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Backgrounder on the 2015 SGR 'doc fix'

Trojan horse for Medicare privatization

By Ida Hellander, M.D.

The bipartisan "Doc Fix" legislation (H.R. 1470, now H.R. 2) and proposed amendments will undermine traditional Medicare and advance the goal of privatization, according to Dr. Don McCanne in a series of posts to his popular health policy blog, the Quote of the Day. If enacted as it presently reads, it will:

1. Limit choice of physician in traditional Medicare.
Physicians in traditional Medicare would be subject to onerous new documentation requirements for payment and financial incentives to avoid complex patients under the proposed "Merit-based Incentive Payment System."  The additional paperwork burden will push physicians to stop seeing patients with traditional Medicare, retire, avoid older and sicker patients, or go to work for large organizations using “alternative payment models” (which are exempt from the requirement and more likely to have contracts with private Medicare plans).

2. Reduce access to care in traditional Medicare. Imposes a deductible that cannot be covered by Medigap insurance (starting in 2020) to encourage patients to join a private plan. The current Part B deductible is $147 annually, although that figure has been rising in recent years; 95 percent of traditional Medicare beneficiaries have supplemental insurance that covers the deductible and other cost sharing in Medicare. The only way to avoid the deductible in the future will be to join a private Medicare Advantage plan.

3. Raise Medicare’s costs by driving more patients into private Medicare Advantage plans. Private plans have already cost Medicare an excess of more than $282 billion since 1985. Mandatory deductibles and reduced access to physicians in traditional Medicare will drive more patients into private Medicare Advantage plans, which are more costly than the cost of caring for patients in the traditional fee-for-service program. Although Obamacare was supposed to reduce the amount the private plans are overpaid (the “Medicare cuts” in Obamacare), these have been mostly offset by “adjustments” and “quality awards” by the Department of Health and Human Services.

4. Undermine Medicare's popular support by requiring higher income seniors to pay higher premiums (means testing). Under means-tested premiums, higher-income individuals will be required to pay larger premiums, undermining the support of this influential group for Medicare program. Although the income subject to extra premiums is high, it can always be reduced in the future.

5. Ending the SGR should cost $20 billion, not $210 billion. These drastic measures aren't even necessary. According to Bruce Vladeck, a former top administrator at Medicare, “Since the Sustainable Growth Rate (SGR) was implemented in 1998, total Medicare physician expenditures have exceeded the allowed amounts by only $20 billion (on a total of almost $1 trillion). To recoup that all in one year would require a 21 percent reduction in fees for one year. And those reduced fees would then become the base for payment levels in all subsequent years. In a rational world, Congress would write off the $20 billion as a relatively small policy error and establish a more realistic prospective formula. But under Congressional budget rules, the cost of doing so is not $20 billion, but $20 billion per year, compounded by inflation, times 10 years.”

6. The GOP sees this bill as a step towards their longer-term goal of turning Medicare into a voucher program for private plans, shifting more costs onto patients. Rep. Mick Mulvaney, R-S.C., a staunch conservative, told the Washington Post he is supporting the bill because it will lead to much greater savings beyond the traditional 10-year time frame for estimating costs. Newt Gingrich stated the GOP’s goal succinctly in 1996: “Now, we don't get rid of it [Medicare] in round one because we don't think that that's politically smart, and we don't think that's the right way to go through a transition. But we believe it's going to wither on the vine because we think people are voluntarily going to leave it -- voluntarily.”

7. Other features:

Continues funding for safety-net programs
* Two-year extension for CHIP
* Two-year ($7.2 billion) extension for Community Health Centers

Restricts abortion, adds funds for war
* Makes Hyde Amendment permanent law. Since the ACA is a permanent statute, any amendment to any part of the ACA becomes part of U.S. Code.
* $94 billion in additional military spending in an “off-budget account.”

Dr. Ida Hellander is director of health policy and programs at Physicians for a National Health Program.