Updated at 10:05 a.m.
With members of Congress back home campaigning during their long summer recess, few have likely forgotten the constituent rage of last August caused by the health care overhaul. Although health reform is largely overshadowed this year by the economy, Republicans continue to hammer Democrats over the new law's impact on Medicare, arguing that reducing the program by an estimated $500 billion will weaken seniors' benefits.
But doubts persist about whether one of the largest cost-savers in the law, which reduces the annual inflation updates to nonphysician provider payment rates, will ever take full effect, or if it is doomed to repeat the fate of the much-maligned "doc fix," an annual reduction to the reimbursement rate for Medicare doctors that Congress habitually overrides.
The provision in question reduces the annual rate updates for payments to hospitals and other nonphysician providers, and is estimated to save Medicare nearly $200 billion by 2020.
Earlier this month, Centers for Medicare and Medicaid Services independent actuary Richard Foster wrote that reductions to the annual inflation update -- which the administration says are justified by expected "productivity" gains in the health care sector in the overall economy -- are not sustainable.
CMS actuaries went on to conclude in an alternative financial estimate of Medicare that "Congress is very likely to legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to health care services."
But not all health experts are as convinced that reductions to provider payments are destined to become the next "doc fix," arguing that the cuts can happen if Medicare is able to change the way it pays providers and rewards both hospitals and doctors for quality of care over volume of services.
"We haven't done it yet, but that doesn't mean we can't," said Mark McClellan, a former CMS administrator in the George W. Bush administration, of maintaining the cuts to nonphysician providers.
But McClellan sees reason for skepticism, pointing to earlier failed attempts to reduce provider payments by cutting the market basket update. The Balanced Budget Act of 1997 reduced market basket updates by 1.1 percent each year, but it was eventually reversed by Congress in 1999 and 2001 after providers complained that reductions were larger than intended.
"If nothing changes with Medicare payments, it will be awfully hard to sustain big differences between costs and payment increases," said McClellan.
But the greatest distinction between the health care law's productivity cuts and previous attempts, including the "doc fix," is the new authority given to HHS, said Larry McNeely, a health care reform advocate for the U.S. Public Interest Research Group. The law gives Secretary Kathleen Sebelius the authority to establish new payment programs across Medicare that are proven to increase quality and cut costs.
"This legislation is creating a magnet for providers to give the best kind of care, while pushing them over there to reduce costs," said McNeely. "The [sustainable growth rate] exerted pressure yearly in reimbursement rates to physicians, but it didn't do much else."
"The point here isn't to starve providers; the point is that traditional fee-for-services isn't doing the job," said McNeely.
Lewin Group actuary John Sheils dismisses the belief that changing the way providers are paid will sustain a reduction in hospital payments as "faith-based economics," but he said the influx of millions of newly-insured patients will dull providers' pain from reduced reimbursements and delay political pressure.
"This time, the Medicare cuts are coupled with huge expansions in coverage that open new revenue streams for providers," said Sheils, comparing the current law to the Balanced Budget Act in 1997. Sheils said his analysis found that, over 10 years, hospital net income would fall by an estimated $11.3 billion despite cuts of nearly $200 billion to Medicare.
Nevertheless, Sheils said, the government is essentially shifting money from future Medicare payments to cover the newly insured.
"We've got a fiction here," said Sheils. "It's still the same amount of money the federal government is going to spend."
Whether or not the cuts actually occur, Ralph Neas of the National Coalition on Health Care, a broad group of organizations that aim to reform the health system, maintains that reducing costs continues to be the key to reforming the industry.
"With nearly 34 million Americans getting coverage, we will see -- as in Massachusetts -- near universal coverage with insufficient cost containment," said Neas. "And with every passing month and year, this precarious situation will become more difficult to fix."
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CORRECTION: Ralph Neas' quote was edited to remove inaccurate information.
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