Is the New Medicare Doc Fix Plan a Long-Term Debt Increase?


Medicare's physician payment formula—known as the Sustainable Growth Rate—has nagged at Congress for more than a decade. The formula calls for doctors to take a major reduction in Medicare reimbursements, but those reductions never happen. Over the last 14 years, Congress has passed 17 temporary overrides to the SGR in a recurring ritual known as the doc fix. Doctors have urged Congress to ditch the formula, and both Republicans and Democrats have bemoaned the ritual temporary overrides. But no permanent override has ever emerged.

It now appears that this might change. Republican and Democratic leadership in the House are closing in on a permanent fix that just might have enough support from both parties to actually pass. That's because there's something that both sides want in the deal.

Democrats get a permanent end to the SGR and an extension to the Children's Health Insurance Program (CHIP), a Medicaid sister-program that provides health coverage for kids.

Republicans get a small but potentially meaningful entitlement reform in the form of additional means testing for Medicare, and higher copays in Medigap.

"From our perspective this is a good start on addressing big entitlement issues in a fair and responsible way," an anonymous senior House Republican aide told TPM's Sahil Kapur. "And that's what we came here to do. That argument appeals to a lot of our guys."

The biggest point of resistance so far has come from conservatives who aren't happy that the deal isn't fully paid for inside the 10-year budget window. A permanent override of the cuts called for by the SGR means formally agreeing to spend a lot of money that isn't technically in the budget now (although history strongly suggests that those cuts won't ever come to pass).

Those in favor of the deal argue that it's not only a productive entitlement reform, but a net savings over the longer term; no, it won't be paid for over the Congressional Budget Office's decade-long scoring window, but over time, the savings from means testing will swamp the cost of ending the SGR and its cuts.

To the extent that this is true, it's a fairly strong argument in favor of taking the deal. But the problem is that it's not at all clear that the longer-term savings would offset the cost of the fix. We don't have official numbers yet, or complete details from House leadership, but the Committee for a Responsible Budget (CRFB) just released an analysis concluding that over 20 years, the plan would actually increase overall debt levels, including the added costs of interest, by about $400 billion. Yes, some savings would accrue due to the means testing, but the total cost of ending the cuts, and continuing to increase physician Medicare rates every year, would be larger than the savings. And that's using generous savings assumptions that the CRFB thinks overstate what the plan would actually produce, meaning the total debt increase could be even higher than estimated. 

If this is correct, it puts a serious dent in a big—perhaps the biggest—reason to support the plan. Obviously we don't have the final details or official numbers, so we'll have to wait and see what emerges. But this is a good reason to hold off on enthusiasm for the plan. The more I read about the deal, the less I like it.

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  1. I’ll gladly pay you Tuesday for a hamburger today.

    1. I was thinking more like pulled pork.

      1. You’ll take what you get and you’ll like it! Or else.

        1. Fine, but I will make it a McDonald’s hamburger in protest.

    2. I don’t want a hamburger. I want a $2 billion warship!

      1. Ah, the McCainburger.

    3. My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can’t believe how easy it was once I tried it out. This is what I do,

  2. Yes.

    Next question?

  3. but those reductions never happen. Over the last 14 years, Congress has passed 17 temporary overrides to the SGR in a recurring ritual known as the doc fix.

    but the total cost of ending the cuts, and continuing to increase physician Medicare rates every year, would be larger than the savings.

    Since, admittedly, the rate cuts never happen, how is there a “cost” in ending them?

    1. In other words, this cost is already there and will always be there. Might as well just face reality. An analysis that assumes otherwise is just fantasy.

    2. Because every single budget projection since the SGR was passed assumes that there would be no doc fix (because SGR is a permanent law and doc fixes have always been temporary). No proposed budget ever assumed a doc fix lasting longer than the expiration of a temporary fix because, seriously, who wants to deal with another few hundred billion dollars on the expense side of the ledger?

      As such, a permanent fix will be a new permanent statutory cost that needs to be taken into account in every future budget projection.

      A permanent fix would make for (slightly) more honest budget projections, at least, since this little accounting trick will no longer be available.

      1. I’m sure that if they go forward that a new accounting trick will present itself quickly.

  4. Yes. Yes it is. Everything is.

  5. addressing big entitlement issues in a fair and responsible way

    When a politician uses these two words you can guaranfuckingtee more money will be spent.

  6. Since the reality was that they were never going to stop passing the doc fix every year, making it permanent doesn’t really increase the debt so much as make our measurement of the debt match actual reality.

    1. as make our measurement of the debt match actual reality.

      I am sure this will not actually happen.

  7. If the Republicans actually cared about fiscal responsibility they would take any deal they could to end the doc fix cuts because no, they are never going to happen. Ending them would remove some small level of regulatory uncertainty and potentially entice a few more doctors to accept medicare patients but most importantly it would end some of the lies embedded in the CBO’s baseline budget and make the real costs of these programs more transaparent.

  8. “additional means testing for Medicare”
    So let me guess: the more you scrimped and saved for retirement, the less benefits you will get,
    while the guy next door with the boat, fancy cars, second home at the beach, etc. but not a dime to rub against the next, is going to get his full medicare benefits.

  9. As I’ve been pointing out in my blog on WordPress, much of the power that doctors currently enjoy over their patients is because of prescription laws passed back in 1938. Repeal these laws and suddenly the doctors no longer enjoy their privileged status. Like anyone else they would then have to “compete” for patients because without prescription laws, they no longer enjoy that government enforced legal monopoly over access to medical drugs.

    If we were to also repeal the “protection” we now give the US drug industry, give the American people the legal right to purchase their medicine from whoever they wish, just as we do today with computers, TV sets, cell phones, automobiles, the cost of medicine would drop to a far lower level.

    The elimination of government “protection” now given to privileged groups here in the US, if repealed, would reduce the American cost of living by perhaps as much as two trillion dollars a year. Or about $6,000 per capita. A family of four would save $24,000 a year!

    When someone asks “What is the cost of government”, here is the “ANSWER”!

  10. Why are we assuming payments to physicians must be increased (and faster than inflation)? Are doctors to be made immune from group buying power?

    At least some of the cuts to reimbursement rates should go through (or the logic behind Medicare is null and void)

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