The Senate was supposed to approve a bipartisan bill passed by the House, but last-minute wrangling by conservative Sen. Mike Lee is jeopardizing the deal. Sen. Mitch McConnell believes he can still get it done.

The House already passed Medicare Access and CHIP Reauthorization Act, or MACRA, in late March. The bill would do something that nearly everyone in Washington supports: repeal the current Medicare funding formula, which, yeah after year, has left the entitlement program short on money and required short term spending patches.

But the bill also does something that conservative legislators and think tanks don't like: it raises the deficit. The proposal requires $214 billion to keep doctor salaries stable for the next decade. About $70 billion of that is covered with cuts to Medicare — but another $141 billion would get tacked onto the deficit.

An amendment offered by Sen. Mike Lee (R-Utah) would require Congress to pay for theentire cost of the legislation. "My amendment would not change or delay anything else in the bill — doctors and seniors won't notice any difference," Lee wrote in a Sunday op-ed for the Deseret News. "It would just require Congress to budget for the costs like we promised we would."

Senate leadership is "optimistic" that legislators will pass the House bill before midnight. But if they don't, that would mandate a double-digit pay cut for Medicare doctors — and throw months of careful negotiations in the House into disarray.

Medicare's problem dates back to a 1997 law

 

(Shutterstock)

Ever since Congress created Medicare back in 1965, it's struggled with a fundamental problem: deciding how much to pay doctors. The government wants to reimburse them enough that they'll stay in the program — but not so much that the insurance plan becomes unaffordable.

Congress has cycled through a handful of wonky-sounding policies that try to set the right prices for doctor visits. There was the Medicare Economic Index of the 1970s, followed by the equally obtuse-sounding Volume Performance Standard of the 1990s.

In 1997, Congress developed its current funding formula: the Sustainable Growth Rate (SGR). As the name implies, the idea was to make Medicare payment growth sustainable. What was different about the SGR was that it set a cap on how quickly doctor payments could grow based on how quickly the rest of the economy was growing.

CONGRESS KEEPS CYCLING THROUGH DIFFERENT, WONKY MEDICARE FUNDING PLANS

SGR worked great for five years, during the economic upswing of the late 1990s and early 2000s. But in 2002, as the economy dipped, Medicare spending started to grow faster than the rest of the economy — and sticking to the SGR formula began to force huge cuts to doctor payments.

Since 2002, Congress has religiously enacted laws that give Medicare additional funding and hold doctor payments constant. In early 2014, the Congressional Research Service tallied 16 separate funding patches passed since 2002. Some are as short as a few months; others as long as a year. The number rose to 17 last spring, when Congress passed a one-year funding bill. That bill ran out on April 1 — but the federal government has said it will hold off on processing doctors' claims until April 15, assuming Congress would appropriate more money by then. That sets a deadline of this Wednesday for Congress to act, or doctor payments to drop.

The new bill aims to pay better doctors more money

(Jim Watson/AFP via Getty News Images)

Right now, the American health-care system is largely "fee for service": doctors get paid a set amount for each episode of care, whether that's an annual physical or a knee replacement. Arguably, that gives them a strong financial incentive to over-treat their patients.

This new bill tries to move away from that, paying doctors more for the value they provide — giving doctors more money, for example, when their knee replacement goes well and less money if the surgery has mistakes or complications.

The replacement Medicare formula lets doctors pick from two ways to participate in that payment scheme:

1. They can join the Merit-Based Incentive Payment System (which goes by the delightful acronym MIPS). This programs rolls three old, other incentive programs into one larger one that gives doctors a quality score. If their scores are really great, doctors' reimbursement rates will go up.
2. They can sign up to be part of an Alternative Payment Model. These are typically payment arrangements that require a whole group of doctors to band together and take a lump sum of money to care for a certain group of patients. If they can provide the care for less — and hit certain quality metrics — they get to keep some of the leftover cash. The hope is that these models will force doctors to be vigilant against wasteful care, since doctors have a financial incentive to spend less than their lump sum amount.

You can think of MIPS as "Pay-for-Value Lite": it some layers some bonuses (and some penalties) on top of a system that still pays doctors a set amount for each medical service.

The Alternative Payment Model option is where there's real potential for change because you have doctors taking on much more risk. They're no longer getting paid for each service; they're getting a lump sum of money and figuring out how to spend it best.

This is the option Congress and the White House want doctors to choose: doctors immediately get a 5 percent bonus on top of all their other Medicare payments just for going this route.

"The good thing we can say about this bill is that it's great to provide strong financial incentives for alternative payment models," says Topher Spiro, vice president for health policy at the Center for American Progress. "In an ideal world, there would be negative consequences for not doing this. But politically, that's probably not feasible."

The new plan has it's own problem: it's really hard to pay doctors for value

 

(Media for Medical/Universal Images Group via Getty News Images)

Here's where experts have a gripe with the new bill: it doesn't say anything about what quality metrics will be used to gauge whether doctors are good or bad — or what counts as an alternative payment model.

"It's way easier in Congress to get agreement on general principles than on details," says Mark McClellan, who directs the Health Care Innovation and Value Initiative at the Brookings Institution. He previously ran the Medicare program under George W. Bush. "That means a lot is going to hinge on how this and future administrations implement the law."

"A LOT IS GOING TO HINGE ON FUTURE ADMINISTRATIONS"

A lot of this concern has to do with the MIPS program. The law doesn't say which quality metrics the government ought to use in measuring quality. And for some specialties, this is very tough: how do you measure if a radiologist, for example, is doing a great job? Mostly by if they read image scans right — but Medicare doesn't get that information in patient claims.

"We're inherently limited by what we're able to measure," Berenson says.

There's already worry about the metric-setting process: it requires the federal government to use quality indicators that doctor groups suggest to the health and human services secretary. The secretary can add her own metrics to the list — but doctors are then free to pick and choose which metrics they want to be judged on.

"This is like if you let students write a test for themselves, and then the teacher offers a range of tests," says Spiro. "And of course the students choose the test they wrote for themselves."

But most legislators like it anyway because it stops the scramble for funds

 

Even the stock-art doctor is fuming mad! (Shutterstock)

There are lots of issues that divide Congress in health care, like whether we should repeal Obamacare, block-grant Medicaid, or raise the Medicare eligibility age.

The doc fix, even with all the experts' gripes, doesn't surface any of those divisions. I have covered health policy in Washington for five years now, and I've never heard a single legislator defend the doc fix as the right way to fund Medicare.

HATRED OF THE DOC FIX MIGHT OVERCOME CONGRESSIONAL DYSFUNCTION

That absolute, vehement hatred could be the one force strong enough to overcome even congressional dysfunction.

Negotiations around a permanent doc fix simply haven't gotten this far — ever. Never has the House agreed to billions in cuts they could make to the Medicare program. If there's one space in which the two parties can work together on an issue, this might just be it.

Barely anything passes through the House right now — and that did give observers reason to believe that the odds are stacked against a giant Medicare reform bill.

Exhibit A would be the recent fight over Department of Homeland Security funding, which split Republicans — and only resolved at the very last minute, two hours before the agency's budget was set to expire.

But there have arguably been some ways this Medicare debate has looked different from the one around Homeland Security. "Unlike the Homeland Security debate this winter, the speaker is being bolder about building a bipartisan coalition to defuse a crisis — rather than waiting until it has engulfed him in the final hours," Politico's Jen Haberkorn and David Rogers reported Monday.

Conservative Senators have big concerns about the price-tag

The House passed the MACRA bill in late March and sent it over to the Senate, which now faces a key deadline to move forward.

Technically, last year's doc-fix funding ran out on April 1, meaning that Congress no longer has the money to keep doctor salaries stable — and must implement a double-digit pay cut.

Except, the government won't do this: since the Obama administration expects Congress to appropriate more funds, it said it will hold off on processing doctor claims until after April 15.

Now, the Senate is facing that Wednesday deadline to either pass the House doc-fix — or let doctor salaries drop. On Tuesday, it will vote on six amendments to the bill – three from Democrats and three from Republicans.

The amendment that has the biggest chance of derailing the bill is one proposed by Sen. Mike Lee (R-Utah), which would require Congress to offset the entire, $214 billion price-tag of fixing the doc-fix. Right now, the bill only includes about $70 billion in budget cuts to offset the new costs. The leftover $141 billion in spending would get tacked onto the deficit.

Without the Lee amendment, Heritage Action has said it opposes the bill and will count Senators' vote on the issue in their regular scorecards of conservative legislators.

The White House has already endorsed the House bill as is, saying the president would sign it into law if it arrived on his desk.

Should we even fix the doc fix?

As dumb as the doc fixes are, they've kind of worked. The point of the policy is to save money, and it has. Loren Adler of the Center for a Responsible Federal Budget tallied upthe offsets Congress used to pay for the various doc fixes and found they've cut deficits by $140 billion.

That's why deficit hawks in Congress don't want to just repeal Medicare's broken payment formula — at least not unless Congress comes up with an alternative way to save the money. But that means that Congress needs to find $177 billion over the next decade.

That's the case for keeping doctor payments steady, by going through the annual ritual of sorting out new cuts.

But there's also a case, albeit politically unpopular, for just letting doctors' salaries drop — not bothering to come up with the extra funds.

It's become accepted as conventional political wisdom that of course we need to hold doctor payments steady. If we didn't, providers would flee the program, and seniors would face long waits.

WOULD DOCTORS ACTUALLY QUIT MEDICARE IF THEY GOT A 5 PERCENT PAY CUT?

Is this true? We don't really know. But it is true that right now, America pays doctors more than most other industrialized countries.

Primary care doctors in the United States earn just over $186,000, about $20,000 more than any colleagues abroad. The disparity is even greater among specialists: orthopedic surgeons here have an average salary of $442,450, which is just about double what other developed nations pay the same medical professionals.

 

Medical education is significantly more expensive in the United States, an issue Kevin Pho has written about at length and a partial justification for their higher salaries once they graduate. In 2014, the average medical student graduated with $186,000 in debt.

At the same time, it's worth noting that American doctors are among the best-compensated professional groups in the United States. When you look at salaries of America's wealthiest families — the top 1 percent of earners — physicians are overrepresented.

The American Medical Association releases regular member surveys showing that doctors would flee the Medicare program if their salaries dropped.

That might be true if Medicare payments fell by the full 21 percent. But what if they fell by about 5 percent or so? Congress did actually let this happen once, in 2002: it didn't pass a doc fix, so reimbursements fell 4.8 percent — and there's no evidence doctors quit.

Politically, reducing Medicare reimbursements is pretty much a nonstarter; the campaign ads against members of Congress who vote to cut doctor pay just about write themselves.

But in terms of policy, it’s an area that matters: labor costs make up 56 percent of the $2.6 trillion we spend on health care annually — so it’s at least worth examining how much we pay those who deliver our health care.