The House yesterday easily approved some of the biggest changes to Medicare since Congress created the drug benefit a decade ago. While the measure still must be approved by the Senate and signed by President Obama (who supports it), it represents a significant shift in the way many seniors get—and pay for—their health care.
The measure, known in Washington-speak as the “doc fix,” is primarily aimed at repairing the way Medicare reimburses physicians for the services they provide. But it is a complicated proposal that would do much more than that. It would raise Medicare premiums for high-income seniors, limit some benefits under Medicare Supplement (Medigap) insurance, continue funding some information services programs for older people, and begin a process aimed at changing the way doctors are paid by focusing more on quality care and health outcomes instead of simply paying by the procedure.
Here are six things to know about the “doc fix.”
Physician Payments: For more than a decade, docs have faced the threat of ever-growing cuts in Medicare reimbursements that Congress delays at the last minute. Now, the House has voted to eliminate that crazy system and replace it with small, but certain, annual increases in Medicare payments through 2019. Claims that many doctors have abandoned Medicare are wildly overblown–Medicare still pays many specialists more than private insurance. But a coherent payment policy would be a vast improvement over the current system.
According to the new schedule, Medicare would increase its payments to docs by 0.5 percent-a-year through 2019. Then payments would be frozen for six years, then increase modestly.
A Physician Payment Alternative: Starting in 2019, doctors could be in line for even bigger reimbursements if they agree to participate in one of two new programs where they’d be paid based on quality rather than volume. The idea: Improve care for seniors and reduce their acute health episodes and hospitalizations—steps that might save Medicare money.
While this sounds great, it will be very hard to do. Getting both the quality metrics and the payment incentives right is enormously complicated. My Urban Institute colleague Bob Berenson, a physician and health policy expert, fears the new system will be so challenging it may have the perverse result of driving more docs out of Medicare. Other critics argue that will encourage physicians to accept only the easiest-to-treat patients.
Medicare premiums. Some costs of those extra doc payments would be funded by a small premium hike for all seniors. However, Medicare beneficiaries with high-incomes would face steep premium increase starting in 2018.
In general, the government currently subsidizes about 75 percent of the cost of Part B and Part D (drug benefit) premiums. Today, those with incomes over $85,000 ($170,000 for couples) get a lower subsidy and thus must pay more.
Under the House bill, seniors with incomes of at least $133,501 ($267,001 for couples) would pay a still-greater share of their premiums for Part B and Part D starting in four years. Starting in 2020, that threshold would fall so more seniors would be hit with big premium hikes. At the same time, low-income seniors would continue to get extra help paying for Part B.
Medigap. The other big change for beneficiaries would make some top-of-the-line Medigap policies less generous, but not until 2020. Today, some high-end policies pick up all of a beneficiary’s out-of-pocket co-pays and deductibles. The House bill would limit coverage to costs that exceed the Part B deductible (currently about $150).
Senior services funding. The bill would continue to fund through 2017 outreach and assistance programs such as State Health Insurance Programs, Area Agencies on Aging, and Aging and Disability Resource Centers. These programs provide information about local senior services. It would also continue funding for community health centers through 2017 and extend certain Medicare managed care plans, called Special Needs Plans (SNPs), through 2018.
Payments to hospitals and nursing facilities. The measure also would limit payment increases to hospitals and skilled nursing facilities for post-acute care and rehab. Remember that this change would not apply to long-stay nursing homes, which are paid by Medicaid, not Medicare.
The Senate won’t consider the doc fix for another few weeks, and it could make some revisions. But the House bill is strong evidence that policymakers are ready to make big changes in the way Medicare pays doctors and in the way high-income seniors pay for Medicare.