Misleading News Report On Deal With Physicians

The New York Times has a misleading item in an article today which claims that deals made by Obama could add hidden costs to health care reform:

The deal with doctors could come at a steep price: a $250 billion fix to a 12-year-old provision in federal law intended to limit the growth of Medicare reimbursements. The American Medical Association and other doctors’ groups have sought to change or repeal the provision, and they are likely to try to extract that as their price for boarding the Obama train, people tracking the negotiations said.

This is not actually a new cost as the provision was so badly written that it is overturned every year. The idea was to tie physician reimbursement to overall health care costs under the assumption that this would give physicians an incentive to keep health care costs down. A formula was written to determine physician reimbursement under Medicare which would pay more if health care costs were kept down but pay less if costs rose.

While in theory this might make sense the formula has not worked. Individual doctors have very limited control with regards to overall health care costs which have increased with increasing technology and an aging population. The price of injectable drugs, primarily administered by Oncologists, has been responsible for much of the increases which would have triggered pay cuts to all doctors. In recent years the formula would have cut physician reimbursement by double digits every year. Realizing that this would cause physicians to be unable to afford to see Medicare patients, every year Congress has acted to block the cuts which the formula would enact.

The formula is highly flawed and pretty much everyone recognizes this. The formula is thrown out every year and has not brought about any cost savings. The formula should be thrown out once and for all rather than having to wait for Congress to act every year. Claiming there is a $250 billion cost to this is misleading as Congress has already been overturning the cuts which the formula would have brought about every year.

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