Time for Truth In Medicare Accounting

November 7th, 2014 by Leave a Comment

By Kelly McCutchen and Patrick Gleason

The mid-term elections are in the rearview mirror, but Congress still has a lot of important work to take care of before lawmakers go home at year’s end and the newly elected are sworn in next January. At the top of the “Lame duck” to-do list: Congress must address urgent problems with Medicare – the most costly federal program and largest driver of national debt – or there will be harsh ramifications for seniors and caregivers in Georgia.

The first step is to address accounting gimmicks that hide the true cost of Medicare and how much it will grow the debt in coming years and decades. The program currently operates under a phony spending baseline that conceals its true cost. How did this come about? In 1997, Congress instituted the Sustainable Growth Rate (SGR), a spending formula to implement physician reimbursement rate cuts and ensure Medicare spending did not exceed the rate of economic growth.

It’s a noble goal, but that’s not what happened. When it was time to implement the Medicare cuts under SGR – in 2003 – lawmakers balked and delayed the physician payment cuts. In the 11 years since, Congress has delayed these scheduled payment cuts a whopping 17 times.

This congressional maneuver is referred to as the “Doc Fix.” The worst-kept secret on Capitol Hill is that Congress will always, at the end the day and often just in the nick of time, pass a Doc Fix to prevent these payment reductions from ever taking place. This charade results in a multitude of problems.

The Congressional Budget Office is forced to operate under the assumption that the SGR will be adhered to, despite 11 years that show it to be pure fantasy. So CBO scores passing this Doc Fix as a spending increase. But it’s not, in reality, because Congress will always pass a temporary reprieve and everyone in Washington knows this. Underscoring this fact, Medicare’s own actuaries admitted for the first time ever this year that scheduled SGR payment cuts will never occur and began factoring that truth into their accounting, noting that “it is a virtual certainty that lawmakers will override this reduction as they have every year beginning with 2003.”

The solution is to end this game. Start being honest with Americans: Pass a permanent Doc Fix and move on to reforms necessary to ensure the nation’s fiscal health and the sustainability of Medicare.

For Georgia, access to care for seniors would be reduced without a permanent Doc Fix:

  • This state currently has 15 practicing physicians per 1,000 Medicare beneficiaries, which is below the national average. Unless Congress acts, the result will be a 24 percent across the board pay cut for caregivers treating Medicare patients.
  • 56 percent of Georgia’s physicians are already over the age of 50, the age at which surveys show many physicians begin to consider cutting back on patient care activities. The scheduled provider cuts will only exacerbate Georgia’s current problems with access to care.

A temporary Doc Fix also breeds corruption and legislative chicanery, producing a goldmine for lobbyists and political fund-raisers. Americans for Tax Reform’s Ryan Ellis explains how the game goes:

“It’s part of the corrupt, crony capitalist shell game in Washington, and it needs to stop. Congress sets up a fake crisis which everyone knows won’t happen.”

“Here,” says Ellis, “is how the typical conversation goes: ‘We actually might not get the Doc Fix done this year, Mr. Lobbyist,’ says the senator. ‘Totally different subject, Mr. Lobbyist – did you know about my cocktail reception at Johnnie’s Half Shell tonight? You’ll be there? Great, I look forward to seeing you. Let’s see what we can do about this Doc Fix nonsense.’”

This is repeated every year, producing a manufactured crisis on Capitol Hill every few months. Worse, the need to constantly pass an emergency and temporary Doc Fix distracts from much-needed Medicare reforms. If Congress continues to ignore the unsustainable trajectory of Medicare spending, the result will be harm to seniors and a federal budget drowning in red ink.

“By 2020, as Baby Boomers continue to age into Medicare at the rate of more than 10,000 a day, Medicare’s cumulative $6.2 trillion in cash flow deficits will constitute 35 percent of the nation’s total debt accumulation,” warns Doug Holtz-Eakin, economist and former director of the Congressional Budget Office.

Fixing what’s wrong with Medicare is the top health and budgetary issue facing the country. Congress must stop kicking the can down the road and institute truth in accounting by passing a permanent Doc Fix. Then roll up its collective sleeves and get to work on real reforms to save Medicare and put the nation on a sound fiscal path.

Kelly McCutchen is President of the Georgia Public Policy Foundation and ‎Patrick Gleason is Director of State Affairs at Americans for Tax Reform.

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