Medicare 'doc fix' is finally a done deal

Higher income seniors will pay more in future

After 17 temporary fixes over the past 11 years, Congress has approved legislation permanently blocking perennial cuts in physicians’ Medicare fees. In a rare show of genuine bipartisanship, the House and Senate both overwhelmingly passed the bill. It should become easier for doctors to make a living while taking Medicare patients and help seniors keep their doctors who accept Medicare.

In a 1997 budget agreement, Congress set up a formula, known as the Sustainable Growth Rate, or the SGR, which called for annual cuts in Medicare physician payments. But every time the cuts have been scheduled, heavy lobbying by doctors, health groups and seniors associations have pushed Congress to come through with some short-term patches, known on Capitol Hill as “the doc fix.”

Without a change in the law, doctors came within hours of facing dramatically smaller paychecks from Medicare – a 21 percent cut in Medicare fees, which was scheduled to go into effect April 1, but had been postponed to allow Congress to finish with the pending legislation. What it will mean to seniors is increased premiums for those with incomes of more than $85,000 a year, starting in 2018.

What is also at stake for doctors is bigger than a simple short-term or long-term fix: without a deal, doctors fear their pay will continue to be reduced or not grow sufficiently. Many doctors have threatened to stop treating Medicare patients altogether. The new payment formula would help doctors get out from under the constant threat of payment cuts while shifting to a new payment system based on quality, value and accountability.

A final stop to repeating uncertainty

The legislation scraps the old Medicare payment system and phases in a new one designed to reward doctors who provide high-value care, not just high volumes of care. It increases payments to physicians by 0.5 percent annually for the next four years. After that rates will remain flat for six years. Then payments for most physicians will increase by 0.25 percent annually. But don’t be surprised if doctors continue to flee the Medicare program as their reimbursement levels haven’t come close to staying even with current costs.

What is new and innovative in the agreement is the establishment of a two-track payment system, designed to push doctors toward value-based payments models such as accountable care organizations and bundled payments. Doctors who have at least 25 percent of their Medicare revenue tied to these kinds of payment models in 2019 will be eligible for 5 percent bonuses.

The Congressional Budget Office projects the doc fix shift could save $900 million over the next 10 years compared with keeping doctor payments flat, which is how their fees have been since Congress started passing temporary fixes back in 2003.

The doc fix bill also provides money for health care programs for children and low-income people and will be partly financed with higher premiums for wealthy Medicare recipients – a cost that bothers many Democrats and senior advocates.

The Congressional Budget Office estimates the doc fix will add $141 billion to the federal deficit with costs rising more sharply after that – adding over $500 billion to the deficit over two decades. These costs are somewhat offset by pushing costs on to higher-end Medicare customers.

Will you be affected?

This legislation will have a direct effect on many seniors, in particular, wealthy ones, who will see Medicare premiums increase.

Before the House passed its bill, AARP argued against increasing fees for seniors, saying it places “unfair burdens on beneficiaries.” AARP and other consumer and aging organizations remain concerned that beneficiaries account for the largest portion of budget offsets (roughly $35 billion) through greater out-of-pocket expenses on top of higher Part B premiums that beneficiaries will pay to prevent the scheduled cut in Medicare physician payments.

The legislation requires patients to take a larger percentage of the costs of their insurance starting in 2018. Those with a modified adjusted gross income of $133,500 to $160,000 for individuals and $267,000 to $320,000 for couples, per year would pay 65 percent of their premium costs for Part B (outpatient services) and Part D (prescription drugs) up from 50 percent now. Those earning $160,000 to $214,000 per year for individuals and $320,000 to $428,000 for couples would see their premiums increase from 65 percent to 75 percent.

The Kaiser Family Foundation estimates this change would affect two percent of current enrollees. Right now, those individuals making between $133,500 to $160,000 currently pay $272.20 per month while those making $320,000 to $428,000 pay $313.90.

But even those making less than $133,500 annually will see their premiums rise slightly. Since all beneficiaries pay a set percentage of premiums as doctor fees rise, those premiums are expected to increase as well. The Congressional Budget Office estimates those premiums will increase by about $10 by 2025 to $181 per month.

The new law also will make changes to medigap policies. Roughly 20 percent of seniors buy a supplemental medigap plan, which helps cover out-of-pocket costs and usually pays the deductible for outpatient services. But now the doc fix would block medigap plans from paying that deductible, currently capped at $147 per year, beginning in 2020. Why? The idea, Kaiser Family Foundation’s Neuman told Fiscal Times, is “for people to have some exposure to healthcare expenditures when they’re making treatment decisions.”

Also contributing to this story were: Fiscal Times, Kaiser Health News, the Hill, and Modern Healthcare.

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