Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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The Doc Fix

Unless a Congressman's name is attached to it by the media, it generally isn't easy to know who was the originator of a disagreeable law. In the case of Medicare, moreover, the program is technically an amendment to the Social Security Act, so revenue amendments must originate in the House of Representatives, Committee on Ways and Means, Subcommittee on Health. The difficulty is easily fixed by the Senate making an amendment to some unrelated House bill such as housing relief in Kansas. All subsequent amendments must jump through the same hoops because Congress is very strict about such traditions.

At any rate, some amendment was passed by both Houses to the effect that doctors' reimbursement would be held down if general Medicare costs had risen more than a certain amount. The theory was of course that doctors are in control of all medical costs, and therefore should be punished if they rose too high. The real purpose was to keep the doctors docile and quiet, since, at the last moment, each and every year, an exception to the punishment was made, just for one more year. This went on for eighteen years until Republicans finally achieved a majority in both Houses of Congress, and the law was promptly repealed in 2014. It was now possible to be pretty sure who had been behind the law all along. To reinforce this identification, the Senate Majority leader, Mitch McConnell (R, Ky.) executed a flashy last-minute parliamentary maneuver to rescue the repeal from its unidentified enemies, who had surely been of the other party. The "doc fix" was finally fixed.

In the course of this wrangle, it was revealed that physicians received 12% of Medicare expenditures. It reminded me, I had published a graph in The Hospital That Ate Chicago, showing that physicians received 20% in 1980. That would suggest their reimbursement had fallen by 8%, and perhaps that is true, corrected for inflation. However, reimbursements to other providers have risen, so the net change in physician reimbursement might be different from 8%. However, a related but different factor probably played an important part in this shift. Also during that period, a majority of physicians changed from solo private practice to working on a salary provided by a hospital group practice. The net effect was to shift the spokesmen for doctors' financial interests. It used to be the American Medical Association and now was to be hospital administration. In time, substance will follow form.

True, the primary cause of this shift was DRG pressure to shift revenue to the outpatient area, but since hospitals also participate in the Henry Kaiser tax dodge, this incentive was also at work, in a combined or concerted effect. The overall reimbursement effect was to shift physician overhead out of the costs, but not out of the reimbursement, which now goes to the hospital. Since almost every physician in practice spends 50% of his gross revenue on office overhead, there is plenty of room for shifts which do not appear on the balance sheet. Yes, physicians temporarily protected their net income by this maneuver, but the hospitals acquired an expense they did not necessarily intend to maintain. Squeeze the hospitals with DRG or other means, and politicians, as well as hospitals, had a piggy bank they could always return to, in a pinch.

The Doc fix has finally been repealed, possibly in part because it has served its several purposes. But tickling the victim for campaign contributions hasn't been repealed. This ancient parliamentary maneuver is unaffected. It will return, in other guises.

Reverse Bribery. Still another seemingly tangential issue is in the news, six months after control of Congress shifted parties. An ordinary layman would wonder if a 2.5% tax on medical devices is worth the acrimony its repeal seems to engender. But the ordinary layman is not familiar with bare-knuckle Chicago politics. When the Affordable Care Act was approaching legislative action, most of the affected groups were approached to sign up. Behind the enticements was an unspoken threat: if you don't come on board, you will be sorry. With only one notable exception (the medical device people), everyone signed on. And then the 2.5% special tax was laid on Medical devices. If you wonder why such small matters stir up so much bitterness, the history of the legislative preliminaries would seem of value to the search.

Originally published: Wednesday, April 15, 2015; most-recently modified: Friday, May 31, 2019