Congress Does a 'Doc Fix'

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During the run-up to health care reform, a number of conservatives argued that the Democrats were dishonestly excluding from the cost of legislation the "doc fix" (altering Medicare payment rates for doctors, who were otherwise scheduled to get their rates cut by about 20% under a mechanism known as the "Sustainable Growth Rate" or SGR).  The SGR is sort of like the Alternative Minimum Tax--it was established a while ago, and since then cost inflation has made the original targets unreasonable, so it has to be altered by Congress.  But since doing so permanently would have a really eye-popping price tag, Congress alters it piecemeal every year.  Perhaps not coincidentally, these is also an excellent opportunity for fundraising from interest groups who would otherwise take a big hit if the law were allowed to go into effect as written.


The back and forth over whether this should be included in the cost of health care has now ended; in the waning hours of the current congress, they've finally struck a deal on the "doc fix", and it is indeed part of the cost of health care reform.  Literally, as my husband points out over on the Reason blog:

Democrats argued that the doc fix was a separate issue, unrelated to the new law and therefore unnecessary to include in the bill or the cost estimates. But that was pretty hard to believe: Reports indicated that Harry Reid had used the doc fix to buy support for the health care overhaul from the American Medical Association, and an early draft had included a fix. The cost proved to be too much.

And as of this week, it's even harder to buy the line that the doc fix is somehow unrelated to the new health care law: Senate leadership has reportedly reached a deal to delay the called-for cuts and pay for a one year extension of Medicare's payment rates. And they're paying for it by taking money out of the health insurance subsidies included in the health care overhaul:


In 2014, some consumers will be able to buy health insurance through exchanges, web portals similar to Orbitz or Expedia. Low- and middle-income consumers will be eligible for tax subsidies to help pay for their coverage. The deal announced Tuesday would change how much money consumers would have to repay if they misreport their income or their income grows mid-year.

Under the health care reform law, if a person gets more of a tax subsidy than they're eligible for, they would have to repay no more than $250. Families would have to repay no more than $450. The deal on the table would raise those caps to between $600 and $3,500, depending on income.

The changes would free up about $19.2 billion to cover the one-year Medicare patch, according to Congressional aides familiar with the Congressional Budget Office estimates. It would impact about 200,000 people. 

Another Politico report indicates there may be some pushback from liberals unhappy with the idea of cutting into ObamaCare's insurance subsidies. The problem at this point is that they need to find a way to pay for the $19 billion cost of the extension. But there just aren't that many plausible ways to raise revenue left at this point; most of the "pay-fors" with any heft went to pay for ObamaCare.  

He tactfully neglects to mention that his wife was one of the people arguing that the "doc fix" had nothing to do with health care reform.  And I suppose you could still argue that it doesn't--after all, as I understand it, the doctors got played.  They were expecting a permanent fix in exchange for their support (or at least their silence), not the same one-year fix they always get. 

But as Peter notes, the health care bill used up all the normal pay-fors, which is why we've got this bizarre time-shifting deal.  In order to pay more for doctor's visits next year, we're revising the subsidies that health-insurance buyers will receive in 2014. I'd argue that if you're balancing the cost of the doc fix with changes to the exchange subsidies three years hence, the doc fix should have been part of the bill.

All other issues aside, this strikes me as a pretty bad precedent.  The doc fix will need to be paid for in 2012, too--shall we start siphoning funds out of the 2020 budget to pay for it?  

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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