Unfixing the ‘DocFix’: How to Make Medicare Solvent Again

A Republican-led Congress is considering a repeal of the infamous DocFix. That is very good news for We The Patients and for our country. The bad news is that they might replace it.

In 1997, a Democrat president and Republican Congress developed the Balanced Budget Act. Amongst many other economic woes at the time, the Medicare Trust Fund was projected to be bankrupt and therefore unable to pay for medical care by 2015.

A fiscal reconciliation approach called the sustained growth ratio, or SGR, was included in the Balanced Budget Act. Congress claimed that the SGR would restore fiscal balance to the Trust Fund: revenue would equal expenditures.

[sharequote align=”center”]What both Medicare and healthcare in general need are less government and more free market.[/sharequote]

The SGR would compare the prior year’s spending to the income and would reduce the next year’s payments to physicians by that amount. This methodology was implemented in 1999. Spending consistently exceeded revenue and so payments to doctors were decreased and decreased again. By 2003, payments to doctors who cared for Medicare recipients were below their cost-of-doing-business.

(I always wondered why SGR reductions were limited to the doctors – Why not cut money going to bureaucrats as well? In fact, if we want Medicare spending to be dollar-efficient, cuts should be focused on dollar-inefficient spending. “Dollar efficiency” is defined as dollars spent that produce the desired outcome from a system or an organization. For Medicare, efficient spending would improve the health of seniors; inefficient spending would not. Of course, if Congress cut inefficient, wasteful spending it would have to cut payments to itself and its agencies. This is something Congress will never do voluntarily.)

There was a huge public outcry about lack of care for Medicare patients. Congress was forced to solve the problem. I write the word “solve” with my tongue firmly in my cheek. Their solution was the DocFix – a temporary cessation of the SGR.

Congress’ answer to Medicare patients not being able to get medical care was a temporary halt in reimbursement reductions. Payment schedules remained unacceptably low but went no lower, for the moment.

The DocFix is a paradigm of disingenuous labeling: it failed to fix the doctor problem.

The DocFix has been renewed each year for the past 12 years…meaning the SGR has not been used since 2003. This means that Medicare has gone further into debt and is spending more than it takes in and is even closer to insolvency.

Obamacare takes all the cuts that SGR would have done in 12 years – $716 billion – and applies them now, all at once. That is an awful lot of money not going to doctors, meaning an awful lot of medical care that Medicare patients won’t get.

Who should fix Congress' mistakes? (Dr. Deane Waldman)
Who should fix Congress’ mistakes? (Dr. Deane Waldman) 

Congress knew that such a massive cut would produce draconian reductions in services to Medicare patients. The Democrats needed that $716 billion in order to make Obamacare look a little less like the huge spending increase that it actually was and is. Then, they passed a new DocFix to hold the Obamacare cuts in abeyance. The Democrats put doctors who care for Medicare enrollees out of business, and then saved them by another DocFix.

Last year, the highly partisan Congressional Budget Office accounting reached a new height with the 2014 CBO Report on the Medicare Trust Fund. The CBO claimed that Obamacare had pushed back Medicare bankruptcy from 2015 to 2030. According to them, Medicare was more solvent. This was bruited as a personal triumph for President Obama.

Hurrah! Success! Outright accounting fraud!

The CBO counted as money “saved” and thus still in the Trust Fund, hundreds of billions of dollars that Medicare had actually spent between 2003 and 2014 because the SGR had been stopped by DocFix. Yet, the CBO accounted the Trust Fund as though the SGR had been implemented. The CBO just ignored 12 years of DocFix’s.

The CBO acted as though the last 18 checks that you wrote didn’t count and weren’t entered into your checkbook. Your balance might look quite healthy but in reality you are broke.

Amazing how a few hundred billion imaginary dollars can make a bank account, such as the Medicare Trust Fund, look very strong when in reality it is insolvent. The collapse of Medicare will likely happen after President Obama has left office. He can then blame it on the next administration.

Repeal of the fictional DocFix and the real-but-not-used SGR would restore a small measure of sanity to what has been a massive distortion of both the market and the facts. That is good.

Will repeal make doctors more available to Medicare patients? Sadly, no. There remains the problem of underpaid or retired and therefore unavailable doctors. Robert Moffitt of the Heritage Foundation warned Congress in 2009 that, “You can’t get more of something by paying less for it.”

His advice was dismissed in favor of the contemptuous and contemptible Jonathan Gruber, who intentionally deceived the American people to get Obamacare passed.

Congress should immediately take four actions.

1. Repeal the SGR.

  • Unimplemented SGR will not balance the Medicare budget.
  • If SGR were implemented, medical services to Medicare patients would virtually cease.
  • Write the repeal in short, simple declarative sentences – the opposite of how Obamacare was written.

2. Repeal the “DocFix.”

  • The DocFix “fixes” no doctor. It is a stay of execution.
  • Do not presume that the DocFix will just disappear when you repeal the SGR.
  • Do not leave the DocFix out there for the Democrats to spin to their political advantage.

3. Replace SGR and Docfix with … nothing.

  • The regulatory burden is the biggest problem in healthcare.
  • Repeal of the SGR and the DocFix will reduce that burden.
  • DO NOT then add a new burden.

4. Tell it like it is.

  • Do not assume that people will automatically understand.
  • Do not emulate Jonathan Gruber. Do not assume that we are too stupid to understand.
  • Tell us what you are doing, why, and what it will do to us: good and bad. No political-speak.

There are worrisome reports that Congress is considering replacing the SGR with new and “better” regulations. Rumor is they are discussing changing price control structures; adjusting means testing; new add-ons; and even new limitations on authorization for medical care.

Congress should reduce the regulatory burden in healthcare, not merely take one millstone off the doctors’ backs to then replace it with a new and “better” one.

What both Medicare and healthcare in general need are less government and more free market. Washington’s tight control of healthcare financing – a hallmark of Obamacare – is speeding our nation’s fall over the fiscal cliff and hastening the demise of We The Patients due to lack of health care.

Dr. Deane Waldman MD MBA is author of award-winning “The Cancer In Healthcare,” Professor Emeritus of Pediatrics, Pathology and Decision Science; and Adjunct Scholar (Healthcare) for the Rio Grande Foundation, a public policy think tank. Dr. Deane also sits on the Board of Directors of the New Mexico Health Insurance Exchange, as Consumer Advocate. Opinions expressed here are solely his and do not necessarily reflect the opinions of the Board.

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