The next steps for Medicare?

January 19, 2007

Perspective

If doctors resented the fact that the 109th Congress waited until the final hours of its final day to resolve the Medicare pay issue, they didn't let on in their post-session news releases.

"On behalf of our patients, the physicians of Texas say to the US Congress, 'Thank you for listening,' " said Texas Medical Association President Ladon W. Homer in a statement following the vote to stop the scheduled 5 percent cut.

Gratitude had its limits, however. After also thanking lawmakers for their "bipartisan efforts," the AMA said it looks forward to working with all concerned on finding "a more permanent solution to the flawed Medicare physician payment formula." Physicians blame that formula-the byzantine sustainable growth rate mechanism-for the annual series of eleventh hour dramas they've had to endure.

As it happens, congressional leaders could offset a big chunk of these additional outlays if they did something that their GOP predecessors were loathe to do: reduce the extra money paid to keep private plans from bolting the Medicare Advantage program.

"For each of the 5.6 million Medicare enrollees in managed care, Medicare spent an average of $922 more than it would have for comparable beneficiaries in traditional fee-for-service Medicare," concludes a November report released by The Commonwealth Fund, a private nonpartisan foundation.

For 2005, extra payments to private plans averaged 12.4 percent-or roughly $5.2 billion-more than costs in traditional or fee-for-service Medicare. For technical reasons, that percentage is supposed to dip slightly in 2010, but payments to private plans will still increase Medicare costs for the next 10 years.

Even if the Democratic-controlled congress brings Medicare Advantage payments more in line with traditional Medicare, something a few leaders have already endorsed, a windfall for doctors is hardly guaranteed. Congress could direct the potential savings elsewhere, like closing the infamous doughnut hole in the drug benefit. But, if lawmakers listen on one point, they might listen on another-the study authors also suggest that another useful improvement would be "finding a viable alternative to the ineffective sustainable growth rate mechanism."

Improvement, indeed. Doctors have already proven they can work within the constraints of the Medicare program, even when their pay, as it was this year, is either frozen in time or limited, for the most part, to a modest 1.5 percent hike if they file certain quality-of-care data. Despite protests to the contrary, private Medicare plans have yet to show they can work as lean.