Unspent war funds eyed to avoid years of Medicare doctor pay cuts
■ The budgetary shift from winding down military actions in Afghanistan and Iraq could offset the large price tag associated with eliminating the SGR.
By Charles Fiegl amednews staff — Posted Feb. 6, 2012
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Washington -- Lawmakers are considering the possibility of paying for a long-term Medicare physician payment solution by reallocating war funding that is no longer needed -- an idea that has gained the support of the American Medical Association and more than 100 state and specialty medical societies.
The drawdown of U.S. troops after a decade of fighting in Afghanistan and Iraq could free up large savings in the federal budget and present an opportunity for the federal government to get more of its finances in order. Congress temporarily has delayed or patched Medicare cuts mandated by the sustainable growth rate formula for years. Lawmakers who want to break that cycle want to eliminate the SGR, which is set to cut physician pay by about 27% on March 1, and fully account for future program spending by doctors.
The AMA released a Jan. 23 letter signed by the organized medicine groups calling on a congressional conference committee to stabilize Medicare pay using the overseas contingency operations funds. The special committee is negotiating a payroll tax cut and unemployment insurance extension package that also will address the upcoming SGR cut.
There is bipartisan agreement to stop the scheduled Medicare cuts permanently, said AMA President Peter W. Carmel, MD. The payment formula affects physician rates not only under Medicare but also under the Tricare program for military families.
"Using funds that will not be needed as the wars wind down to protect health care for men and women in uniform and our nation's seniors is the fiscally responsible thing to do," Dr. Carmel said. "By eliminating this failed formula once and for all, Congress can stop growing the size of the problem for patients, physicians and taxpayers."
Conferees from both parties have signaled some willingness to use the unspent war funding to boost physician pay. Sen. Jon Kyl (R, Ariz.) said in December 2011 that he would be open to the strategy, and Rep. Allyson Schwartz (D, Pa.) cited the opportunity during the first conference committee meeting on Jan. 24.
"Using part of the savings achieved through the reduction of military operations in Iraq and Afghanistan offers a unique and limited-time opportunity to resolve a budgetary problem that grows more costly with each passing month," Schwartz said.
A Jan. 31 Congressional Budget Office report said reduced outlays for the overseas contingency operations fund -- money that is not expected to be necessary given the troop drawdowns -- would total $838 billion from 2013 to 2022. In his Jan. 24 State of the Union address, President Obama said that money should be used to help pay down the national debt and undertake "some nation-building" at home, although he did not mention Medicare physician pay specifically.
Some GOP leaders in Congress had dismissed the overseas fund opportunity as a budget gimmick. During the tense negotiations that led to the agreement extending talks on the payroll tax and SGR issues until March 1, Obama and congressional Democrats proposed reallocating the unspent war money to pay for the spending priorities, but Republican negotiators rejected that plan.
During a December 2011 floor speech, Sen. Jeff Sessions (R, Ala.) called the approach a fallacy that should not be considered acceptable by his colleagues. "Everybody knows the war costs are going to be coming down, and we've been planning for that. You can't assume that money will be available to spend willy-nilly."
Some movement possible
In recent days, however, some members of the House GOP Doctors Caucus said they were seriously studying the war funding strategy as a possible way to prevent doctor pay cuts. Citing the charge that the move would represent flawed accounting, the organized medicine groups pointed out that continued stalling on the SGR issue amounts to the same thing, making the cost of a solution grow increasingly larger despite bipartisan agreement that the formula is broken.
"Using the [overseas contingency fund] baseline as an offset for the accumulated SGR bad debt amounts to 'cleaning the books,' by eliminating one flawed budget gimmick with another and allowing for a more accurate accounting of future government expenditures without increasing the federal deficit," the organizations said in their letter. "It also provides an opportunity to immediately repeal the SGR and to establish a pathway toward a truly sustainable physician payment system that focuses on improving quality and value for our nation's Medicare beneficiaries."
But not everyone on the GOP Doctors Caucus or the conference committee is sold on the idea. The discussion about using war funding is premature, conferee Rep. Tom Price, MD (R, Ga.), said in an interview. Dr. Price still supports a two-year physician pay plan that passed the House in December 2011. That measure would offset the cost of the temporary patch by restricting federal subsidies offered through health insurance exchanges and rescinding $8 billion earmarked for a prevention fund created by the health system reform law. The Senate rejected the measure in favor of the two-month payment stopgap that eventually was adopted.
Dr. Price suggested that the Senate offer a longer-term solution. "If they're not fond of the offset we brought, then recommend another offset and we'll go from there."
Rep. Michael Burgess, MD (R, Texas), opposes the war funding offset. "It would open the door to a flood of additional spending," he said.
Medicare's unstable future
Meanwhile, Medicare's uncertain future and congressional inability to fix the program has doctors evaluating their patient panels and insurance payer mix.
A survey by the Connecticut State Medical Society showed that patient care has been affected by the threat of severe doctor pay cuts, said Michael Krinsky, MD, the society's president. Nearly 20% of members responding to the survey said they have limited appointment times for Medicare and Tricare patients or have stopped accepting new beneficiaries.
"The frustration level among Connecticut physicians is at the boiling point," Dr. Krinsky said.
Physicians are small-business owners who are being forced to make difficult decisions about their practices, he said, adding that doctors' offices would need to lay off staff or even close if they were paid nearly 30% less for services.
Physician organizations have noted that some doctors have chosen to leave -- or have considered leaving -- Medicare because of the unstable pay environment. The Dept. of Health and Human Services Office of Inspector General reported in January that 7,900 physicians and other health professionals have left the program since 1998, but that it lacked the data to say why.