Fixing the “Doc Fix” Good for America


Finding a doctor is fundamental to finding good healthcare. Without a doctor Americans must scramble to get healthcare in emergency rooms or by self-treatment on the Internet. This is the predicament many find themselves in if they have Medicaid insurance.

Regular readers of this blog know that Medicaid patients have a hard time finding a doctor because the fees paid to doctors are so low most doctors won’t accept Medicaid patients. As documented in an Oregon study in 2008, this leads to 40 percent more E.R visits for Medicaid patients than those without health insurance.

Medicare is not much better. Michael Tanner of The Cato Institute says studies have shown Medicaid pays only 70 percent of the expense to doctors for delivering healthcare. But Medicare only pays 78 percent of these costs. So if Medicare payments to doctors decline, seniors will find themselves scrambling to find a doctor just as Medicaid patients do today.

ObamaCare Cuts Fees to Doctors

In order to pay the extreme costs of ObamaCare, the White House cut  $716 Billion from the Medicare budget over the next ten years. As a result of these cuts, the Medicare Actuaries estimated by 2020, Medicare payments to doctors will be lower than Medicaid. If allowed to happen, seniors will be standing in line at the emergency rooms just like the poor do today.

This threat to Medicare actually began long before ObamaCare. In 1997, Congress created the Sustainable Growth Rate (SGR), a system that tied the growth of Medicare payments to doctors to the projected growth of the economy. However, economic growth lagged far behind the growth of healthcare spending creating a huge imbalance in funding for Medicare payments.

Since 2003, Congress has passed “doc fix” bills to appropriate funding for Medicare to avoid drastic cuts that might threaten access to doctors for seniors. In the absence of these bills, doctors would receive lower payments for Medicare than Medicaid.

ObamaCare made all this worse. The drastic cuts in Medicare funding under ObamaCare threatened a wide-spread boycott of Medicare by physicians. In 2014 a 24% cut in doctors’ fees mandated by ObamaCare was avoided at the last minute by another ‘doc fix’ passed by Congress.

House Passes New Bill to Permanently Fix the “Doc Fix”

In a bipartisan effort to permanently fix this problem, the House passed a bill by a vote of 392 to 37 called The Medicare Access and CHIP Reauthorization Act of 2015. Early reaction from the White House suggests President Obama will sign the bill if it passes the Senate.

The bill would make the following changes:

  • Medicare payments to doctors would increase 0.5 percent/year (less than inflation) to 2019, then would be frozen for six years, then increase modestly.
  • In 2019, doctors could receive higher payments if they participate in a new program that measures quality instead of volume.
  • Medicare premiums would increase slightly for all seniors. Seniors with incomes over $133,501 would pay more. After 2020 the threshold declines so more seniors would pay more.
  • Medigap policies after 2020 are slightly less generous, requiring seniors to pay $150 deductibles. (Today they pay nothing.)
  • Senior services funding would continue through 2017. Special Needs Plans (SNPs) would be funded through 2018.
  • Payments to hospitals and skilled nursing facilities for post acute care and rehab would see limits on payment increases.


Avik Roy, healthcare analyst for The Manhattan Institute, is critical of this legislation.  He is concerned about the cost of this legislation, which will raise the federal deficit by an estimated $141 Billion over the next decade. He seems to believe this is a move by Congress to protect the incomes of doctors.

Roy says, “But Congress appears to believe that the biggest problem facing American health care is that doctors don’t make enough money. This is such a big problem, they say, that it’s worth actually adding to Medicare’s unfunded liabilities in order to ensure that doctors make more.”

I have often cited the work of Roy in the past and highly respect his usual analysis of healthcare reform. But strangely on this issue he has lost sight of the forest for the trees.

First, this bill merely seeks to codify the continued payment of fees to doctors that has been annually appropriated by the ‘doc fix’ every year since 2003. In other words it is a rare move by Congress to acknowledge the real cost of healthcare rather than continue the myth that ObamaCare cuts the federal deficit.

Second, this bill increases payments to doctors by only 0.5% each year until 2019, which is less than inflation. Mainly, it protects doctors from the draconian cuts mandated by ObamaCare that would devastate the system and threaten healthcare for all seniors. As stated earlier in this post, payments to doctors already cover only 78% of the actual cost of delivering healthcare. Doctors seeing Medicare patients are already losing money; this just prevents further losses.

Third, Roy cites comparison of doctor incomes in the U.S. to other foreign countries as justification of lowering their fees. While these comparisons may be valid, the real issue is not a comparison of incomes but access to healthcare for seniors. If Medicare fees are allowed to go down again, many doctors will refuse to see Medicare patients just like they refuse to see Medicaid patients today.

Fourth, we already have a doctor shortage in this country that is getting progressively worse. Significant cuts to Medicare will only exacerbate this growing problem. That’s precisely why Congress has responded with bipartisan support to prevent this problem for the last twelve years!

Medicare must find more funding if it is to remain a viable system for treating senior Americans. Asking wealthier seniors to pay more is a reasonable approach. Asking Medigap policyholders to pay something is also reasonable. Maintaining current doctor payments will preserve access to healthcare and prevent the exodus of more physicians from the workforce.

The issue is not doctors’ incomes. The issue is the need for seniors to be certain they can find a doctor. Even President Obama seems to understand that much.

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