The recent proposal from the Gang of Six has received attention as a possible deal for raising the debt ceiling. On health care, the G6 proposal was initially weak, and as the story goes, the Gang allegedly beefed up its changes to health care spending to attract more support. But in reality, the improvements are small, and the plan ultimately fails to adequately address federal spending on health entitlements or to promise acceptable solutions down the road.
Medicare, the health entitlement for the elderly and disabled, represents the largest driver of deficit spending, as its cost rises each year due to rising health care costs and the aging population. For this reason, most agree that reductions in federal health spending should be at the heart of any serious proposal to reduce deficits.
The G6 proposal is almost laughably vague on its changes to Medicare. It would require the Senate Finance Committee to find savings within all health spending to offset the cost of permanently fixing the sustainable growth rate—which would otherwise cut physicians’ Medicare payments by almost 30 percent at the end of this year. This flawed strategy of cost containment has been delayed since 2002 due to the harmful effects it would have on seniors’ access to physicians and services, and a permanent solution would be a welcome change. But punting to the Senate Finance Committee gives no indication whatsoever of how the “doc fix” will be paid for. The only real clue is the committee’s previous work: Obamacare.
With little direction provided by the Gang of Six proposal itself, the “savings” used to pay for the doc fix would probably follow along the same lines as the policies in the unpopular health care legislation already passed into law. More reimbursement cuts or unproven promises of future efficiency gains won’t be enough to pay for a “doc fix” or to address the additional trillions in unfunded obligations for which Medicare is responsible.
The Finance Committee would also be tasked with finding additional savings in federal health spending, but here, both the amount and the source are up for interpretation. The executive summary cites savings of either $85 billion or $202 billion—apparently, the Gang hasn’t decided yet.
Neither of these numbers is anything to applaud. Even if the G6 proposal aimed for the higher target—$202 billion between 2012 and 2021—this would save only a measly $13 billion above the health savings in the Bowles–Simpson deficit commission proposal over the same timeframe. If the G6 aimed for $85 billion in savings instead, their plan would be $104 billion below the commission’s proposal. And then there’s the fact that we still have no idea how either dollar amount in savings would be achieved. In the Bowles–Simpson plan, we knew exactly how the cuts would be delivered.
Finally, the G6 relies on a hard cap on Medicare spending to create savings. It would be enacted in—get this—2020 and would require Congress and the President to act if the growth in total federal health costs exceeded GDP+1 percent per beneficiary. This is the same growth rate that will be enforced by the Independent Payment Advisory Board for Medicare. While placing a hard cap on health care spending is a good idea, this one is unenforceable and does nothing to ensure much-needed structural reforms.
Congress won’t ever achieve meaningful deficit reduction without a complete transformation of Medicare. Nothing in the G6 proposal indicates that it would even start Congress down the path to accomplishing this goal. This is, quite simply, insufficient and unacceptable