The problem is the "sustainable growth rate" formula Congress passed for Medicare years ago. It was too stingy to be practicable, so every year Congress has to vote to override it and come up with enough money to make the reimbursements adequate. Which it always does, though in recent years it's become just one of many handy hostages for Republicans to take. Not passing the "doc fix" is a big problem because a powerful lobby—physicians—get very exercised and because they have a potent way of fighting back, threatening to stop taking Medicare patients.
According to administration sources, President Obama has included a permanent repeal of the sustainable growth rate in his offer to Boehner on the fiscal cliff, a proposal that has a $245 billion price tag. It adds a few more headaches if it's repealed, because it'll have to be replaced with something.
If the White House does indeed succeed in eliminating the sustainable growth rate, it would presumably need to find $244 billion to pay for the provision. It would also need to settle on a new formula to calculate what Medicare ought to pay doctors for each surgery they perform and medication they prescribe.That's a good solution for primary care docs, but the specialists will raise hell about it. But at some point, if real health care savings are going to be realized in this country, physicians are going to have to make some sacrifices, too. Putting that sacrifice mostly on primary doctors, who provide the majority of care, would be backwards. That's why a permanent repeal makes sense, but it might be too complex to try to shoehorn, along with everything else, into some
MedPac, a non-partisan body that advises Congress on Medicare policy, has its own preferred option. It has recommended that if Congress repeals the sustainable growth rate, it should continue to hold primary care doctor payments steady. At the same time, specialty doctors would see a haircut in their services for three years, and then see their rates freeze as well.