get the memo. All eight senators who voted against the bill are Republicans (Ted Cruz, Mike Lee, David Perdue, Marco Rubio, Ben Sasse, Tim Scott, Jeff Sessions and Richard Shelby). Notable among the naysayers are announced presidential hopefuls Cruz and Rubio.

Rafael Edward “Ted” Cruz (R-TX), criticized the bill that even Senator McConnell called a “sensible compromise” by insisting that “any deal should be fully paid for and include significant and structural reforms to Medicare.” The bill, Cruz complains, “institutionalizes and expands Obamacare policies that harm patients and their doctors while adding roughly half a trillion dollars to our long-term debt within two decades.” Marco Antonio Rubio (R-FL) has a “three part plan to serve as a foundation for the post-Obamacare era.” Medicare falls under part three along with Medicaid–in Rubio’s opinion, health care for the 50 million Medicare beneficiaries does not merit a full point. Rubio would replace the current Medicare program with a “premium support system, empowering seniors with choice and market competition.” It is unclear how “empowered” seniors will pay for health care if they cannot afford private insurance.

Randal Howard “Rand” Paul (R-KY) voted for the bill, but he is still evolving on Medicare. It seems that he was against it before he was for it. Three years ago, he proposed to replace the Medicare program with private insurance. Now it seems he would preserve Medicare for those already receiving it but raise the eligibility age, promising current Medicare beneficiaries in Iowa last August that “nothing will change.”

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