Medicare Physician Compensation

Will the Doc Fix happen this year?

The Healthcare Economist is going on vacation for the next week.

In the meantime, I pose to you, my reader, a bet.  Do you think the ‘doc fix’ gets passed?  Before you read on, make your predictions in the comments section below.

Healthcare Economist’s Prediction

What is the doc fix?  In 1998, Medicare implemented the Sustainable Growth Rate (SGR) system.  Medicare intended that the SGR  was intended to slow the rate of growth on Medicare physician spending by decreasing reimbursement to physicians over time (for more information, see here).  Each year since 1998, however, Congress has reversed the decrease in physician payment rates.  It did not, however, abolish the SGR.  Abolishing the SGR would create a huge shortfall in Medicare spending.

Instead, Congress temporarily removes the SGR for the upcoming year without abolishing it.  Because the gradual decreases in physician payments were never implemented,  if the SGR is not overturned, Medicare physicians would see a 27.4 percent decrease in their reimbursement rates.  Ezra Klein’s WonkBlog notes that this may in fact be a good idea.

This is unlikely to happen.

Although the Washington Post questions whether it will actually happen, physicians are a strong lobbying group and a 27.4 decrease in anyone’s salary is enough to cause Congressmen to have their inboxes filled with letters and emails from angry physicians.

If you ask most Americans if they want to have their payroll taxes lowered, they will say they do.  If you ask most Americans if they Medicare physician fees should be cut, they will say no.  The recently passed payroll tax cut, however, funds Medicare physician salaries; payroll taxes in part are used to fund Medicare.

By passing the doc fix, Medicare finances will be placed into peril.  By failing to pass the doc fix, reimbursements will be cut and Medicare may begin to look more like Medicaid–a insurance benefit where finding a doctor willing to accept low reimbursement rates is difficult.

In my opinion, Congress will do what they always do: pass the buck to the next generation. The doc fix will pass.


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