So, here goes. This is what is coming. But to understand how it changes things, you have to know where we have been, where we are and then where we are going.

Other than a failed experiment in HMO capitated care in the 90s, American Medicine has always been "fee for service" meaning the patient gets a service, then gets billed for that service. Third party payment via employer based insurance arose in the forties as a way to "pay" scarce employees during a time that there was a wage restriction by the federal government.

By the sixties, it was noted that only 2/3 of seniors were insured, so the hue and cry came about and viola, Medicare was created. But Medicare was not like other insurances in that it did not cover just catastrophic care..it began the trend of covering routine care. Medicare initially reimbursed doctors and hospitals whatever they charged. That had the predictable effect on healthcare prices as fees went up dramatically across the board. By the late seventies, Carter instituted price controls in healthcare by having the federal government set the fee for every physician that sees Medicare patients. The same bill also banned charging the patient in excess of the "allowable" fee..the bill was called the Balanced Billing Restriction and it introduced the Medicare Allowable Fee. Medicare would pay 80% of the allowable fee, and the patient or their supplement would pay the 20% "copay". This is basically what we still have today. Hospitals got around this by charging in excess for supplies ($9 aspirins). In addition, doctors were limited by their "usual and customaryfee" and could not charge more if Medicare raised its allowable fee..UNLESS they already had a fee higher than the Medicare Allowable. That is why doctors fees are always 2-3 times what is actually paid.

In the 1980s, Reagan capped hospital fees by introducing the "Diagnosis Related Group" or DRG, which set a fixed fee per diagnosis for patients admitted. For instance, there is one fixed fee for a hip replacement (fees vary by region). All services up to that point eat way at that fee..use less resources and the doctor and hospital make a profit. That is why you rarely see an MD after your surgery. It is cheaper to use a NP or PA for daily rounding and the surgeon just keeps cutting.

As the Medicare budget still kept rising with unfunded promises, Clinton and Gingrich devised a scheme to make the budget look better. The devised the "Sustainable Growth Rate" or SGR which would reduce physician payments by however much the Medicare budget rose the year (or previous years) so Medicare was "neutral". Since Medicare payments suck anyway, the politicians knew doctors would abandon Medicare if those cuts ever came to reality so every year, after the CBO calculated the budget, they would pass a "doc fix". By passing it after the budget was calculated, the 30% cut in Medicare was always factored in to the deficit..even though that savings was never actually realized. This is difficult for people to realize, especially liberals but THE US HAS NOT HAD A BUDGET SURPLUS IN AT LEAST 40 YEARS. Our national debt has increased every year, even under Bill Clinton. SGR only made the budget LOOK good on paper.