Medicare doctors face a 21 percent pay cut this year. A complex formula called the Sustainable Growth Rate (SGR), a feature of current law, requires that devastating cut. But repeal of that formula to pay physicians would add hundreds of billions of dollars to the nation’s deficits. That is why the House Energy and Commerce Committee held two days of hearings on new ways to reform Medicare physician payment while improving Medicare and controlling its costs.
The Heritage Foundation has proposed several Medicare reforms that would generate major savings that could more than offset the cost of replacing the Medicare physician payment formula while making structural improvements to the Medicare program . These include the simplification of Medicare’s benefit structure, gradually increasing the Medicare age of eligibility from 65 to 67, reducing taxpayer subsidies to wealthy Medicare recipients, and introducing market-based payment setting into the Medicare Advantage program.
The first two lead witnesses, former Sen. Joseph Lieberman (an Democrat turned independent) and former CBO Director Alice Rivlin (now with the left-leaning Brooking Institution), are offering certain proposals that, though differing in details, are broadly similar to those long advanced by Heritage. For example, like Heritage, they both recommend that Congress combine the complex parts of Medicare Part A, which covers hospital services, and Part B, which covers physicians services, into one program, with a single deductible and a uniform coinsurance system. The American Hospital Association also favors this change. It would simplify Medicare’s crazy quilt of confusing co-insurance and co-payments.
Like Heritage, they also both recommend a reform of the current Medi-gap program, which provides supplemental coverage. Seniors purchase supplemental insurance, and pay additional premiums, largely because Medicare does not give them protection from catastrophic illness, leaving them vulnerable to financially devastating health care costs. But today’s arrangement, where supplemental health insurance also provides for “first dollar” coverage, drives excessive utilization of medical services and thus higher premiums for seniors , as well as higher costs for the taxpayers. Like Heritage, both Lieberman and Rivlin would limit first dollar coverage by Medigap to a reasonable level, and thus slow premium increases and cost growth. And also like Heritage, they would protect seniors from catastrophic costs, giving them a peace of mind and security that they do not have today in traditional Medicare.
Lieberman and Rivlin, like Heritage, also favor gradually increasing the age of Medicare eligibility and reducing taxpayer subsidies to the wealthiest Medicare recipients. To fix the broken Medicare physician payment system, while improving Medicare and reducing the burden on seniors and taxpayers alike, would amount to a major bi-partisan achievement for the new Congress.