Flawed solutions to complex health policy problems can be very costly. Scrutinize, therefore, the congressional compromise legislation (H.R. 4015 and S. 2000) to repeal the unworkable Sustainable Growth Rate (SGR) formula, which updates Medicare payments to physicians. The initial 10-year cost of the SGR repeal legislation would be $138 billion, according to the Congressional Budget Office (CBO).
Medicare Part B, which pays Medicare physicians, would experience the direct impact of these higher costs. Under current law, 75 percent of Part B costs are paid by federal taxpayers through general revenue transfers from the Treasury; only 25 percent of costs are paid by Medicare beneficiaries through their monthly premiums.
Current law assumes that the SGR formula will be enforced, cutting Medicare physician payments by 24 percent this year. If current law is upheld instead of repealed, then, of course, the draconian cuts would ensue and tax (and premium) burdens would be less—though doctors would find it more difficult to treat seniors with such lower Medicare reimbursements.
Since 2003, current policy, as opposed to current law, has been for Congress to override the law and prevent physician payment cuts from going into effect. In almost all cases, Congress has offset the additional costs with other Medicare spending cuts. In contrast to current law, the staff at Medicare’s Office of the Actuary calls this current policy the “alternative physician update scenario.”
Yesterday, the Office of the Actuary completed a brief analysis of the continuation of current policy and outlined how both Medicare spending and seniors’ premiums would be higher than current law, including the enforcement of the SGR payment cuts. On the crucial issue of taxpayer obligations, the Office of the Actuary concluded: “Therefore the 75-year present value of general revenue contributions (for Part B) under the alternative physician update scenario is $17.9 trillion, or $2.3 trillion higher than under current law ($15.7 trillion).”
The big problem for taxpayers is this: Neither the House version of the SGR repeal bill nor the Senate version adequately offset its costs. The House version of the bill would be temporarily funded with a delay of the individual mandate until 2019, but from 2020 through 2024, according to the Committee for a Responsible Federal Budget, the House bill would add $49 billion to the nation’s deficits. The Senate Finance Committee reported out a bill costing an estimated $177 billion with no spending offsets. House and Senate Democrats have meanwhile surfaced proposals to finance the SGR repeal with “war savings” from the Overseas Contingency Operations fund, a silly scheme already discredited by the CBO.
The SGR bill is a big test of Washington’s seriousness to address debt and deficits and exercise fiscal responsibility. Watch closely.