Do Doctors Really Support a Public Plan Option?

The American Medical Association's  (AMA) endorsement of HR 3200, America's Affordable Health Choices Act of 2009, surprised many because the bill includes a public plan option paying physicians at Medicare rates. Those hoping doctors will fight what could be the opening act in a government takeover of the healthcare system may be in for a disappointment. Although there is no disagreement among doctors that healthcare reform is needed, as a profession they are deeply and perhaps fatally conflicted over the proper approach.  An AMA press release lists many reasons for that organization's support of the House plan but of key importance is,

Fundamental Medicare reform, including repeal of the flawed sustainable growth rate (SGR) formula.

Although widely alluded to in the press, few in the public likely comprehend the importance of SGR for doctors and why it may be preventing the profession from taking a strong stand in opposition to a public plan option.  A stand many doctors strongly support.

To understand the impact of SGR it's necessary to know how physicians are paid.  In 1965 the Medicare program began offering government insurance to seniors using the same rates doctors were receiving from private insurance. But financial problems soon emerged as previously uninsured people were given unlimited access to taxpayer- subsidized healthcare. Progress in medical research along with new drugs and technologies led to more beneficiaries living longer using more services and more federal money.  To slow the growth in physician payments Congress turned to price controls, which were eventually refined into the 1992 Medicare Physician Fee Schedule (MPFS), the scheme under which payment for all physician services is still made. The effect of the MPFS was greatly increased when private insurers adopted it to cut their own physician costs.  Most insurers now pay doctors a fraction of the MPFS payment, usually a little more or less but always tied to Medicare rates.  Thus a change in Medicare rates reverberates throughout the healthcare system. 

The Sustainable Growth Rate or SGR formula is used to determine annual updates to the MPFS.  It's like a COLA (cost of living adjustment) but with a kicker.  To the political mind a simple COLA was out of the question due to the assumption that, once fees were cut, physicians would recoup losses by providing more services.  And without a system of rationing there was no way to control the number of services provided and hence the total cost.  So the SGR takes data from the Medicare Economic Index (MEI), a measure of inflation in the cost of providing medical services, and combines it with a preset target level of growth for physician services.  The net result is to limit any increase in total physician fees to a level the government desires.

But the formula was fundamentally flawed.  It did not account fully for the new and expensive services available and it included physician-administered drugs (like new cancer drugs) that can increase costs but are not under physician control.  Thus the cost of "physician" services can exceed target levels for reasons unrelated to changes in physician income.  When this happens the SGR can mandate a negative update (decrease) in physician fees despite an increase in the actual cost of delivering the care.  The result; between 1992 and 2010 the cumulative increase in the MEI has been 54.8% while physician Medicare payments rose just 11%.  A Press Release from the Centers for Medicare and Medicaid Service (CMS) on July 1, 2009 describes government actions to deal with this problem.

The Medicare law requires CMS to adjust the MPFS payment rates annually based on an update formula which includes application of the Sustainable Growth Rate or SGR that was adopted in the Balanced Budget Act of 1997.  This formula has yielded negative updates every year beginning in CY 2002, although CMS was able to take administrative steps to avert a reduction in CY 2003, and Congress has taken a series of legislative actions to prevent reductions in CYs 2004-2009.  Based on current data, CMS is projecting a rate reduction of -21.5 percent for CY 2010.

And recall that a 21.5 % decrease in Medicare payments really means a cut across-the-board.

So imagine you're a doctor facing the same dismal scenario year after year.  Preexisting law mandates a decrease in fees, a sort of original sin with the US Congress playing God.  So doctors pay, sorry lobby, all year long begging financial forgiveness.  Legislators rake in the cash, relent at the end of the year and pronounce: Yee shall receive neither a cut this year nor salvation. The result? The money that should go to cover your increased costs is instead used by Congress for other purposes, and you're still on the hook next year.  No surprise then that Congress has been reluctant to fix the SGR formula despite its abject unfairness, until now.

Now is 2009 and the president has promised healthcare reform.  He seeks physician support the old fashioned way, by buying it. He promises repeal of the flawed SGR formula, something also included in HR 3200. This places the medical profession squarely between the Scylla of supporting a public plan option and protecting their income, and the Charybdis of open opposition and alienating both the President and the Congress, which must act by year's end to prevent the loss of billions in physician income. 

Under these circumstances, the lack of public opposition by the AMA cannot be construed as physician support for a public plan option.  Many doctors are convinced that such a plan will lead inevitably to Medicare-for-all with its attendant rationing, decreases in quality and increased federal spending.  These same doctors have also pointed out that there is real risk to physicians from the current policy of appeasing instead of opposing a President who seems to break political promises at will. In response to a CBO statement that HR 3200 would be $240 billion in the hole over the next decade, Peter Orzag, President Obama's director of budget said on Fox News Sunday, "The payments to physicians is in the legislation, and that is the only reason that the bill shows a deficit. Once you take that part out, the bill is deficit neutral,"  Goodbye SGR FIX, hello public plan option; the worst possible outcome for doctors.

Led by the AMA, thousands of doctors spend millions of dollars working countless volunteer hours every year to ensure that you can get the high quality care you want for yourself and your family. The care the President and Congress will still get when most people are in a public plan.  Current AMA policy shows that your doctors can no longer fight this battle without your help. So, if the people do rekindle the spirit that made this country great and snatch our healthcare system from the jaws of socialist mediocrity and rationing, perhaps they'll also save their doctors. 

Government degradation of the medical profession in the name of cost saving is pennywise and pound-foolish. The President and the Congress can fix the SGR independent of other healthcare reforms.  This might get your doctors back in the fight to preserve your access to the high quality care you now take for granted.
The American Medical Association's  (AMA) endorsement of HR 3200, America's Affordable Health Choices Act of 2009, surprised many because the bill includes a public plan option paying physicians at Medicare rates. Those hoping doctors will fight what could be the opening act in a government takeover of the healthcare system may be in for a disappointment. Although there is no disagreement among doctors that healthcare reform is needed, as a profession they are deeply and perhaps fatally conflicted over the proper approach.  An AMA press release lists many reasons for that organization's support of the House plan but of key importance is,

Fundamental Medicare reform, including repeal of the flawed sustainable growth rate (SGR) formula.

Although widely alluded to in the press, few in the public likely comprehend the importance of SGR for doctors and why it may be preventing the profession from taking a strong stand in opposition to a public plan option.  A stand many doctors strongly support.

To understand the impact of SGR it's necessary to know how physicians are paid.  In 1965 the Medicare program began offering government insurance to seniors using the same rates doctors were receiving from private insurance. But financial problems soon emerged as previously uninsured people were given unlimited access to taxpayer- subsidized healthcare. Progress in medical research along with new drugs and technologies led to more beneficiaries living longer using more services and more federal money.  To slow the growth in physician payments Congress turned to price controls, which were eventually refined into the 1992 Medicare Physician Fee Schedule (MPFS), the scheme under which payment for all physician services is still made. The effect of the MPFS was greatly increased when private insurers adopted it to cut their own physician costs.  Most insurers now pay doctors a fraction of the MPFS payment, usually a little more or less but always tied to Medicare rates.  Thus a change in Medicare rates reverberates throughout the healthcare system. 

The Sustainable Growth Rate or SGR formula is used to determine annual updates to the MPFS.  It's like a COLA (cost of living adjustment) but with a kicker.  To the political mind a simple COLA was out of the question due to the assumption that, once fees were cut, physicians would recoup losses by providing more services.  And without a system of rationing there was no way to control the number of services provided and hence the total cost.  So the SGR takes data from the Medicare Economic Index (MEI), a measure of inflation in the cost of providing medical services, and combines it with a preset target level of growth for physician services.  The net result is to limit any increase in total physician fees to a level the government desires.

But the formula was fundamentally flawed.  It did not account fully for the new and expensive services available and it included physician-administered drugs (like new cancer drugs) that can increase costs but are not under physician control.  Thus the cost of "physician" services can exceed target levels for reasons unrelated to changes in physician income.  When this happens the SGR can mandate a negative update (decrease) in physician fees despite an increase in the actual cost of delivering the care.  The result; between 1992 and 2010 the cumulative increase in the MEI has been 54.8% while physician Medicare payments rose just 11%.  A Press Release from the Centers for Medicare and Medicaid Service (CMS) on July 1, 2009 describes government actions to deal with this problem.

The Medicare law requires CMS to adjust the MPFS payment rates annually based on an update formula which includes application of the Sustainable Growth Rate or SGR that was adopted in the Balanced Budget Act of 1997.  This formula has yielded negative updates every year beginning in CY 2002, although CMS was able to take administrative steps to avert a reduction in CY 2003, and Congress has taken a series of legislative actions to prevent reductions in CYs 2004-2009.  Based on current data, CMS is projecting a rate reduction of -21.5 percent for CY 2010.

And recall that a 21.5 % decrease in Medicare payments really means a cut across-the-board.

So imagine you're a doctor facing the same dismal scenario year after year.  Preexisting law mandates a decrease in fees, a sort of original sin with the US Congress playing God.  So doctors pay, sorry lobby, all year long begging financial forgiveness.  Legislators rake in the cash, relent at the end of the year and pronounce: Yee shall receive neither a cut this year nor salvation. The result? The money that should go to cover your increased costs is instead used by Congress for other purposes, and you're still on the hook next year.  No surprise then that Congress has been reluctant to fix the SGR formula despite its abject unfairness, until now.

Now is 2009 and the president has promised healthcare reform.  He seeks physician support the old fashioned way, by buying it. He promises repeal of the flawed SGR formula, something also included in HR 3200. This places the medical profession squarely between the Scylla of supporting a public plan option and protecting their income, and the Charybdis of open opposition and alienating both the President and the Congress, which must act by year's end to prevent the loss of billions in physician income. 

Under these circumstances, the lack of public opposition by the AMA cannot be construed as physician support for a public plan option.  Many doctors are convinced that such a plan will lead inevitably to Medicare-for-all with its attendant rationing, decreases in quality and increased federal spending.  These same doctors have also pointed out that there is real risk to physicians from the current policy of appeasing instead of opposing a President who seems to break political promises at will. In response to a CBO statement that HR 3200 would be $240 billion in the hole over the next decade, Peter Orzag, President Obama's director of budget said on Fox News Sunday, "The payments to physicians is in the legislation, and that is the only reason that the bill shows a deficit. Once you take that part out, the bill is deficit neutral,"  Goodbye SGR FIX, hello public plan option; the worst possible outcome for doctors.

Led by the AMA, thousands of doctors spend millions of dollars working countless volunteer hours every year to ensure that you can get the high quality care you want for yourself and your family. The care the President and Congress will still get when most people are in a public plan.  Current AMA policy shows that your doctors can no longer fight this battle without your help. So, if the people do rekindle the spirit that made this country great and snatch our healthcare system from the jaws of socialist mediocrity and rationing, perhaps they'll also save their doctors. 

Government degradation of the medical profession in the name of cost saving is pennywise and pound-foolish. The President and the Congress can fix the SGR independent of other healthcare reforms.  This might get your doctors back in the fight to preserve your access to the high quality care you now take for granted.