Government Spending

Temporary Funding Forever?

What happens when the federal government finally shuts short-term money down?

|

In Washington, temporary funding is rarely temporary, and planned spending cuts, especially to health care, frequently fail to materialize. That means that on the rare occasions in which federal funding actually runs out—or looks ready to run out—calamity is sure to ensue. The 2009 stimulus package, for example, included an additional $87 billion for Medicaid, intended to fund the short-term expansion of the program above and beyond its usual enrollment. The funding was set to run out at the end of 2010. But along the way, states got used to the boost. By May of this year, the National Conference of State Legislatures was pleading with the federal government not to shut off the funding faucet.

And for a while, it looked as if the drip-drip-drip of federal stimulus would not end as originally called for. Congress took up an extenders bill that included an additional $24 billion in Medicaid funding—enough to keep states going until at least June of 2011. In Massachusetts, the bill's passage was assumed: Governor Deval Patrick's told fellow legislators that the funding was a "near certainty," according to the Boston Globe. And he seemed to believe it, too; he built a budget that presumed $608 million in additional Medicaid funding for his state.

But much as Patrick might wish otherwise, nearly-certain funds don't plug budget holes. As it turns out, in this case, they helped create them. What Patrick and other state governors clamoring for additional funding hadn't counted on was that deficit spending would become politically toxic in Washington right as their Medicaid money came up for a vote.

The extended funding was housed in an emergency spending bill, the "emergency" designation being the gimmick that federal legislators typically use to avoid making tough cuts in order to pay for their initiatives. But as of now, it looks very much like that gimmick has backfired. Because the bill would have contributed to the federal deficit, Senate legislators increasingly antsy about the effect of the swelling deficit on the nation's fiscal future have so far refused to give the extenders bill a pass. A handful of Democratic governors flew into Washington late Tuesday night to press for the funding, but most indications are that it's dead.

Now even those states that drafted spending plans accounting for the cutoff are facing serious budget crunches. Massachusetts will have to cut $608 million from its spending plans, while California is expected to come up nearly $2 billion short. Scott Pattison, executive director of National Association of State Budget Officers, declared that, because of the cutbacks, states face "fiscal peril."

No doubt the lack of funding puts states in a tough fiscal position. But relying on perpetual extensions of temporary funding has its dangers too.

Consider what's happened with the so-called "doc fix." In 1997, the Balanced Budget Act implemented what's known as the "sustainable growth rate" (SGR) formula to determine Medicare reimbursement rates for doctors and other health care providers. The formula, which was designed to keep per-beneficiary costs from rising faster than GDP, was installed in hopes of constraining the program's runaway growth.

For a few years, payments to providers rose. As long as that was happening, the system worked mostly as planned. But in 2002, the formula called for a 5 percent reimbursement cut. Congress allowed the cut to take effect, but the grumbling was loud enough that when the formula called for another cut in 2003, Congress overrode it and voted to institute a small reimbursement hike. Since then, that pattern has held: Each year, the SGR has called for a reimbursement cut, and each year Congress has instead voted to delay the cut and fund a hike.

As the overrides mounted over the years, so have the cuts called for by the formula. The gap between what Medicare providers are supposed to be paid and what they are paid is enormous. By the formula's reckoning, doctors face a 21 percent cut now, and depending on how long Congress continues to delay the cuts, an even steeper reduction in the future—an estimated 40 percent if the charade continues until 2014.

Doctors had hoped a permanent pay fix would be included in the new health care law. But after an initial draft proved too expensive, the provision was sent to the chopping block. Reports indicated that the AMA's support of the health care overhaul was predicated on the promise that a doc fix, with an estimated price tag of at least $276 billion, was on the way. But Congress has no clear way to fund the payments except for more deficit spending. As a result, it has struggled in recent months to pass even a temporary fix. For a few days following Memorial Day, the SGR cuts actually took effect, and by the end of June, a plan to delay cuts for a further three years was scrapped in favor of a six-month, $6.5 billion extension.

Doctors may or may not get a fix of some sort eventually. But at this point, both they and their congressional counterparts are desperate enough for a long-term solution that it's likely to be less than providers hoped for. Yet doctors have become so used to federal favors that they don't know how to operate with less; many are turning away new Medicare patients because of low payment rates.

But they'll have to. As both states and doctors are learning, relying on the federal government for an endless stream of deficit-funded handouts is unsustainable. Budgetary restraint is difficult, whether you're in the statehouse or the emergency room. But it's crucial to restoring fiscal sanity to our nation's aching economy. In the end, learning to work comfortably with less is always preferable to counting on nearly certain funding that someday will inevitably fail to arrive.

Peter Suderman is an associate editor at Reason magazine.

NEXT: IRS Fails Government Audit

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. You act like there’s some sort of limit on the amount of money the government can provide. If it weren’t for those greedy conservatives, we’d have everything paid for by the federal government.

  2. “I will gladly pay you Tuesday, for a hamburger today.”

    1. You owe me for last week and I’m here to collect.

  3. What happens when the federal government finally shuts short-term money down?

    Sounds like a dumb law.

  4. What happens when the federal government finally shuts short-term money down?

    HAHAHAHAHAHAHAHAHAHAHA

    Don’t be silly, Suder-Man. They will never shut it down.

    1. When the Federal Reserve’s ponzi scheme catches up with them, all Federal spending will end. We are quickly approaching the point where the interest on our debt equals the total output of the country. Dollars will then be used only for kindling. So yes, short-term money will end sooner or later.

      1. Not until the government is literally forced to stop spending will it stop.

        1. I agree, frugal politicians are few. But I still want to know what goes on in the big marble building with our forced currency even if it blows hell wide open.

  5. There is no such thing as temporary money. Only temporary taxpayers.

    1. There is no such thing as temporary money.

      Oh yes there is: Watch what happens to the dollar over the next couple years.

  6. Don’t you read the NYTimes front page? Cheap money is the savior of us all, and cutting spending is a dangerous experiment!

    http://www.nytimes.com/2010/06…..t.html?hpw

    1. Saving is a risky scheme.

      1. And causes global warming!!!

      2. Saving is a risky scheme criminal.

        FIFY

  7. Good article. Suderman.

    The elephant in the room is the “free market” specialty physician who is Medicare subsidized by the taxpayer to the tune $.5-1 million per year in salary to swab off the dying elderly.

    We can’t get rid of Medicare so the next best thing is to regulate it. But the Teabaggers went full throttle in the Town Halls to prevent cutbacks.

    “Git yer Goddamn Government hands off my Medicare!”

    1. shrike|6.30.10 @ 4:59PM|#
      “…But the Teabaggers went full throttle in the Town Halls to prevent cutbacks.”
      Cite, please.

      1. Forget it, he’s on a roll.

      2. Cut the feigning shit.

        Sista Sarah dog-whistled her Rapture Riders with calls of Medicare “death panels” and cutbacks before Armageddon rolled in for her janked-out dipshit Bible-swilling following.

        This meme exists in right-wing Facebook and e-mail fantasy land.

        Please say you are above this twisted bullshit lie-land.

        1. Who writes your material?

          1. I do.

          2. Its all original, Sewage.

            I do like The Rude Pundit though. Check his blog out.

            Conservatism is crap. Even Senator Bennant (R-Utah) has said it today with his criticism that the GOP has “no ideas”.

            1. The urge to lord over others is original sewage. Likewise the arguments advanced by the defenders of the state’s monopoly on the administration of justice.

              1. I agree. I reject all lords (including Jesus), all kings, and all tyrant dictators.

                1. Ditto. Although I must confess, I do like how ole JC gave it to the high priests, rabbiis and pharacies.

                  1. I agree.

                    We would probably work together nicely.

                    Seriously.

                    I LIKE JC, Socrates, et. al.

            2. Lewis Black said it better:

              The only thing dumber than a Democrat or a Republican is when those pricks work together. You see, in our two-party system, the Democrats are the party of no ideas and the Republicans are the party of bad ideas. It usually goes something like this. A Republican will stand up in Congress and say, “I’ve got a really bad idea.” And a Democrat will immediately jump to his feet and declare, “And I can make it shittier.”

            3. “Conservatism is crap. Even Senator Bennant (R-Utah) has said it today with his criticism that the GOP has “no ideas”.

              Amazingly he didn’t say that until his ass was bounced out of office.

              But he’s your hero du jour right?

              Slurp, slurp, gawulp.

          3. You can always tell when Shriek is blowing smoke, he starts with this shit.

        2. Who’s Sista Sarah?

          1. Palin, I presume.

            1. She has about 15 million on her fan list.

              Fortunately – even Rasmussen says 61% of America thinks she is a dingbat Pap-smear at best.

              1. shrike|6.30.10 @ 5:41PM|#
                She has about 15 million on her fan list.”

                Poor shrike; lusts after her day and night and she won’t even return a stinking email!

              2. Fortunately – even Rasmussen says 61% of America thinks she is a dingbat Pap-smear at best.

                So why do liberals keep talking about her?

                1. Because she’s so easy to pick on.

                2. It’s a politically correct way to be misogynistic.

                  1. “It’s a politically correct way to be misogynistic.”

                    That’s a good point. I’ve been wondering why so many radical-feminists have been bashing a woman whose attempting to gain power. Go figure. I guess the ultra-feminist-humanitarian-equal-rights movenet only extends its compassion to lefties. Typical of ideology… and religion.

                3. No – she is a foil!

                  I want her front and center GOP to highlight their reactionary primitivism.

                  No one in the GOP Country Club set will support this idiot.

                  1. What about down at the Liberal Limousine Lot, shrike? Whom do THEY support?

                    Answer: Fucks just as stupid and evil as Palin.

              3. 61%. That still puts her ahead of actual office holders. What’s congresses latest approval ratings?

        3. shrike|6.30.10 @ 5:23PM|#
          “Cut the feigning shit….”

          IOWs, you have no more than some anecdotal bullshit you collected from one of your fave brain-dead sites?
          Good, glad you admit to being a liar.

          1. No, you stupid bastard.

            If Sista Sarah tweets some falsehood to her 15 million loyal gullibles it becomes reality to them.

            1. shrike|6.30.10 @ 6:25PM|#
              “No, you stupid bastard.”
              No, you brain-dead fucktard.
              I asked for evidence and all you’ve got is your fixation on Palin. Forget it; dumb as she is, she’s way brighter than you ever hope to be. And it doesn’t take a lot of smarts to realize you’re a raging asshole besides.
              The left ran out of any currency many years ago, and you are simply an example of that intellectual poverty.

              1. dumb as she is, she’s way brighter than you ever hope to be

                That’s what really has the libs so pissed. They can’t believe that this trailer trash hick chick runs circles around them.

                1. Why is everyone jumping down shrike’s throat with their defense of the GOP and Palin? If there’s anyone whose views are completely antithetical to the idea of limited government, it’s Sarah Palin. She claims to be opposed to federal overreach, but was Governor at a period when Alaska received the most per capita federal funding. She supports the Bush-era war powers which place basically no limits on executive power. And a host of other ideas I think most libertarians would oppose.

                  The comments here illustrate shrike’s original point. That is, the GOP and the so-called Tea Party are fiscal conservatives only when it’s convenient. Don’t pass the health care bill but maintain Medicare in its current state. They support an inconsistent set of ideals which is not compatible with libertarian principles.

                  Let’s stop with the line that the GOP is better than the DFL, or any related memes. Neither of the parties is working toward our aims of advancing economic and social freedoms.

    2. Re: Shrike,

      The elephant in the room is the “free market” [sic] specialty physician who is Medicare subsidized by the taxpayer to the tune $.5-1 million per year in salary to swab off the dying elderly.

      There are no free market specialty physicians, only those of the guild.

      1. I think we agree, thus my “..”.

        Medicine is fixed by federal pricing.

        I hate it.

  8. And as counterpoint, University of Maryland economist Peter Morice thinks Obama sucks:
    “Twelve months into recovery from such a deep recession, this is a terrible performance. The economy must add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6 percent, and President Obama’s policies are not creating conditions for businesses to hire”

    http://www.sfgate.com/cgi-bin/…..3da9a3a306

  9. The “National Conference of State Legislatures”, huh? I wonder who they are…

    Link:

    NCSL is an effective and respected advocate for the interests of state governments before Congress and federal agencies.

    I’m fairly sure that’s what the Senate is for, no?

    Good article, though. I didn’t know about the SGR formula.

    1. I’m fairly sure that’s what the Senate is for, no?

      I have strong doubts that Senators represent the interests of state governments anymore.

  10. Editor Peter Suderman asks what happens when the federal government finally shuts short-term money down?

    You and your impertinent questions, Peter. I’m reporting you to the White House ungood snitchmail addy — and your little wife, too.

    1. Shouldn’t you at least add “congratulations” in your first post-nuptial snitch threat?

  11. One logic problem in the second-to-last paragraph:

    Yet doctors have become so used to federal favors that they don’t know how to operate with less ?

    Doctors do know how to do with less. They see fewer patients. They turn away medicaid/medicare patients in favor of better paying private patients?or, where there is not a large enough load of private insurance patients to fill the gap?they work less. It’s such an obvious free-market solution; heck, if the gov’t cuts fees by 40%, my pediatrician wife will get to spend 40% more time at home playing with our kids.

    It’s the patients that won’t know what to do, when no doctors will take the government dime any more.

  12. It is a shame that the people that passed this bill & said it would save us money either are liars or stupid & probably both. They are having us pay for 10 years for 6 years of rationed, socialized, government health care that will send the older people home with pain pills if we are lucky & the rest will be primitive health care because most of the good doctors will close up their practices. This administration & Congress & Senate & Czars & Unions all get to keep their good insurance while they close down ours & all those people that work for them will be jobless too! Why people continue to march on Washington & speak out they do not want it & they laugh at us, mock us, & refuse to listen to the American People. Go to the You Tube Web site:
    http://www.youtube.com/watch?v=53EuoMd5t40
    Also, go to Van Jones Progressive Movement called America’s Future 2010.

    1. It is a shame that the people that passed this bill & said it would save us money either are liars or stupid & probably both.

      Yes, it is. But it’s not like it’s news.

  13. Fucking entitled scum- every AMA member.

  14. I think it is almost time for Business to go to war against the government… We shall start making our own money and selling whatever the fuck we want. Anybody tries to stop us, I’ll banish them to the communist people’s temple controlled by Jim Jone’s Ghost and the 7 million dollars his group left the CP.

    1. Are you kidding? Wars are expensive and dangerous.

      You get a much better ROI when you buy politicians.

      Now don’t start bothering me with any of that long term thinking crap. Business men stopped thinking like that a long, long time ago.

  15. And for a while, it looked as if the drip-drip-drip of federal stimulus would not end as originally called for

  16. dless stream of deficit-funded handouts is unsustainable. Budgetary restraint is difficult, whether you’re in the statehouse or the emergency room. But it’s crucial to restoring fisca

Please to post comments

Comments are closed.