Medicare Costs Key to Healthcare Reform

Many doctors' support for reform hinges on Medicare payments.

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About 45 million elderly or disabled people get their health insurance from Medicare. In 2008, it cost the government about $450 billion. The figure is growing rapidly, consuming ever larger chunks of the federal budget, something Congress desperately wants to fix as part of healthcare reform. But as events last week showed, Congress so far isn't up to the task.

The challenge played out over what might seem like a mundane topic: a mathematical formula. Called "the sustainable growth rate," it determines how much the government pays doctors for seeing Medicare patients. And by almost all accounts, it's deeply flawed. It somehow manages to spend too much money (according to the government) and too little money (according to many doctors) at the same time. For many doctors, including the powerful American Medical Association, their support for healthcare reform appears to hinge on getting this formula right.

The White House and Democrats definitely want doctors' support for healthcare reform, so last week Senate leaders tried to address their concerns—not easy, given that the problem goes back to 1997, when the formula was created. Back then, Congress wanted to balance the budget, and one of the things it did was to tell doctors that the government would pay them only so much for their services and would cut those amounts if necessary. But in the past decade, Congress has basically pushed off cuts, year after year, letting them add up instead. That means that in January, unless Congress steps in again, doctors are looking at a 21 percent cut.

"It leaves the physician community in a very difficult spot," says James Rohack, president of the American Medical Association. If that cut goes into effect, it's basically telling doctors, "OK, we want you to limit access to Medicare patients," he says.

Last Wednesday, the Senate sized up, then voted down, a bill by Sen. Debbie Stabenow, a Michigan Democrat, that would have done away with this annual scramble by putting a 10-year freeze on any cuts, much to the relief of the medical community. "Enough is enough," Stabenow said. "Enough of running physicians up to the brink every year, not knowing what's going to happen."

But that move also would have cost about $250 billion, and Stabenow didn't offer any way to pay for it. As a result, many moderate Democrats refused to back the bill. Meanwhile, Republicans decried Stabenow's effort as a purely political tactic to keep doctors behind the president's healthcare effort. In the end, it got only got 47 of the 60 votes it needed to move forward.

There was clearly a political element of the bill, as the GOP pointed out. But the vote also underscores a very real dilemma facing Congress and the country. On one hand, government spending on healthcare continues to go up, so there is pressure to find ways to curb spending. On the other hand, the government pays doctors only part of what it costs to treat a patient (about 80 percent of the full cost, according to estimates), meaning that any deep cuts to doctors will most likely drive some out of business, as Rohack suggests. So the pressure is on Congress to find some way to spend less on healthcare without making it harder for the most vulnerable patients to find a doctor.