Fiscal Cliff Deal Doesn’t Include Long-Term Solutions To Address Health Care Costs

The last-minute compromise negotiated to avert the so-called “fiscal cliff” provides some immediate solutions for enacting tax policies, but simply punts other fiscal questions — most notably, an agreement on raising the national debt limit — further down the line. The deal also prioritizes short-term fixes for cutting health care spending over more permanent solutions that would help safeguard the futures of the Medicare program and its beneficiaries.

During last month’s back-and-forth negotiations, earlier proposals from President Obama included a permanent repeal of the “doc fix” — an short-term funding patch that is negotiated annually to make up the difference between the current formula for calculating Medicare reimbursement rates and the money needed to keep doctors’ salaries stable. But the final deal doesn’t, falling back on the temporary doc fix to delay addressing the issue for another year:

The tentative deal shaping up would solve one problem — temporarily. Doctors are facing a nearly 27 percent cut in Medicare payments in January — another yearly collision with the flawed payment formula known as the Sustainable Growth Rate, or SGR. The fiscal cliff package being negotiated would include another one-year “doc fix.” […]

Congress’s ad hoc yearlong solutions don’t alleviate the uncertainty physicians face as they make decisions about, for instance, whether to take new Medicare patients. Nor does a one-year fix resolve the annual crisis created by the broken formula in the first place.

Rather than relying on a quick fix to address a perennial problem, Congress could help keep Medicare costs down by reforming the payment structure altogether, and particularly by eliminating fraud and administrative waste in the program. Hospitals are already receiving as much as $33 billion in excess Medicare payments, and the program currently pays disproportionate rates for specialty services compared to the payments that primary care physicians receive. Addressing these issues will cut down on Medicare spending without compromising seniors’ benefits or shifting costs onto elderly Americans.

A proposal from the Center for American Progress estimates that making serious reforms to Medicare reimbursement rates — ultimately bringing them more in line with the actual costs of health care — would result in $88.6 billion in savings. The fiscal cliff compromise, on the other hand, seeks to collect about $25 billion in Medicare savings to offset the cost of the temporary doc fix for another year.