Once more with feeling

Like a bad penny, the SGR (sustainable growth rate) keeps on turning up.  To review:

The “doc fix” stems from the method used by the government to pay doctors who serve Medicare patients. Ever since Medicare was created in 1965, the social insurance program has experimented with various formulas to determine the rate of doctor reimbursement. Officials have created complex formulas with wonky names — the Medicare Economic Index in the 1970s, followed by the Volume Performance Standard in the 1990s. Each has been shuffled out in favor of a new formula.

The most recent incarnation of the Medicare reimbursement formula is called the Sustainable Growth Rate, put into place in 1998. The government uses the formula to set an overall target amount of spending for certain types of goods and services. Using Medicare spending in the late 1990s as a baseline, the SGR factored in overall economic growth to create a yearly budget.

“It was enacted during a time period when physician payments were not growing rapidly,” said Paul Van de Water, an economist at the Center for Budget and Policy Priorities. “It was assumed that the relative slowdown was likely to continue.”

But a formula that may have seemed sound in 1997 did not account for one huge detail: Medical spending has grown at a much faster rate than inflation. The SGR turned out to be totally unsustainable, leaving doctors with a reimbursement rate that did not keep pace with increasing medical costs, thus requiring a fix — not of the formula but of the payment.

Basically, back in the 90’s, Congress tried to slow the rising costs of Medicare by pegging how much they pay doctors to a formula.  Yes, the formula underestimated how quickly medical costs would rise, such that every year, Congress “fixes” the problem by ignoring it and pushing it to next year.  They’ve been doing it so long that if they let the SGR kick in, reimbursement rates to physicians would drop overnight by more than 20%.

You can imagine how much this pleases the AMA.

They could permanently fix it.  That would cost a fortune.  Fixing it just for a decade runs about $275 billion.  When Republicans run Congress, they are afraid to do it because it will look horrible both for Medicare costs and deficit control.  The same applies to Democrats when they run Congress.

You should read the whole article.

But here’s the thing: Everyone seems to be arguing that the solution HAS to be somehow permanently increasing docs’ pay and then finding a way to pay for it.  They are upset at the budget shenanigans, they are upset about the temporary fixes, they are unhappy about the politics.  No one seems to be unhappy that costs have risen so much so fast.

Don’t you think it’s interesting that no one is making the argument that maybe we’re paying too much?  I’m not suggesting that docs should all take a 25% pay cut, but one of the reasons that Congress implemented the SGR was to contain costs.  It hasn’t, but possibly because we have never given it a chance.  Every year Congress ignores it and allows costs to increase faster than inflation, faster than any other comparable country.

I would at least expect someone to argue that instead of finding an additional $275 billion over the next decade, we should find a way to slow costs and save money in what is already the most expensive (and least cost-effective) system in the world.

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