Congress Delays Medicare Cut ... Again

Another day, another delay.

Congress today put off for another month the pending 23 percent cut in Medicare payments that were scheduled to take effect Wednesday. During that time, the leading Democrats and Republicans in key committees (especially Senate Finance) will attempt to forge a 12-month delay. If they get that far, they’ll spend those 12 months trying to come agree on some of kind of permanent solution to the problem.

If you’re confused about what they’re actually trying to solve, it is this: In the 1990s, Congress reformed Medicare spending by creating a formula, called the Sustainable Growth Rate, under which Medicare spending was supposed to fall. If spending exceeds the SGR formula in a given year (which it does every year), Congress is supposed to cut payments to doctors, hospitals, and other providers in the ensuing year in order to bring spending back into balance with the SGR. But Congress has never been willing to truly enact those cuts, and doing so now (as the size of the shortfall has continued to grow) would devastate the program. The basic problem is that the SGR is pinned to the nation's Gross Domestic Product, instead of medical inflation, even though medical inflation is always much higher.

So what’s needed is a permanent solution to the SGR. This mythical solution is what’s called the “doc fix.” It would cost hundreds of billions of dollars, and while there are plenty of ideas about how to fix the formula - one is to peg Medicare spending to a healthcare inflation index - no one has the foggiest idea how to pay for it.

And that is why we go through the Medicare Cut Kabuki Dance every few months. The next deadline is January 1, when the cut will be 25 percent. Stay tuned.