Price controls don’t work to control cost inflation. Politicians are not the most steadfast policymakers; over time, changing and re-changing direction. Nowhere have these two truisms been more evident than in the debate surrounding the Medicare sustainable growth rate formula. In 1997, Congress imposed a formulaic price control to reign in the escalating budget impact of rising Medicare liabilities. But, politics are politics and the doctors’ lobby is a powerful one, and these limits were annually kicked down the road. So much so that, without legislative action, we faced a whopping 21% decrease in Medicare payment to doctors.

As a “permanent” solution, President Obama signed H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015. This law essentially reset the index to current rates, and allows modest increases of .5% per year through 2019. In the following years, the law implements a system which pays doctors incentives based upon their efficiency and quality of their care. The law also significantly increases Medicare Part B premiums beginning in 2018, for those earning more than $85,000 per year.

Also see: “The government wants to tell us how much to pay our doctors

Having watched the physicians obtain 17 legislative delays on SGR, I am less than optimistic that the federal government will be successful in their laudable efforts at payment reform. The AMA website, commenting on this 2015 legislation says, “The legislation takes an important first step by eliminating the SGR formula, and the AMA will remain vigilant in working to ensure that implementation bolsters the sustainability of physician practices and empowers physicians to provide the best possible care for patients.” Let’s not be naïve. The government is no match for well-financed, politically-connected special interests.

Also see: “Does another enrollment deadline extension help or hurt the ACA?”

Hasday is chief operating officer of Frenkel Benefits, LLC, one of the largest privately held independent employee benefits brokers in the United States. Reach him at chasday@frenkel.com or (212) 488-0200, and read more from Hasday at frenkelyspeaking.com.

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