Medicare Math: Understanding
the Budget Climate
Ronald Szabat, J.D., L.L.M., Director
Governmental and Legal Affairs
n preparing for this year’s ASA Legislative
Conference, one thing was clear: Medicine, and anesthesiology
in particular, needed to refocus its energies on near-term
or incremental solutions to long-term problems. The
reason, once again: The looming federal budget deficit
and the continued conservative push to stem government
spending. So what does this have to do with our ASA
advocacy agenda? Everything!
Like a good speaker who knows his or her audience,
those who lobby Congress, here in Washington or from
home, need to know the prevailing climate. It’s
like checking the weather before you leave the house
to see if you need an umbrella, snowshoes or sunglasses.
As important and familiar as our major federal and
state legislative and regulatory issues are to us,
it pays to know what the competition is thinking.
And it always pays to know what else is distracting
or occupying our lawmakers.
In late March and early April, for example, Congress
and the nation saw pitched debate and protests in
the streets over proposed immigration measures that
many regarded as too harsh. At about the same time,
negotiations over a pension reform bill stalled out.
More recently Congress turned back to the overall
budget for fiscal year 2007 and faced other tough
choices. Fresh on the heels of early 2006 Medicare
and Medicaid budget cuts totaling tens of billions
of dollars over the next decade, and despite a welcome
one-year reprieve from the Sustainable Growth Rate
(SGR) formula under Medicare Part B, Congress is back
at it.
If President Bush were to have his way, we would again
see sharp cuts across Medicare that would spare physician
services new and added cuts. This is good news, except
that this same budget plan was silent on how to address
the continuing crisis in Medicare physician payment
that irrationally ties payment increases to medical
service and drug utilization decreases under the SGR.
Continuing discussions in Congress right now will
begin to lock-in whether or not this same stance will
guide its own deliberations. In other words, it’s
still too early to tell if it will be a good or bad
year for Medicare physician payment. Once again this
year, the numbers are staggering.
Based on recent calculations by the Congressional
Budget Office (CBO), even another one-year freeze
in the Medicare conversion factor (CF) would cost
$1.1 billion in 2007 and some $11 billion over five
years. Some continue to scratch their heads over such
figures. “How can that be?” they ask.
Part of the answer is the craziness of the SGR formula,
which requires so-called “budget neutrality”
over a five- to 10-year budget window. In other words,
any extra money that is paid to physicians for medical
services now has to be paid back at a high rate of
interest within a fixed time-frame, running up the
cost of even a short-term fix.
This point is best illustrated by similar recent CBO
calculations which estimate that it would take more
than $13 billion over five years to offset a one-year
1-percent CF update increase (and avert a certain
4.6-percent cut for 2007) and nearly $20 billion over
the same period to offset a two-year freeze. And what
would it take to get rid of the insanity of the SGR
and move to a more rational update based on the Medicare
Economic Index (MEI), as the Medicare Payment Advisory
Commission has recommended? Hold your breath. The
cost of the fix that needs to be made is $58 billion
over five years and several times that amount over
10 years. So where does that leave us? Not surprisingly,
the matter is, in large measure, back at our doorstep.
As you may have noted, our ASA Web site contains updated
Position Papers for 2006, calling for grassroots membership
advocacy. If you have not yet done so, please take
a few minutes to read them and send a message to Congress
now. Don’t assume that this year will be like
those of the recent past in which the SGR was temporarily
fixed and Medicare payment cuts were averted. Congress
is under no requirement to solve this matter without
strong voices from back home. Please do your part
and make a call or send an e-mail or fax today to
your U.S. Senators and Representative on one or more
of our key issues, particularly the need for SGR reform.
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