Medicare Gets another Reprieve

The House and Senate rebuked President Bush today and overrode his veto of a bill to spare doctors from a mandated 10.6% cut in Medicare payments, which would have been the most drastic ever. This historic veto override is the denouement of what the American Medical Association (AMA) called an unfortunate new annual rite whereby Congress must act to prevent cuts called for by the Sustainable Growth Rate (SGR) formula used by Medicare to pay health care providers.

The SGR formula was created in 1997 by the Republican Congress as an attempt to control growing Medicare spending (part of the omnibus Balanced Budget Act). Instead of indexing physician fees to real costs, to inflation, or to any other sensible measure, the SGR formula linked payments to the Gross Domestic Product (GDP). These were justified using projections based on the 1990s dot-com bubble, when GDP was soaring--but it just was another disaster waiting to happen. For more details, read this alarming AMA editorial from 2005, or this more technical article on their website.

Since 2002, Congress has stepped in each year to replace the SGR-mandated cuts with very modest increases--although since these increases fell well short of the rising costs, they still represented real losses to physicians. Last year, instead of applying yet another patch, the new Democratic majorities in the House in Senate attempted to solve the problem once and for all: they acted to wipe out two years' worth of cuts at once and alter the SGR formula itself for all future years--but this effort was part of the ill-fated SCHIP bill. The Democrats in the Senate had to drop those provisions from the final version to win Republican support, and then Bush vetoed the legislation anyway.

After a long fight, Medicare finally got its annual stay of execution today, but it remains on death row. Next year, the mandated SGR cut is expected to top 15%, a reduction so severe it might well kill the Medicare program altogether. We need a new national approach to health care to move us past this SGR madness toward a real solution. Simply paying doctors less money for the same services is not the answer. The current environment in which Medicare must live, privatized insurance, is becoming toxic.