Doc pay fixes snowball, making Medicare all the harder to reform

Once again, Congress puts off a tough decision on physician fees and shows the failure of top-down cost control. Obama-Care charts a similar path. When will Washington wise up? Amid the recent political game-playing over the payroll tax, the doctors' lobby was quietly at work on its annual task of persuading Congress not to cut Medicare payments.

As usual, the effort paid off. As it has every year since 2003, Congress agreed to the so-called doc fix, suspending a scheduled Medicare fee cut of 27.4%.

Of course, no sane member of the House or Senate was going to vote for a cut that huge. Doctors would have threatened to drop Medicare patients like hot potatoes, and lawmakers know better than to invite the wrath of seniors in an election year.

So the vote was a foregone conclusion. But if this year's doc fix wasn't exactly big news, it deserves attention for what it says about Medicare and the futility of current laws designed to hold its costs down.

The story behind the doc fix — and the reason the scheduled fee cut was so huge — is a 1997 law that set a "sustainable growth rate" (SGR) for Medicare doctor payments based on per-capita GDP.

Until 2002, payments rose more slowly than the SGR, but they've outstripped it since then. That's why the gap is now so big — and impossible to close all at once.

Suspending SGR each year takes an act of Congress. But it gets easier for doctors each year as the gap widens and the idea of closing it becomes more unthinkable.

In short, the 1997 scheme to make supposedly automatic cuts in doctor fees based on what looked like a reasonable index has totally failed. Everyone in Congress must have figured this out long ago.

But that didn't keep a majority (at the time) from setting up a similar top-down cost-cutting regime for Medicare when President Obama's health plan was enacted in 2010. That law created an Independent Payment Advisory Board (IPAB) to squeeze $480 billion out of Medicare and Medicaid spending over 12 years.

Overriding the IPAB cuts requires a three-fifths Senate vote, but things may not even have to get to that pass. Once doctors and seniors see what the IPAB is up to, they can press Congress to abolish it.

Sooner or later, Congress will have to try something different if it doesn't want to bankrupt Medicare or jack up taxes to keep the program afloat. A real alternative to top-down cost control is a system giving consumers influence over costs and rewards for keeping costs low.

Changes that give money or vouchers to individuals to buy competing coverage plans or for out-of-pocket payments embody this bottom-up principle. Even some Democrats are no longer afraid to entertain such ideas.

Earlier this month, Republican Rep. Paul Ryan and Democratic Sen. Ron Wyden teamed up on a plan to offer future Medicare beneficiaries the option of private insurance with limited premium subsidies.

That's a good start toward real reform. Such plans may sit on the shelf during a presidential election year. But there's always 2013, when America may have a new president and a Congress tired of playing games.

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