Deal on Medicare Physician Pay Leaves Clues to Future Debates

  ·  Health Policy Hub

Last Friday, Congress reached an agreement on how to prevent a payroll tax increase on 160 million working Americans, preserve unemployment benefits for laid-off workers and also extend a number of expiring health care provisions, most visibly, deferring a scheduled 27 percent cut in Medicare physician pay (the so called Sustainable Growth Rate Formula, or SGR). The agreement also preserves programs that help low-wage workers and low-income Medicare beneficiaries with their health care costs.

Key takeaways:

Who killed a long-term SGR fix? (Hint: It wasn’t Colonel Mustard)

Although they reached a short-term (ten month) agreement, Congress passed up a chance to put an end to the annual exercise by using unspent war funds. Their decision not to do so makes you wonder in whose interest is the recurrent debate over physician pay? No one wants their fingerprints on the knife, but the evidence does point in a particular direction. Congress’s failure to address the payment formula means physicians are less happy with the Medicare program. It also means physicians are less well disposed toward the Affordable Care Act (ACA) because they thought that they had a commitment that SGR would be addressed in the context of broader health reform. Finally, failure to fix SGR also leaves in place a device for forcing additional spending cuts either in health care or elsewhere in the federal budget. Now, let’s see…who wants to undermine support for Medicare and the ACA and force additional cuts in federal health spending? (If you really can’t figure it out, check out this post).

An eroding commitment to public health?

We sometimes criticize corporate CEOs for being too focused on the next quarterly profit statement and their unwillingness to think long term. However, there is plenty of short-term thinking in Washington as Congress just proved with their decision to cut funding from the Prevention and Public Health Fund (PPHF) as a partial offset to the cost of blocking the scheduled cut in Medicare physician pay. As we argue here, a successful strategy to reduce health care spending must include a commitment to improving the underlying health of the American public.

To their credit, the drafters of the ACA recognized this simple truth and included new investments in public health as part of the legislation. Unfortunately, that moment of clarity appears to all too short lived. Almost immediately, public health resources were diverted for the worthy, but different, purpose of training more primary care providers. Pre-existing commitments to public health have since been scaled back with the assumption that the funding gap would be filled by the PPHF, resulting in less of a net gain in funding. Now Congress has diverted $5 billion from the fund to avoid the physician pay cut.

The problem is that while the case for public health investment is compelling, there are not enough powerful champions to defend the fund, especially since cutting it means taking away funds that are to be allocated in the future. As a result, in the short run, no one actually experiences a current funding reduction.

The shape of things to come?

As we said in our blog last week even though President Obama’s budget will not be enacted, it contains important signals for the direction of future action. Hardly 48 hours after its release, health programs the President indicated a willingness to cut showed up as offsets for yet another short-term SGR patch. This means we need to take very seriously other cuts President Obama has indicated he would support because these items are sure to reappear in future debates over cuts in health spending.

Those debates are likely to occur in the context of the 2012 elections, and will resume in Congress immediately thereafter since the delay in the physician pay cut is only for ten months. Many other issues—such as the scheduled expiration of the Bush tax cuts, the recently extended payroll tax reduction, the debt ceiling agreement and more—will also need to be addressed at that time, setting the stage for a high stakes debate over both taxes and spending, including (perhaps especially) Medicare and Medicaid.

We can guarantee that Congress will be looking for spending cuts yet again, and if we don’t want to see costs shifted onto Medicare and Medicaid beneficiaries or more raids on the Prevention Fund, advocates will have to start working with Congress and the Administration now to protect those programs.

-- Michael Miller, Director of Strategic Policy