How much is it worth?
Yesterday, in the Bronx, Chris Veres took his grandfather to see Dr. Bob Murrow. He was worried about his grandfather's heart. Dr. Murrow talked to the family and ordered a cardiogram, which came back normal.
It was a pretty routine visit. But what happens next for the doctor — getting paid by Medicare, the government-run health insurance program for the elderly — is suddenly sort of a big deal.
Included in the fiscal cliff is a 30 percent pay cut to doctors who treat Medicare patients. It's set to kick in on Jan. 1. Lawmakers from both parties say they want to prevent the cut. But the cut is part of a plan Congress put in place 15 years ago to contain healthcare costs, then proceeded to postpone again and again.
After he sees the patient, Dr. Murrow writes what he did on a form and then sends it to his billing guy, who turns the form into codes. The codes are what the doctor needs to get paid by Medicare.
First visit with a new patient is code #99204. That's worth $144.96. The cardiogram is worth another $17. That's a total of about $162.
Hundreds of thousands of doctors like Dr. Murrow bill for every service and procedure they provide for Medicare patients. And every year, they bill for more and more services and procedures.
So back in 1997, Congress said that if doctors' bills per patient increase beyond a certain rate, then Medicare would start paying a little less for each bill. There's a whole formula to figure it out. In 2002, the formula said fees for each procedure should be cut by 4 percent
"Doctors were somewhat grumpy about this," says Joseph Newhouse, who teaches Health Policy at Harvard University. "Some of them started to talk about, 'Well maybe we won't be happy about taking Medicare patients.'"
People on Medicare didn't like the sound of that. People in Congress didn't like to hear complaints from senior citizens, who vote in high numbers.
And then, the next year, 2003, same thing: The formula said cut doctor fees another 4 percent. People in Congress got very nervous about how their senior citizen constituents would react.
So instead, Congress passed a bill to ignore the formula that year. Instead, they raised doctors' fees. And then for the next year. And the next...
The formula is cumulative. So if you ignore a 4 percent cut two years in a row, the following year the formula will call for an 8 percent cut. And so on. The formula now says doctors' pay should be cut by 30 percent next year — which means that $160 Dr. Murrow made for treating Chris Veres's grandfather should, according to the formula, be only about $120.
Congress is very likely override the formula once again, and prevent doctors' pay from being cut next year. But Congress is much less likely to get rid of the formula altogether.
That's partly because projections of the long-term budget deficit assume that the formula will kick in eventually, and the federal government will spend less money paying doctors. Those projections — clearly based on a fiction — make the long-term deficit picture look brighter than it really is.