Doctors around the country are pleading for Congress to scrap a slew of Medicare payment cuts set to take effect next year. If lawmakers don't act, healthcare providers could be looking at an 8.47% reduction in pay.
Such a pay cut could have significant implications for seniors.
Medicare has paid doctors and hospitals much less than private insurance for years.
Cutting reimbursements further could cause providers to reduce the number of Medicare beneficiaries they'll see — and thereby jeopardize their ability to access care.
At the same time, Medicare's finances are a mess.
The program's Part A hospital insurance trust fund is set to run out of money in 2028. Congress needs to make structural reforms to Medicare to make sure that it's there for those who truly need it over the long term.
The current turmoil is a function of several mandated changes to how Medicare reimburses providers. First, there is the 4.5% cut in the Physician Fee Schedule that goes into effect next year.
On top of that, Medicare is required to implement an across-the-board 4% cut under the so-called "PAYGO sequester" rule.
A 5% pay increase for doctors participating in the Alternative Payment Model program also expires at the end of this year. And the program could cut payments for clinical laboratory tests by as much as 15%.
This isn't the first time physicians have cried out about mandatory Medicare cuts.
In the past, Congress has heeded those cries.
This year will likely be no different.
But waiving pay cuts for providers won't change the long-term math problem facing Medicare. It could just move up the date of fiscal reckoning.
According to the latest report from the program's trustees, providers will face a 10% pay reduction when the hospital insurance trust fund is projected to run out of money in 2028.
Providers can't afford those kinds of cuts. According to the American Hospital Association, Medicare paid hospitals just 84 cents for every dollar of care delivered to Medicare patients in 2020.
Addressing the fundamental flaws that have led to this financial predicament will require significant reforms — reforms which Congress has put off for too long.
Lawmakers can start by means-testing the program, so that Medicare devotes the bulk of its funds to caring for seniors who genuinely require taxpayer assistance.
Injecting more competition into the program is another way to bring Medicare's costs under control without sacrificing the quality of care.
This might mean using some of the program's funds to provide vouchers to patients, which they could use to purchase coverage on the open market.
Under such a system, private insurers would have to compete for the business of Medicare beneficiaries by offering the highest-quality coverage at the best possible price. Patients would benefit from better, more personalized health plans, while Medicare could see its per-patient costs drop.
Allowing seniors to contribute to health savings accounts would also place downward pressure on overall healthcare costs. HSAs allow patients to set aside money tax-free for future healthcare expenditures.
Account holders can then shop around for care — and take their business to providers that offer the best care at the lowest cost.
These kinds of reforms could help put Medicare on sounder financial footing and preserve access to care for the millions of seniors who rely on the program.
Yet they rarely get a hearing on Capitol Hill — and certainly not among Democrats, who would seemingly prefer to ignore the entitlement's precarious financial situation.
Medicare's long-term finances will likely become even more challenging, if and when Congress waives the pay cuts looming next year.
That may be the right move in the short term. But it only makes entitlement reform even more critical in the long term.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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