What is the “Doc Fix” and why do you care?
Congress recently accomplished something increasingly rare – they actually passed legislation that drew well over 90% agreement. This is even more remarkable when you consider that the legislation finally fixed something that has been temporarily patched over 17 times since it was first enacted. Please welcome a new acronym to your vocabulary – MACRA (the Medicare Access and CHIP (Children’s Health Insurance Program) Reauthorization Act)), popularly known as the “doc fix.”
What needed fixing began in 1997 when Congress passed the Balanced Budget Act (BBA). The BBA replaced the earlier Medicare physician reimbursement method with a formula that cut doctor pay every year up to 20%. This approach was intended to cut Medicare spending, but had the unintended consequence of causing more doctors to refuse to take Medicare patients. By 2007, Congress recognized the problem they had created, but couldn’t agree on how to correct it. They started routinely deferring the cuts and kicking the can down the road.
The situation became critical when doctors who accept Medicare would have seen a 21% cut in their reimbursement on April 15, 2015. The Congressional Budget Office estimated that to repeal the cuts would have cost billions of dollars. Very quickly, John Boehner and Nancy Pelosi got together and agreed (!) it was time for a permanent fix. In the ensuing negotiations, each got something that they could brag about and gave up something that they could live with.
MACRA replaces the old reimbursement formula, cuts Medicare spending, and extends CHIP for a total of four more years. If you are not on Medicare, you are probably pleased to hear this, but don’t really see how it affects you.
The new reimbursement system moves away from fee-for-service payments and focuses on a new “merit-based incentive payment system” that encourages pay-for-performance. Higher fees will be available to medical professionals who work in risk-based multispecialty settings that heavily manage quality of care, resource use, electronic health records usage and clinical practice improvement activities.
So how are we paying for this? Remember, the original problem was created because Congress was trying to contain Medicare spending. The acceptable solution to both factions in the legislature was to further the transition of Medicare from a “needs-based” to a “means-tested” system. First of all, MACRA will raise the cost for Medicare beneficiaries earning more than $133,500, by decreasing the level of federal Part B premium subsidy for those with higher incomes. Second, beginning in 2020, Medicare supplement (“Medigap”) plans will no longer cover the Part B deductible. These measures, while increasing participant out of pocket costs, offset much of the provider reimbursement costs and improve access to physicians who accept Medicare.
After many years, Congress finally stepped away from the cliff of draconian physician payment cuts, and through negotiation and compromise came up with new cost controls pleasing to both parties. Let us hope that we will see more legislation in that spirit in the future. Hooray for the “doc fix!”