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Medicare ‘Doc Fix’ Debate Shifts to Senate

KHN’s Mary Agnes Carey talks with Politico Pro’s Matt DoBias about the latest developments on Capitol Hill concerning a pending Medicare physician payment cut set to take effect Jan. 1 without passage of a “doc fix.”

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MARY AGNES CAREY:  Good day.  This is Health On The Hill.  I’m Mary Agnes Carey.

The House of Representatives has passed legislation that would stop a 27 percent cut in Medicare physician payments, scheduled to go into effect on Jan. 1.  But the measure appears to be going nowhere in the Senate. 

So what’s next for the Medicare “doc fix”?  Matt DoBias of Politico Pro joins us today with the latest.  It’s great to have you, Matt. 

MATT DOBIAS:  Good morning.

MARY AGNES CAREY:  The House has passed a two-year patch for the Medicare doc fix.  How would that work?

MATT DOBIAS:  As you said, the first thing it does, probably most importantly, is it stops a 27 percent pay cut from hitting the physicians who are paid by Medicare starting in Jan. 1.  What it also does, it gives them a slight bump up in pay.  So it stretches over two  years, starting in 2012, extending through 2013.  In each of those years, physicians will get a 1 percent increase in Medicare reimbursement, something I’m sure they wanted a little bit more of, but they will be happy with 1 percent.

MARY AGNES CAREY:  Senate Majority Leader Harry Reid has said the bill is dead on arrival in the Senate.  Why?

MATT DOBIAS:  Not just Harry Reid.  President Obama also, his White House administration has issued a veto threat if it goes through, and there’s very little chance of that.  One of the reasons why, and this is more of a political conversation, but along with the package that includes the Medicare doc fix are a couple of controversial what they call “riders” that Republican leadership included in there  — one of them referring to a pipeline extension that would run from Canada down south through America.  This is something that the Republicans want to accelerate the development of.  Democrats want to slow it down.

There are a couple of other positions that just don’t jibe with the Democrats in the Senate and what they want.  But primarily that seems to be the issue.  There are these political arguments, and then there are also what they call the “pay-fors,” how they want to pay for this package.  And the pay-fors really get into the Affordable Care Act.  They syphon away close to $19 billion to pay for, not just the doc fix, but also other provisions that are in the bill.

MARY AGNES CAREY:  So they are talking about – the bill would reduce funding, I believe, for the health law’s prevention fund. It would extend the current income-relating provisions that exist in Medicare. Is that correct? 

MATT DOBIAS:  That’s absolutely correct. And that is $8 billion coming out of the Medicare prevention and public health fund. Republicans have made it clear that they see this as a slush fund, but it has some very allies in the Senate and also in the White House. So that again is one of those provisions, one of those pay-fors, that will probably gum up the works.

MARY AGNES CAREY: Hospital groups have been very vocal. They are upset about these payment cuts for hospitals that are also being used to finance the doc fix. Has their lobbying campaign made a difference? 

MATT DOBIAS:  The hospital lobby really took it on the chin in this bill and it’s remarkable considering the amount of clout they have had and built up over the years. There are cuts in here that you never thought you would see. There’s $10 billion that will come out of what is known as “Medicare bad debt payments.” This is money that compensates hospitals for treating patients that can’t pay.

There are some other areas where they are getting hit. There’s a $6.8 billion hit in reimbursements for treating non-emergency patients in a hospital out-patient setting. And then there are some other tweaks that are a philosophical hit to hospitals. This is something that the American Hospital Association and the Federation of American Hospitals lobbied against and that is kind of a loosening of the rules for physician-ownership of specialty hospitals. So on one hand, yes, we know that hospitals are kind of Medicare’s biggest cost center. There’s more money that flows into that sector than any other sector paid by Medicare, including physicians. I think it is also an acknowledgement that the low hanging fruit – the easy pay-fors – when it comes to these types of provisions, these types of bills–are pretty much tapped out already. 

But it also is an acknowledgement that the hospital lobby really, really did take one right on the chin. And I think that what happens when they go to the Senate — obviously hospitals have some pretty strong allies in the Senate as well. We’ll see how this shakes out.

MARY AGNES CAREY: Speaking of the Senate, has Senator Reid proposed his version of the doc fix?

MATT DOBIAS: Not yet. What the Senate has, is a version of the jobless benefits and the payroll tax break, and even that isn’t the match that the House passed last night. What is happening now is that the committees that have jurisdiction over Medicare on the Senate side, that is primarily being Senate Finance Committee, are quietly working, we assume, on a package that can run anywhere from a short-term fix to perhaps a longer-term fix. I think they’re still trying to calibrate the numbers right now. But, again, they’re facing somewhat of the same issue as the House phase and that is, trying to find a way to pay for a costly doc fix on their end.

What’s happened, we don’t know a lot at this point, but some of the ideas that have surfaced, the way that the Senate wants to pay for, if they can, a longer-term extension for physician payment — and that some of the provisions that we’ve heard would include: a surtax on millionaires and also what’s known as the OCO funds. This is O-C-O; it’s the acronym that’s basically shorthand for war savings. So the savings that would result as the U.S. kind of draws down its troops in Iraq and Afghanistan is also being thought as a way to pay for this package.

MARY AGNES CAREY: Thanks again, Matt DoBias of Politico Pro.

MATT DOBIAS: Anytime, Mary Agnes.