Time for truth in Medicare accounting

Published November 19, 2014

by Patrick Gleason and Katherine Restrepo, published in News and Observer, November 14, 2014.

The midterm elections are in the rearview mirror, but Congress still has much important work to finish before year’s end. Topping the “lame duck” to-do list should be addressing urgent problems with Medicare, the most costly federal program and the largest driver of national debt. Failure to act would have harsh ramifications for seniors and caregivers in North Carolina.

The first step is to address accounting gimmicks that hide Medicare’s true cost and its effect on federal debt in the years ahead. The program operates under a phony spending baseline that conceals its true cost.

How did this come about? In 1997, Congress instituted a new spending formula, the Sustainable Growth Rate. It would institute physician reimbursement rate cuts in order to ensure that Medicare spending did not exceed the rate of economic growth. Noble goal, except that’s not what happened.

In 2003, the first time Medicare cuts were scheduled to take place under SGR, lawmakers balked and delayed the scheduled reduction in physician payments. In the 11 years since, Congress has delayed these scheduled payment cuts a whopping 17 times. This maneuver is referred to as the “doc fix.”

The worst-kept secret on Capitol Hill is that Congress will always, just in the nick of time, pass a doc fix to prevent these payment reductions. This charade results in a multitude of problems.

The Congressional Budget Office is forced to operate under the assumption that Congress will comply with SGR, even though the last 11 years have shown that to be pure fantasy. CBO treats passage of a doc fix as a spending increase. But it’s not, in reality, because Congress always passes a temporary reprieve. Everyone in Washington knows this.

Underscoring this fact, for the first time ever, even Medicare’s own actuaries admitted this year that scheduled SGR payment cuts never would occur. They began factoring that truth into their accounting, noting “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 ourselves, pass a permanent doc fix and move on to reforms necessary to ensure the nation’s fiscal health and Medicare’s sustainability.

For North Carolina, failure to pass a permanent doc fix would reduce seniors’ access to care. North Carolina has 15 practicing physicians per 1,000 Medicare beneficiaries, which is below the national average. If Congress does not act, the result will be a 24 percent across-the-board pay cut for caregivers treating Medicare patients. With 43 percent of North Carolina’s physicians over the age of 50, the age at which surveys show many physicians begin to consider cutting back on patient care, scheduled provider cuts would only exacerbate North Carolina’s problems with access to care.

A temporary doc fix breeds corruption and legislative chicanery, producing a goldmine for lobbyists and political fundraisers. Here is how a 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.”

Around and around we go every year under the temporary doc fix charade. Worse, the constant need to pass an emergency, 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.

Fixing what’s wrong with Medicare is the top health and budgetary issue facing the country. As former Congressional Budget Director Doug Holtz-Eakin warns, “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.”

It’s time for Congress members to stop kicking the can down the road, institute truth in accounting by passing a permanent doc fix, roll up their collective sleeves and get to work on the real reforms that will save Medicare and put the nation on a sound fiscal path.

Patrick Gleason is director of state affairs at Americans for Tax Reform. Katherine Restrepo is health and human services policy analyst for the John Locke Foundation in Raleigh.


November 19, 2014 at 10:42 am
Richard Bunce says:

... and this is why you do not want the government... elected officials or government bureaucrats... involved in your healthcare. The politics will be far worse than anything the private market can produce.