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'Doc Fix' Could Be Left Stranded as Health Care Overhaul Founders

By Jane Norman, CQ HealthBeat Associate Editor

January 22, 2010 -- Like the last guest left when the party's over, the Medicare physician payment formula remains an awkward presence for Congress as Democrats attempt to regroup on efforts to overhaul the health care system.

Those who follow the long-running doctor saga say the poisoned atmosphere surrounding health care spending makes it difficult to see how Congress will agree to the hundreds of billions of dollars needed to make a permanent change in the payment formula. The Senate has rejected attempts to pay for the 10-year cost without offsets.

But there's also mounting pressure from the influential doctor and senior lobbies to do something—and fast—out of fear that beneficiaries will lose access to care. Those who advocate a permanent fix point to the recent news that physicians at a Mayo Clinic family practice clinic in Glendale, Ariz., have decided to try opting out of Medicare.

Doctors who treat Medicare beneficiaries face a 21.2 percent cut in their payments beginning March 1. The deadline had been Jan. 1, but a two-month extension was included in a defense spending bill (HR 3326) to give lawmakers time to come up with a solution. "Clearly, for physicians, something needs to be done by Mar. 1 or there's a big problem," said Julius W. Hobson, Jr., a lobbyist at the Bryan Cave law firm and former director of congressional affairs for the American Medical Association.

The reductions are mandated by what's called the sustainable growth rate formula, or SGR, which sets overall targets in order to hold down spending on Part B physician services. Payment rates are adjusted every year to reflect differences between actual spending and the target. Since 2002, spending has exceeded the target but Congress beginning in 2003 has raced to the rescue to avert the cuts.

Lobbying Begins Anew
Doctors now are growing restless in the face of the March 1 deadline, and have begun pushing hard to make this the year for an SGR repeal, or "doc fix."

The AMA—which gave Democrats a big boost with endorsements of both the House and Senate health care overhaul bills—joined up with AARP and the Military Officers Association of America at a press event Jan. 21 to urge the Senate to set up a new foundation for physician payments. Retired Navy Capt. Kathy Beasley, deputy director of government relations for the military group, said the formula for Medicare payments puts 9 million military beneficiaries at risk because their payments under the Tricare program are tied to Medicare's.

Cecil Wilson, president-elect of the AMA, spoke from Portland, Maine, the home state for two Republican senators, Susan Collins and Olympia Snowe, who are viewed as friendly to the idea of a fix. "Every year, seniors, military families and their physicians are unwilling players in a game of legislative chicken as Congress takes us to the brink before stopping Medicare cuts at the last minute," said Wilson.

The AMA and AARP also have launched a television ad campaign to run through Jan. 29 in Georgia, Florida, Maine, Mississippi, Missouri, North Dakota, Virginia and Wisconsin, states with large elderly populations as well as key senators.

The House-passed bill that would make a permanent fix (HR 3961) at a cost of $210 billion over 10 years has been placed on the Senate calendar. The Finance Committee Chairman, Max Baucus, "is committed to finding a permanent fix for the physician payment formula and is examining a range of policy options to meet that goal," an aide to the Montana Democrat said. "He intends to ensure payment cuts for critical medical services do not go into effect."

The doc fix also has a toehold in the debate over the debt limit. The administration and Democratic leaders are trying to finalize a deal on a special commission to find a way to control the debt. As part of that, the Senate would have to enact pay-as-you-go budget legislation that would require offsets for any new spending. Tentatively, a plan to prevent cuts in Medicare payments to physicians would be exempt from the pay-as-you-go rule, for five years.

It's unclear whether that will fly in the Senate, where moderate Democrats in the past have demanded that the cost of the doc fix be offset. The Senate voted Oct. 21 against taking up legislation (S 1776) that would eliminate the Medicare formula entirely. That would cost $247 billion over 10 years. Now the Senate has a new Republican, Scott P. Brown of Massachusetts, and a 41st vote to help the minority wage filibusters.

Those interested in controlling overall costs say that it wouldn't be a bad thing to see the House bill fail because it does too little to curb spending.

Gail Wilensky, the former administrator of the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services, called the House bill "an abomination" in that sense. She said Medicare should instead move toward bundled payments in which doctors and other providers are paid a single fee for an episode of care, rather than every visit or treatment.

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