CBO Says Doc Fix To Cost More Than Expected

A long-planned adjustment to Medicare reimbursement rates will probably cost more than expected, according to the CBO:

On Friday, the Congressional Budget Office said that just freezing current Medicare payment rates to doctors would likely cost nearly $276 billion through 2020, a 33 percent increase from legislation that would "accomplish that goal introduced late last year by Sen. Debbie Stabenow, D-Mich., estimated to cost $207 billion at the time" according to CongressDaily. "Aides on both sides of the aisle attributed the cost increase to assumptions of an improved economy, which tends to add more to the cost of health services, as well as demographic changes that foresee increased numbers of retirees in 2020 over the previous year."

Democrats would like to pass a "doc fix" bill to stave off the cuts for perhaps as long as five years—at a cost of almost $89 billion—but scheduled cuts are slated to take effect June 1 if nothing is done. "The American Medical Association is continuing to lobby hard for a permanent fix, despite the cost."

The rate change, which would block a big cut in reimbursements called for by the sustainable growth rate formula that governs Medicare payment rates, appeared in an early draft of the health care bill, but was later removed to help trim down the bill's cost and it keep its score deficit neutral. Since then, Democrats have passed a series of temporary fixes, each blocking the rate change for just a few months. But doctors are insistent that a longer-term—and preferably (from their point of view) permanent—solution be implemented. Right now, though, both of the options that are being discussed are unappealing: A five-year "fix" simply kicks the problem down the road, and a permanent fix is likely to be expensive and unfunded.

This is a key part of the reason that opponents of the health care bill were critical of the way the doc fix was handled: As Reihan Salam argued last week, "any new legislation takes place in a wider context." With the doc fix, though, that context was missing. We passed a "deficit neutral" bill, but only by ignoring a major, ongoing problem in the system. Now, with all the new revenue and reshuffling going to fund a new entitlement, there's no money to pay for fixing the problems that already existed. And in the long run, that's likely to mean a lot more overall fiscal damage. "Fiscal responsibility" this is not.

My column on deceptive accounting in the health care bill is here. More on the doc fix here and here.