Members of Congress have come to an agreement to replace the flawed Sustainable Growth Rate (SGR) formula with a new system that would reward quality over mere quantity in the delivery of medical services. But the proposed replacement of SGR would entail an estimated $150 billion of additional Medicare spending over the next 10 years.
Alarmingly, in the wake of the latest Congressional Budget Office warning that massive annual deficits will soon return, Congress is being pressured to downplay or ignore offsets for this additional Medicare spending to permanently abolish the SGR.
For example, the president of the American Medical Association recently said, “We must not let the challenge of offsetting the cost of ending the failed SGR policy become an excuse for maintaining the status quo.” Far more surprising, The Wall Street Journal’s editors recently opined, “Simply pass the bill as is and forgo the pretense of fake-paying for it, if only to destroy a vehicle for even more spending.”
Nonsense. While Congress has historically enacted temporary “doc fixes” (stopping its own payment formula from going into effect), it also enacted cuts in other Medicare spending to offset the higher Medicare physician payments. Between 2003 and 2013, there have been 12 such offsets, almost all of them financed by Medicare cuts.
A failure to offset an additional 10-year Medicare cost doesn’t merely result in 10 years of deficit spending. It further undermines the solvency of the entire program. Some leaders in Congress have long recognized this, criticizing House Democratic colleagues during the 2009 debate on Obamacare for enacting a temporary doc fix and adding an estimated $210 billion in Medicare spending over 10 years.
In November 2009, then-House Minority Leader John Boehner (R–OH) declared: “This irresponsible ‘doc fix’ proves once again that out-of-touch Washington Democrats simply cannot help themselves when it comes to piling debt on our kids and grandkids. Democrats continue to add tens of billions of dollars to the deficit while promising to eventually end their unprecedented spending binge.”
According to former Medicare trustee Tom Saving and his colleague Andrew Rettenmaier, failing to offset the 2009 doc fix costs would have raised Medicare spending as a percentage of gross domestic product over time and resulted in an additional $1.9 trillion (over 75 years) to Medicare’s unfunded liability.
A permanent replacement for the SGR requires nothing less than real, permanent savings—not short-term budget gimmicks, such as raiding the Overseas Contingency Operations fund, manipulating Medicare’s administrative payment systems, or cost shifting from one part of the program to another. Such permanent savings can come only from permanent structural reforms of the Medicare program, such as modernizing the Medicare benefit structure, tightening up the means-testing standards, and gradually raising the age of eligibility.
Taxpayers should settle for nothing less. Enough is enough.