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March 26 2015

This Week in Doc Fix

Hadley Heath

As I’m considering buying a house, I’ve been telling my friends, family, and real estate agent that I want to be “conservative,” meaning, in this sense, that I want to buy a house that is much less than what I can afford.  I want to budget too much for my mortgage, so that, even if something goes wrong, I can be financially secure. 

Now, the opposite of this is how the federal budget treats Medicare, and specifically Medicare’s payments to doctors. The government budget rests on the assumption that the government will follow a formula put into place in 1997, cut reimbursements to doctors and only spend so much.  They always get it wrong, because Congress never actually follows the formula and instead passes an annual measure called “the doc fix.”

Thus, Medicare is constantly blowing its budget.  This process is inherently anti-conservative, because, unlike my mortgage plan, the amount budgeted is too little to pay the bills.

All conservatives understand this, and for this reason, they don’t like the charade that the government is going to follow the Medicare formula, which always distorts the government budget. But, conservatives are divided over what to do about it, and about whether a plan that recently passed in the House of Representatives is a step in the right direction.   

You might think that, given any opportunity to permanently repeal this formula (the “Sustainable Growth Rate” or SGR), conservatives – and anyone interested in good government, good budgeting, and dependable payments to Medicare doctors – would take advantage.  The plan currently under consideration does this.

But some fiscal conservatives have grown to appreciate the annual adjustment, called “the doc fix,” because while Congress inevitably allows doctor pay to continue above the SGR, this expense is often countered with a “pay-for” or other reductions of the same size somewhere else in the budget.

So, we face a dilemma: would it be better to keep a fake formula in place that might annually force negotiations for other budget reductions, or would it be better to abolish this formula in favor of better, more transparent accounting and budgeting in the Medicare program (which could lead to more significant, structural reforms)?

To answer this question, we need to ask another question: How effective of a budget control has the doc fix process been in the past? Certainly, the SGR-doc-fix dance has not been effective at controlling Medicare’s costs, but has it controlled the budget in some other way?

Indeed, almost every “doc fix” dollar has been “paid for,” or offset, by another reduction in the budget. But analysts dispute how real those offsets were. Congress has a great capacity for rigging the numbers, promising and then undoing future cuts, and otherwise using smoke-and-mirror accounting gimmicks (see ObamaCare). 

The plan that just passed in the House includes other Medicare reforms as well. The reforms are not drastic: Basically, the plan slightly expands means-testing (meaning wealthier seniors will have to pay more for their own health care) and restricts seniors’ ability to use Medigap plans for first-dollar health coverage. These are commonsense, broadly-supported reforms that will save Medicare money.

Some conservatives say these reforms are not enough. Of course, all of us on the right would like to see bigger changes to Medicare that would ultimately transition the program to a premium-support model that would allow seniors more choice in their coverage and care, and that would use market competition to control costs.  But we are told such a bold plan isn’t realistic, and that may be right. Certainly, with President Obama in the White House, major reforms in health policy are a long shot.

The deal that passed the House yesterday is not perfect. Conservatives can disagree about whether it is a good deal or a bad deal.  But we shouldn’t reject solutions just because they are imperfect and don’t get us all the way to our conservative ideal.

It’s important to remember that the root of our problem isn’t this current deal, or the doc fixes, or even the Sustainable Growth Rate that became law in 1997. The root of our problem is that since 1965, the federal government has been controlling the health care of nearly all American seniors, and along with that, the pay of doctors who treat these patients.

The best way forward for our public policy is to reduce the role that the federal government plays in all of health care, so that we can avoid the difficult and unnecessary task of taking Congressional votes on choices that should ultimately stay in the hands of individuals and families.

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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