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The Real Problem with the 'Doc Fix'

Author: Peter R. Orszag, Adjunct Senior Fellow
March 31, 2014
Bloomberg.com

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As policy-making disgraces go, last week's House of Representatives vote for a temporary "doc fix" to avoid a cut in Medicare payments to doctors is hard to beat: It's financed in part through accounting gimmicks, and the vote was so rushed that most members of Congress didn't even realize it had been held. A permanent fix is offered as an alternative, and it would indeed be better, but this option, too, could be much stronger.

Even middling structural reforms are apparently out of reach in this age of diminished expectations. And yet, as Medicare costs overall continue to decelerate, lawmakers should seize the opportunity to reform health-care financing so that payments are based on value rather than volume. Doctors and hospitals need some clarity about how and when this evolution will proceed; the House legislation, which will be voted upon by the Senate today, provides none.

The doc fix is a mechanism that Congress has used for about a decade to avoid following the "sustainable growth rate" formula that lawmakers came up with in the late 1990s to constrain annual increases in Medicare payments to doctors. This year, doctors are scheduled to face a 24 percent reduction in Medicare rates, and the House has voted to spend $16 billion to keep that from happening. (The legislation also includes an unnecessary delay in a shift to a new, and admittedly more complicated, billing code system. But that is a topic for another column.)

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