Medicare Payment "Cuts" In New White House Budget Don't Cover the Cost of Medicare Payment Increases
Has President Obama finally come around on entitlements? Last week, The Wall Street Journal reported that the new White House budget plan was expected to "duck big benefit cuts" and "leave largely unchanged the biggest drivers of future government spending"—entitlements like Medicare, Medicaid, and Social Security. But now I see Reuters reporting that the new budget blueprint proposes "more aggressive deficit reductions through savings from Medicare, Medicaid, and other federal healthcare programs." Obama is indeed backing some $360 billion worth of cuts, mostly provider payment reductions, to health programs over the next decade, much as he did during the debt ceiling showdown last year.
But even ignoring the virtual certainty that Obama's budget won't pass, I wouldn't call these payment reductions "aggressive," or anything like it. The president himself has insisted that he only supports "modest" changes to Medicare. And as I reported in my January feature on Medicare's payment history, "Medicare Whac-a-Mole," federal policymakers have been attempting to control health costs and spending through various payment games for decades with minimal success.
Indeed, the federal government is still hundreds of billions in the hole thanks to ongoing problems with a payment formula instituted more than a decade ago, the sustainable growth rate (SGR). Thanks to the SGR's convoluted rules, doctors are continually set to take Medicare pay cuts, and every time Congress overrides those cuts, the long-term cost of fixing the system permanently goes up: At this point, a long-term fix would cost at least $316 billion (according to the Congressional Budget Office) and perhaps as much as $522 billion (according to GOP Sen. Jeff Session, although I'm not sure where he got the number). The administration's budget pegs the ten-year cost at $429 billion, and assumes that it will be covered—but, as it has done before, provides no way to pay for the full cost. What that means, though, is that using the administration's own numbers, the proposed provider payment "cuts" don't even add up to the price of the payment system fixes it assumes will be made.
