Paying Physicians For Medicare Services

It is Widely Agreed that the Existing Payment System is Broken. Congress Has Again Enacted a Short-Term Fix to a Long-Term Problem that it Must Soon Revisit.

Last week, the House of Representatives passed legislation that instituted a six-month, 2.2 percent rate increase in fees paid to physicians when treating patients enrolled in Medicare. This increase represents the fourth time this year that scheduled Medicare fee cuts to physicians have been averted.

Under current Medicare rules intended to restrain growth in spending, payments to physicians have been subject to “automatic” cuts for a number of years. As they did last week, however, Congress has consistently postponed those cuts and instead raised physician fees or held them constant.

A permanent solution that would override both pending and expected automatic cuts in future years could add as much as $276 billion to federal spending over the next decade.

There is no agreement in Congress on how best to make the fix or how to pay for it—whether by raising taxes, cutting other federal spending or simply adding the amount to the federal deficit—and examine likely options for congressional action in the months and years ahead.

This Health Policy Brief examines the ramifications of the so-called “doc fix,” both in the long and short term, and was published online on December 2, 2010 in Health Affairs.