Latest Threat to Health Reform: Docs' Reimbursement

After insurers last week turned on health-care reform with a pair of sharply critical reports, it was only natural that Democrats would start worrying that other key industry players might drop their (already cautious) support of the ambitious overhaul. It was also no surprise that Senate majority leader Harry Reid would invite the American Medical Association (AMA) and 10 other doctors' groups in for a meeting. But what came out of that session, critics say, is too high a price for maintaining physicians' backing: a stand-alone, unfunded bill on the Senate floor this week that would hand doctors $247 billion more than they would otherwise get for their Medicare services over the next 10 years.

Senate Finance Committee chairman Max Baucus, one of the key men drafting a final Senate bill behind closed doors this week, on Tuesday called the doctors' legislation "very important" to ensuring final passage of health-care reform. Republicans counter that that is precisely the problem. Not only is the move a transparent ploy to get physicians onboard the reform bill, said Senator Jon Kyl, the No. 2 Senate Republican, "I also see it as a transparent way to take the deficit off the table." Republicans have called the move a budget trick, one of many Democrats are using, they say, to help keep down the final price tag of the reform bill; they insist it actually costs more than $1.2 trillion over 10 years instead of the less than $900 billion the Congressional Budget Office estimates the Baucus version of the bill will cost, all of it offset by cuts to avoid adding to the deficit.

Some observers say neither side is really in the right; while it's not fiscally prudent to keep temporarily fixing doctors' Medicare reimbursements by going deeper in debt, they argue the problem is more than a decade old and is not actually related to the current health-care reform debate. And indeed, the issue reaches all the way back to 1997, when President Clinton and a Republican Congress altered the complicated formula that dictates Medicare payments. At the time, the so-called sustainability growth rate (SGR) was depegged from inflation to wage growth. That was fine with doctors until the recession hit and wage growth ground to an abrupt halt, posing the threat of real cuts to their Medicare reimbursements. To prevent that from happening to a constituency no politician likes to alienate — or, worse, having doctors cut services to patients — Congress in 2003 passed a one-year spending patch to fix the problem; six fixes later, that "temporary" solution has become an annual, bipartisan affair that hasn't solved the fundamental problem. So now, unless Congress acts, doctors are looking at a wage cut of 21% next year and 40% the year after.

And while everyone agrees the formula is broken, no one agrees on how to fix it. The $247 billion would simply freeze doctors' wages where they are today for 10 years, giving Congress some breathing room to come up with a better formula. "The Administration is prepared to promise to do what any administration would do anyway, but that doctors now have to spend time and energy to forestall, in return for support from physicians on the Administration's most important domestic policy initiative," says Henry Aaron, a senior fellow for health policy at the Brookings Institution. "This seems to me to be a good deal for both sides. The question now is whether Congress will go along."

Many Republicans have made clear that they won't. "I don't know a single person who wants to see disbursements decreased," said Senate Minority Leader Mitch McConnell in a speech on the Senate floor Monday. "But we shouldn't do it by racking up more debt on the government's credit card."

Certainly, breaking out the doctors' reimbursement issue from the broader health-care effort is removing a major expense, and headache, from an already very complicated process. But opponents of the fix aren't entirely consistent in their demand for fiscal discipline. Kyl, for one, doesn't object to running up the deficit to pay for a fix — he's working on an amendment to increase physicians' payments to keep up with the cost of living — he just doesn't like it in the context of a larger reform bill.

For Republicans, like Kyl, who have voted for fixes in the past, justifying voting against this bill to doctors in their states may be tough; and, though critical of the measure, Kyl declined to say he would vote against it. "I think they thought they were going to get a problem off the table," Kyl said. "I think instead they've kind of grabbed a rattlesnake by the tail and they don't know how to let it go."

So what seemed like an easy solution last week in the health-care negotiations is now facing uphill battles in both chambers, which is why Democrats are relying on physicians' groups to throw the power of their lobby behind the bill. The AMA has run $200,000 worth of ads in a dozen states in the past week and has pledged to spend upwards of $1.8 million on more. Likewise the seniors' lobbying organization AARP, which strongly supports the legislation, has run about $2 million in ads in the past two weeks, mostly on this issue.

Still, there's no guarantee the AMA or other physicians' groups will ultimately support health-care reform. "We haven't seen the Senate bill," AMA president Dr. J. James Rohack said at a press conference Tuesday urging passage of the 10-year freeze. "So once we get that out there then I'll be able to answer that question." Courting health-care interest groups one giant giveaway bill at a time is a risky tactic by Democrats, who also are hearing from hospitals demanding fixes for their payments and insurers asking that cuts to Medicare Advantage be reinstated. And, clearly, a couple hundred billion dollars just doesn't go as far as it used to.