Tax Reform

What the Medicare ‘Doc Fix’ Means for States

The U.S. Senate late Tuesday evening passed legislation containing a permanent ‘doc fix’ for calculating physician reimbursements under Medicare. By doing away with a decades old formula, the bill staves off an automatic 21 percent cut in payments that would have gone into effect at midnight. While much of the focus has been on Congress and the impact of the legislation on the federal Medicare program, the measure raises three important issues for the states.

First, the measure also includes a two year extension of the State Children’s Health Insurance Program (CHIP), the federal-state program extending coverage to low-income children and pregnant women in families with incomes too high for Medicaid. The extension of CHIP comes at a critical time—while the Affordable Care Act (ACA) requires states to maintain their CHIP eligibility levels through 2019, federal funding for the program would have otherwise ended this year.

Second, while an amendment was offered during debate to ensure that the measure was fully paid for, it failed to garner enough support. As a result, the doc fix is expected to add $141 billion to the federal deficit over 10 years, according the Congressional Budget Office. This is important for states to recognize as federal policymakers head into budget negotiations—reports last month indicate that Congress may look to offset the cost of the doc fix bill with deeper cuts to Medicaid funding.

Third, though the doc fix addresses the issue of the Medicare provider payments, states are still in flux as to reimbursements for Medicaid providers, which average just 58 percent of what Medicare pays. Under the ACA, the federal government funded a two-year increase in Medicaid fees for primary care providers to bring them in line with Medicare, but that funding expired at the end of 2014. As a result, just 16 states chose to maintain higher reimbursement levels. Federal legislation introduced last month would seek to restore the increased funding.


In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A…

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