Medicare Doc Fix is Fixed — Sort of — for Now

by Bud Meyers, published March 26, 2015 (via The Economic Populist)

The House overwhelmingly approved sweeping changes to the Medicare program (voting 392 to 37) which would establish a new formula for paying doctors and increasing premiums for Medicare beneficiaries.

The John Boehner-Nancy Pelosi measure would replace a 1997 formula that linked doctor pay to economic growth with a new one that is more focused on “quality of care and performance” by rewarding them for higher-quality work, rather than on the volume of their services.

According to Forbes (who isn’t happy with the plan):

“Medicare payments to doctors would rise by 0.5% in each of the next four years—a rate that is likely to be well below inflation. Then, payments would be frozen for the next six years. After that, physicians would get modest annual increases again. After 2019, doctors would receive financial incentives to participate in two alternative payment systems that would tie their compensation to performance. Potentially, this could improve the quality of care for seniors. That, in turn, could reduce their acute health episodes and hospitalizations and might even save Medicare money.”

To help offset the costs of the new Medicare bill, it would also require means-testing of Medicare beneficiaries so higher income people pay higher premiums for coverage of doctors’ services and prescription drugs. Seniors with incomes at or below $85,0000 currently pay $104.90 per month in Part B premiums, and higher income seniors pay between $146.90 and $335.70, depending on their income.

According to TIME, under the plan, Medicare recipients with annual incomes of between $133,000 and $160,000 would see their Medicare Part B and Part D premiums increase from 50 to 65 percent; and recipients with annual incomes between $160,000 and $214,000 would pay 75 percent rather than 65 percent. The premium hikes would begin in 2018, and more beneficiaries could be income-tested starting in 2020. (TIME noted that Congress should have also had Medicare negotiate better drug prices with pharmaceutical companies; and tighten up reimbursements to Medicare Advantage plans.)

Robert Moffit at the Heritage Foundation said this increase in premiums on upper-income individuals would only affect about 6 percent of the Medicare population.

Most people pay the Part B premium of $104.90 each month — but this will go for everyone on Medicare. Under current law, enrollee premiums are set to cover 25 percent of Medicare Part B spending, so some of the doc fix’s increased costs will be allocated to them automatically. A freeze in physician fees is already baked into the monthly Part B premium for this year, but the doc fix could result in an increase in premiums going forward.

The new bill would also make permanent another program that subsidizes Part B premiums for some people with low incomes (individual monthly income is limited to $1,197 and a married couple’s monthly income is limited to $1,613).

Here’s the bigger question: If a Medicare beneficiary isn’t a high-income earner, and doesn’t qualify for a subsidy as a low-income individual , will this “doc fix” increase monthly premiums over and beyond what any future annual Social Security COLA might pay, resulting in a lower monthly benefit for them to live on? (Poor people on disability are already facing a 20% cut in benefits by the end of next year — about as much as those uppity doctors had faced.)

And then there’s Medigap. According to Reuters:

Many Medicare enrollees buy private Medigap policies that supplement their government-funded coverage (average annual cost: $2,166, according to Kaiser). The policies typically cover the deductible in Part B (outpatient services), which is $147 this year, and put a cap on out-of-pocket hospitalization costs. Under the bipartisan plan, Medigap plans would no longer cover the annual Part B deductible for new enrollees, starting in 2020, so seniors would have to pay it themselves. Current Medigap policyholders and new enrollees up to 2020 would be protected.

The Congressional Budget Office said the measure’s costs totaled $214 billion over the next decade, and about two-thirds of the costs would be added to the deficit — estimated to be $141 billion. (Conservative Republicans were concerned because the bill was not totally paid for — just like the wars in the Middle-East.)

The legislation was designed to spare Medicare doctors a 21-percent pay cut effective this coming April 1st under the existing payment formula. If the Senate does not act until mid-April, doctors might still be able to avoid pay cuts because Medicare doctors’ claims generally take at least 14 days to be paid. Such a reduction would almost surely prompt some doctors to accept fewer Medicare patients.

Wall Street analysts said it would help healthcare services companies whose revenues depend on government Medicare reimbursements. Brian Tanquilut, an analyst at Jefferies bank, noted that this bill could help the stock prices of hospital companies, such as Community Health Systems, HCA Holdings Inc and Tenet Healthcare. (So healthcare companies and well-to-do doctors would benefit, while Medicare rates go up on the disabled and elderly.)

The new legislation also includes a two-year extension of the Children’s Health Insurance Program (CHIP) for low-income children and a two-year extension of funding for community health centers. However, some Senate Democrats have expressed concern about anti-abortion language in the bill and their desire for four years, not two, of CHIP funding.

The Senate, who is also expected to pass it, may not act until it returns from a two-week vacation (yes, they’re already on vacation — can you believe it!)

Obama is also expected to sign off on the new bill that will raise Medicare premiums (before the GOP turns it into a block grant or voucher program).

According to the Alliance for Retired Americans, from their newsletter today regarding the Senate’s just passed budget proposal:

The Senate budget proposal slashes $431 billion from Medicare over a decade, but does not provide many specifics on how those savings would be achieved. Instead, the plan tasks individual Senate committees with jurisdiction over Medicare to find such savings. (The House budget would pare $148 billion from Medicare and convert it into a voucher-like program for future beneficiaries, a step the Senate shunned.)

Also: An amendment to the Senate budget from Senator Ron Wyden (D-Ore.) also failed on the Senate floor. It would have made it easier to reject bills that “would cut benefits, raise the retirement age, or privatize Social Security”.

Also: Democratic Senators offered an amendment to the Senate budget to expand Social Security. The amendment lost on almost a completely straight party-line vote: every Democrat but Heidi Heitkamp (ND) and Tom Carper (DE) voted for it (with Dianne Feinstein (D) and Barbara Mikulski (D) not voting). Every Republican voted against it.