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Is Medicare “Fixed’?

The Medicare system may not be totally fixed, but the physician payment formula is. The “doc fix”, as it has become known, passed the Senate this week with a rousing 92 to 8 victory, after passing the House 392-37.  It now moves to President Obama and he has indicated the he will sign the bill.

What exactly is “fixed”? The Senate vote came just a mere hours before Medicare doctors faced a 21 per cent Medicare cut. The new bill would remove the old physician payment rates, which were set based on an economic formula known as “sustainable growth rate” (SGR). This SGR was created by a 1997 deficit reduction law in an attempt to regulate Medicare expenditures. For first few years, the formula met its target and enabled physicians received small pay increases. Beginning in 2002, however, the SGR reduced physician payments by 4.8 percent. Since then, cuts have been deferred by Congress thereby increasing the size of the “fix”.

The new payment rates would give doctors a 0.5 percent increase in each of the next five years as Medicare moves to a payment system that rewards doctors based on the quality of care provided, rather than the number of procedures performed, as has been the case in the current formula. This corresponds to efforts in the federal law to link Medicare reimbursements to quality metrics.

The idea behind changing the way Medicare pays doctors is to encourage better care coordination and chronic care management. Existing payment incentive programs would be combined into a new “Merit Based Incentive Payment System”. Also alternative payment models, to be developed in the future, will be reviewed by a technical advisory committee to determine suitability.

Some seniors will be impacted by the new bill. Beginning in 2018, wealthier Medicare beneficiaries would see an increase in the cost of their Medicare coverage. This increase is expected to affect only 2 percent of Medicare participants.

Also, in 2020, Medigap (Medicare supplement) plans would no longer be able to cover the Part B deductible for new beneficiaries. This “first dollar” coverage usually covers nearly all deductibles and copayments. According to a Kaiser Family Foundation study, Medigap enrollment trends have been declining among 65 year olds so that, hopefully, this should impact fewer seniors.

The doc fix is part of a bigger bill with more components. What it will do for Medicare remains to be seen. Stay tuned.


For additional information, contact EAB HealthWorks.