Unpacking the Doc Fix

If you blinked on Thursday, you might’ve missed the House passing the latest Medicare’doc fix’ (see here for its 30-seconds of deliberation).

After posting the bill in the wee hours of Wednesday morning, House leaders faced opposition over its stop-gap approach and some of the cuts employed to offset the cost of the bill. With some arm-twisting, they managed to suppress objections for the handful of seconds necessary to hammer the gavel and call it done.

The Senate is due to take the bill up Monday evening, and it is highly likely to pass (this time it should actually get a vote). Since it is about to become the law of the land, let’s take a look at what’s inside. There’s a little slice of fun in here for everyone.

First and, theoretically, foremost, the bill blocks the pending cuts to doctors under the long-broken Sustainable Growth Rate (SGR)  formula. It would maintain existing physician pay rates for another twelve months, through March 31, 2015.

Not coincidentally, a vote to raise the debt limit will likely come due again at about that time.

Second, the bill continues, for a comparable period, the package of so-called Medicare extenders: a hodge podge of policies that boost payments in rural areas, suspend caps on certain benefits and other otherwise sunsetting policies that each have their niche constituencies. Many of these items have been reauthorized by Congress for over 15 years.

Third, the bill includes some new policies that put out fires of their own, or effectuate high priority programs for well-placed Members of Congress. These include:

  • An additional six month extension of the Two Midnights Rule, which drew a bright line distinction between presumptive inpatient and outpatient hospital stays but has created significant confusion and objections among many hospitals;
  • A one-year delay of ICD-10 implementation, to October 1, 2015 (this is the second time Congress has acted to delay ICD-10);
  • Elimination of the ACA cap on deductibles for employer-sponsored health plans; and
  • Two provisions aiming to improve mental health services, including the Excellence in Mental Health Act that, among other things, improves funding for community mental health centers.

Woah, some of you are saying. Dial back to that 2nd bullet. While the transition to ICD-10 has been controversial since it was first proposed in 2005, just last month CMS Administrator Tavenner said there would be no more delays (last year, the Administration voluntarily delayed the program from 2013 to 2014).

Healthcare providers have been battening down the hatches and preparing for this colossal transition from ICD-9 and its 14,000 codes to ICD-10 and its 69,000. Word on the street is that the provision was included primarily to earn cred with specialty physician groups, whose support for the bill was in question for concern about other provisions (see the bullet re: misvalued – aka overvalued – codes below).

Turns out, the specialty doc associations by and large opposed the bill anyway, and the healthcare sector is now left grappling with this unexpected turn.

Moving on. Last, but certainly not least, the doc fix includes pay-fors that fund the ~$20 billion cost of the package. While no one likes to get cut, it’s fair to say that most of these items have attracted at least some support from the sectors they impact, easing their pathway to passage:

  • Value-based purchasing for skilled nursing facilities, with  savings equating to 0.6% of payments ‘locked in’ to the program;
  • Cuts to clinical laboratory payments to more closely align them with commercial rates, which have historically trailed Medicare reimbursement considerably;
  • Delay of the inclusion of oral drugs in the bundled payment system for dialysis providers, with some additional cuts to providers that are offset by relief from rebasing policies included in the ATRA;
  • Cuts to physicians and hospitals that use older CT equipment and appropriate use criteria for advanced diagnostic imaging services;
  • Expanded authority and new requirements for CMS to cut overvalued codes under the physician fee schedule;
  • Extension of the ACA Medicaid DSH policy into 2024 (this one will likely be used into perpetuity as the budget window rolls into each new year); and
  • Rejiggering of the Medicare sequester to create more savings in 2024, while redeeming some ‘banked’ savings from the last sequester extension.

So there you have it. My previous posts have cataloged the slow, painful demise of the permanent SGR repeal and reform effort. Suffice it to say that, at least, Congress has made considerable progress in designing a new system to replace the old. It will now sit on a shelf until there is ever the will to agree on the substantial cuts necessary to pay for it.

Billy Wynne is the Founder and CEO of Healthcare Lighthouse, a one-stop shop for comprehensive policy information for healthcare organizations and businesses. He is also a Partner at the Washington policy and lobbying firm Thorn Run Partners. Previously, he served as Health Policy Counsel to the Senate Finance Committee.

8 replies »

  1. You are correct.

    I have long argued that competent primary care physicians should be paid far more than they now get. The latest reported average pay for primary care docs is insulting to them, particularly in light of the training and broad/deep skills required.

    PQRS. Don’t get me started. A Quadrant 3 waste of time.

  2. I feel the need to defend the beleagured family physician at this point ( I am boarded in FP but practice Occupational Medicine).
    First, most family docs don’t make money on tests ordered. They may be ordered for several reasons, actual necessity, to fulfill some protocol, to pacify a patient or to CYA. As Vic mentioned, we do have a public which expects access to the latest technology and diagnostics.
    Secondly, family docs have been assaulted by CMS with poor reimbursement and myriad mandates such as EHR, PQRS, MU, looming ICD-10, etc, etc. The ones in private practice are struggling to keep up and take care of their patients as best they can, while swimming in a whirlpool left by the Titanic. The ACA, ACOs and exchanges are bent on saving money, so the first thing to suffer will be physician reimbursement.
    Thirdly, family docs are being told that NPs and PAs can do their job for half the cost, and besides, we’re all a buch of greedy SOBs anyway. So for someone who spent 11 years of training and is struggling to keep his/her head above water, this really hurts.
    Yes there are greedy doctors, and for that, I am disturbed. In my opinion, propotionately speaking, there are more greedy lawyers and politicians.

  3. Thanks for the post, Billy.

    There is plenty to argue about each bullet point. But the overall point of this news is larger: This is both a window into how we got where we are with such a radically over-expensive system, and at the same time a vision of what “single payer” would look like.

    Here we see Congress, as Vik points out, micromanaging an extraordinarily complex system, and doing it at the behest of interest groups within healthcare. The AMA RUC and CMS together establish the rates for Medicare, which then become the base rates for the whole system. Commercial payers tend to more or less accept the relative values established by the RUC, and adjust and negotiate their reimbursements from there. And the RUC is a committee of doctors appointed by their societies — and is heavily weighted toward the specialists. In a “fee-for-service” system, those who provide the services have been setting the fees for decades, slowly pushing them up far above the fees charged in other countries, far above their relative value to the general economy, and for the specialists far above their true value relative to primary care doctors and nurse practitioners.

    There is nothing accidental about the fact that the one time Congress actually attempted to fix this in a systemic way — the SGR – it came back to “fix” its fix every single year.

    “Single-payer” will not fix this problem. No reimbursed “fee-for-service” system in which the sellers set the prices will fix this problem, because it is a system with no real buyers. Real buyers are using (at least partially) their own money, have real choices that they can make, and ways to know what might make one choice better than another. The closer we get to that, at least in major fractions of the health care system, the sooner we will see health care inflation end and even reverse.

  4. Sigh. This post could really be retitled “Unpacking More Deck Chairs,” as in ones to rearrange on the Titanic, which is what our healthcare system has become. This reads almost comically: our Congress, which is incompetent and negiligent (both parties, both ideologies) on its good days, micromanages issues that are far beyond its expertise but not beyond the reach of interest groups looking for succor and a new fiscal teat to suck on or least the opportunity to suck harder and longer on the ones already clenched in their teeth.

    We maintain pay for doctors, who steward a system that may account for 18% of all deaths in the US annually and is shoving overutlization down the throats of an indolent and needy public. Congress delays implementation of a coding system whose underlying assumption is that more complexity is better (someone explain to me how well complexity expansion has worked historically in things like the ICD system, the tax code, EPA regulations, etc.), but the delay is warranted only because physician specialists (read: people who make lots of money from the way the current coding system is structured because they’ve learned how to manipulate it and mastering how to scheme the new system will take time) don’t like it.

    Here is what I missed, maybe it was just in some other piece of unwarranted legislative intrustion that no one read like, you know, health reform: fixing farm subsidies and tariffs so that Americans find lower prices and a greater variety of produce in their stores; improvement in the medical discplinary system to get bad docs (and there are plenty of them) out of the system; reforming the not-for-profit tax status of hospitals and health systems so that, on the one hand they don’t make bundles of money from direct tax transfers and tax subsidies, and then, on the other, build brand spanking new facilities in places like the Cayman Islands so that they can compete in the medical tourism biz; funding to put health and physical education back in every school in America, including colleges; incentives to localities to improves roads and neighborhoods so that they are bike and walker/runner friendly. This is list of things that actually improve health is endless, nearly as long as the list of health-related things the federal government does that qualify as massively stupid.

    But, the problem is this: gym teachers, strawberry farmers, cyclists, and runners, don’t contribute to campaigns. No, they’re just out there trying to actually make people healthier, instead of continuing the great American fleecing under the guise of “health policy.”

  5. Hi John:

    The doc fix addresses the ‘conversion factor’ that is the ‘constant’ variable used to set payments for each service code. It’s the part of the equation that is subject to cuts under the SGR. The RVUs establish the relative amount each respective service is worth. RVUs are predominantly set by the AMA RUC, which can change them periodically, but CMS has final say on how they are applied in Medicare. That misvalued codes provision referenced in this note gives CMS broader authority (and some mandate) to change RVUs, regardless of what the RUC has said. So stay tuned for that.

    But, for practical purposes, for the next year at least – yes – payment rates for the vast majority of procedures will be frozen.