Good News for Doctors and Budget Hawks

Catherine Hollander

The price tag for repealing a flawed Medicare doctors' pay formula will remain near a recent record low, according to a new estimate from the independent Congressional Budget Office released on Tuesday. It’s good news for the physicians and lawmakers who hope to see a permanent “doc fix” in 2013, and suggests the momentum behind achieving repeal is likely to continue this year.

What's more, the CBO lowered its estimates Tuesday for Medicare spending between 2014 and 2023 by $85 billion. 

In February, the CBO, which analyzes the country’s budget and the price of proposed legislation, surprised doctors and lawmakers alike by slashing the price tag of a permanent doc fix by over $100 billion, to $138 billion over 10 years. Some physicians had been concerned that the notoriously volatile CBO score could be raised when the agency updated its 10-year budget projections this week; after all, it didn’t seem like the estimate could go much lower. The news on Tuesday was about as good as they could have hoped for; CBO only raised the cost of a permanent doc fix by $1.1 billion, to $139.1 billion over 10 years.

“Today’s number does not make the permanent fix outlook harder,” said Julius Hobson, a senior policy adviser at Polsinelli and the former top lobbyist for the American Medical Association. But Hobson said he was still worried about what could happen when the CBO releases its next round of projections in August. “An August baseline could be a problem. We just don’t know,” he told National Journal.

There have been a number of attempts to repeal the so-called “sustainable growth rate” formula since it became law in 1997. The goal of the SGR was to control Medicare costs by keeping them in line with the country’s gross domestic product. But beginning with the economic downturn in 2002, the formula would cut physician payments. Doctors lobbied for – and received – a series of temporary patches, the “doc fix,” that prevented the cuts from going into effect.

The formula is now widely believed to be flawed and the patches a source of uncertainty, but repeal has been an expensive proposition. That’s why advocates of a permanent doc fix were pleased by the low price tag the CBO released in February – they feel the time is finally right for reform. “We need to do it this year,” Sen. Max Baucus, D-Mont., chair of the Senate Finance Committee, said at a Tuesday hearing before the latest CBO score was released. “This is a window of opportunity. We need to seize it.”

“We know from previous years that the CBO score has a tendency to fluctuate,” Sen. Orrin Hatch, R-Utah, the committee’s ranking member, said. “I believe we currently have a good window of opportunity before us, but we need to act very soon.”

Last Friday, Baucus and Hatch sent a letter to health care providers soliciting input on how to reform the Medicare physician payment system. Tuesday’s hearing made clear there is no agreement on the best path forward yet. But A. Bruce Steinwald, a health care consultant who testified, noted that now appears to be "an especially fertile period" of serious proposals to restructure Medicare. 

Baucus and Hatch vowed that the repeal of the SGR and Medicare payment reform were a top priority for the committee this year. There has also been movement in the House, with lawmakers on the Energy and Commerce and Ways and Means Committees circulating a framework for repealing and replacing the SGR formula in February and Ways and Means holding its own hearing on the doc fix last week. Reps. Allyson Schwartz and Joe Heck have also introduced bipartisan legislation to replace the current Medicare physician payment system.

Tuesday's CBO price tag only increases the likelihood that Congress will be willing to take up legislation to reform physician payments, either as a stand-alone bill or as part of a larger deficit-reduction agreement.