Monday, April 20, 2015

Bipartisan Medicare Reform: Debt and Deficits, All the Way Down

The extremely flawed so-called Medicare “doc fix” has passed.  Its direct consequences include increasing federal government control of the practice of medicine and increasing deficits by at least $141 billion through 2025. However, it also has implications far beyond Medicare’s physician fee schedule, to post-Obamacare reform and general governance.

Let’s tackle the fee schedule first. This “doc fix” was promoted as solving the problem that Congress has to increase Medicare’s physician fees at least once a year beyond the rate of growth originally legislated in 1997. If this did not happen, physicians’ fees would drop by about 20 percent, and they would reduce Medicare beneficiaries’ access. This “doc fix” abolishes the 1997 formula in favor of fixed, nominal rates of growth.

As a consequence, the fee schedule is not “fixed” in the sense that it is “solved”. It is “fixed” in the sense that Congress has dictated the total amount that will be paid to physicians in future years. It will go up 0.5 percent per year from 2016 through 2019. Then, the amount freezes, and doctors enter a war of all against all, competing against each other for shares of an amount that will inexorably shrink in inflation-adjusted terms. It gets even more bureaucratized after 2025, but there is no point thinking about that because the whole thing is almost certain to unravel before then.

Read the entire Health Alert at NCPA's Health Policy Blog.

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