George Gibbs Center for Economic Prosperity

Ga⁠i⁠nesv⁠i⁠lle Sun — Sal Nuzzo: T⁠i⁠me for ⁠t⁠ru⁠t⁠h In Med⁠i⁠care accoun⁠t⁠⁠i⁠ng

By: The James Madison Institute / 2014

Gainesville Sun
Sal Nuzzo: Time for truth In Medicare accounting
By Sal Nuzzo
November 13, 2014The midterm elections are in the rear-view mirror, but Congress still has a lot of important work to take care of before defeated or retired 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 should be addressing an urgent and ongoing problem with Medicare, the most costly federal program and largest driver of national debt. If members of Congress fail to do so, there will be harsh ramifications for seniors and caregivers in Florida.The first step is to address the fact that the program currently operates under a spending assumption that hides the true cost of Medicare, as well as exactly how much it will grow the national debt in coming years and decades.How did this come about? In 1997, Congress instituted a new spending formula, referred to as the Sustainable Growth Rate (SGR) that would institute physician reimbursement rate cuts in order to ensure Medicare spending did not exceed the rate of economic growth. Noble goal, except that’s not what happened.In 2003, the first time that 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, 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 results in a multitude of problems.

The Congressional Budget Office (CBO) is forced to operate under the assumption that the SGR will be adhered to, even though the last 11 years has shown that to be pure fantasy. Consequently, the CBO views passing a doc fix as a spending increase. This runs counter to the reality that Congress consistently passes it (and everyone in Washington knows it).Underscoring this fact, for the first time ever, even Medicare’s own actuaries admitted 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.”Temporary doc fixes also breed corruption and legislative chicanery, producing a goldmine for lobbyists and political fundraisers. Congressional members hold the carrot of a doc fix over the heads of lobbyists and special interests as a way to extort campaign contributions.This charade is replicated over and over as 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 red ink.For Florida, failure to pass a permanent doc fix would reduce access to care for seniors. Florida currently has 13 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. 53 percent of Florida’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 Florida’s challenges with access to care.Fixing what’s wrong with Medicare is among the top health and budgetary issues 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.”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 the sustainability of Medicare.Sal Nuzzo is vice president of policy at the James Madison Institute, a Tallahassee-based public policy research and educational organization.Article: