Let us kill the Medicare ‘doc fix.’

Let us kill it with FIRE.

Background: the ‘doc fix’ is one of those things that happens in Dizzy City with alarming regularity.  Basically, it was set up in order to control Medicare costs by linking Medicare subsidies to doctors to annual growth; if costs rose too high, Medicare payments to doctors would shrink.  Nice feedback loop – only thing is, the first year it was supposed to come into effect (2002) the medical lobby started screaming, and it turns out that the medical lobby has a lot of money for lobbying.  So since then the government has been ‘fixing’ the ‘problem’ on a year by year basis so that Medicare payments to doctors would not be reduced (this cost the government $30 billion last year, by the way).  And if you’re wondering why they simply don’t fix the numbers permanently, or let the cuts go in fully… well.  It turns out that the CBO is required to assume that Congress is NOT going to extend the ‘doc fix’ until it actually does, which means that the budget (when we have one) can actually get away with not taking that $30 billion into account when it comes to calculating expenditures.  Thirty billion here, thirty billion there: add it all up and pretty soon we’re talking about real money.

With me so far?  Good.  So let’s kill the ‘doc fix.’

The reason for arguing that we do this now is largely because we’ve already shot two hostages: there’s no real reason not to keep going.  Biting the bullet on salvaging what tax cuts we could, and letting the sequester’s defense cuts take effect, seems to have worked out fairly well so far:

By making all of the tax cuts permanent but only avoiding the sequester for two months, the president traded away most of his leverage in return for only half of the revenue he had been seeking — and no clear way to force Republicans to the table for more.

“It’s playing out exactly as we warned them it would,” a senior Senate Democratic leadership aide said.

It’s not as if Republicans were shy about making that argument at the time: GOP leaders immediately said that the deal effectively set in stone revenue for the president’s second term.

(H/T: Instapundit) Yesss.  This, indeed, happened.  And I miscounted, above: we’ve actually shot three hostages.  The third was the Alternative Minimum Tax extensions, or ‘AMT fix;’ that was actually a roughly similar situation (Congress had been putting off permanently adjusting the AMT tax for inflation, largely because they didn’t want to give up the $86 to $119 billion’s worth of budgetry tricks of THAT). So just embracing the pain seems to be a viable strategy; of course, the argument then becomes what to replace it with.  Heritage argues for a reasonable, multi-stage set of policy changes that will allow doctors to transition smoothly to a more transparent, flexible, and market-based approach to Medicare costs: I favor a more dramatic, not to say brutal approach… but then, I’m a wild-eyed online agitator, so Heritage’s approach is probably best.  The point is, we can and should take this opportunity to actually repair some of this stuff.  I mean, it’s not like Congress can get much less popular than it already is…

Moe Lane (crosspost)


5 thoughts on “Let us kill the Medicare ‘doc fix.’”

  1. If by “kill the doc fix” you mean let the cuts go fully and immediately into effect, I suppose it depends on how much you want retirees to actually see doctors. Other than fraudulently (which happens a fair bit), doctors aren’t getting wealthy off of Medicare right now. In fact, most doctors LOSE money on a fair percentage of their fee-for-service Medicare patients. If you cut their reimbursements by another 20%, they’ll just close their practices to new Medicare (or leave the profession, or shift to concierge care, or otherwise make themselves unavailable to Medicare retirees). Likewise with hospitals for other than emergency cases. Medicare economics suck for providers.
    Now if you wanted to replace fee-for-service with something like Medicare Advantage, which is a captitated condition-based health plan approach that allows large health systems to assume the risk for patients while incenting them to keep those patients as healthy as possible, go for it. Only problem is that the Obama administration and the Democrats in Congress are implacably hostile to Medicare Advantage. It, after all, is moderately efficient, market-based, and demonstrably effective. It’s also doomed, under Obamacare.
    On the other hand, if you could talk Congress into doing away with ICD-10 at the same time they cut Medicare reimbursements (and promising never to go to ICD-11 or any other new value-free mandarin-dictated coding initiative), you could sell it. Good luck with that, though.

  2. Speaking as a family doc, the medicare cut would be devastating to primary care. We already have trouble recruiting new docs due to massive debt loads from medical school, primary care does not pay as well as specialists. Access to docs will become much more difficult. I agree that the system needs to change but just cutting reimbursment without changing the system will just make it worse, especially on the elderly that need care

    1. Specialists won’t cope either. Access to cardiologists and neurologists is getting worse, and even the orthopods are beginning to wince. The only really solvent providers at this point don’t care for a high percentage of Medicare FFS patients, but it’s rapidly becoming the default insurance for older Americans.
      Not, interestingly, for federal retirees, who have Federal Blue Cross and IT pays physicians pretty well. I wonder how THAT happened?

  3. There will be pain and the longer we put it off, the more pain we will experience. After a series of bubbles burst around 2000, Paul Krugman, et al, came out for a strengthening of the housing bubble to avoid the downturn which should have followed our misuse of assets in the 1990s. We all saw how that worked out.

    Removing the ATM fix would cause the most pain in high tax, i e mainly Blue, states. This might be just the incentive we need to address an overhaul of our tax code. My suggestions include:

    1. Remove the double taxation of dividends by making them deductible to corporations and taxed as ordinary income to individuals. This would certainly make the tax system fairer and might cause companies to increase dividends and repatriate foreign earnings.

    2. Stop taxing capital gains. A person who increases the wealth of our country should not be punished and a person should not be rewarded for losing money. Capital gains tax revenues tend to increase in good times when they are less needed and decrease in bad times. Planned government inflation is enough of a tax on gains.

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