Committee for a Responsible Federal Budget

Support Grows for Fiscally Responsible Doc Fix

Mar 16, 2015 | Health Care

As doc fix discussions continue in Congress, three opinion pieces recently declared support for fully offsetting the cost of a replacement for the Sustainable Growth Rate (SGR) formula. Editorials in the Washington Post and National Review plus an op-ed in The Hill by Heritage Foundation Senior Fellow Robert Moffit all called for an SGR fix to be fully offset, in contrast to the current discussions that apparently would only offset part of the cost.

The National Review wrote:

The unpleasant fact is that there is no way to make our current entitlement programs sustainable absent deep structural reform. But if Congress is unwilling to undertake that reform, then keeping SGR as is, or fully offsetting the cost of repealing it, would be the next best outcome.

The worst outcome — abandoning those spending restraints while doing little or nothing to mitigate the fiscal impact of doing so — is, unfortunately, what is currently under consideration. If presented with that option, conservatives should put their foot down — on the neck of this profligate, deficit-swelling deal.

The pieces refute the notion that doc fixes don't need to be offset, arguing that the cost is too great to be added to the debt and onto a program that is already expected to be growing significantly in the coming decades. Moffit points to a Medicare actuaries' analysis which shows a $2.3 trillion cost on a present-value basis over 75 years if lawmakers enact an unpaid-for doc fix. The potentially $215 billion ten-year cost (if smaller "health extenders" are included) would increase debt as a percent of GDP by nearly one percentage point by 2025.

Moffit underscored the point:

This is an opportunity for Congress to start a bigger conversation on Medicare. In the meantime, Congress should modernize traditional Medicare, make it more patient-centered by creating a sensible and simpler benefit design, and free doctors and medical professionals from a costly and overly bureaucratic system that serves neither them nor their patients well.

One more thing: Congress should do it without adding one red cent to the deficit.

The pieces each note that the SGR has been an important catalyst for the enactment of small but legitimate health care savings to offset each doc fix. Referring to the fact that most doc fixes have been offset, the Review says that "by the standards of federal budgetary deals, 90 percent is wildly successful. Like the Gramm-Rudman-Hollings Balanced Budget Act a generation ago, SGR is being targeted not because it is ineffective, but because it works." 

In supporting a fiscally responsible fix, the pieces cite our work on how almost every previous doc fix has been offset, often with structural health savings, and mention our PREP Plan, which outlines $215 billion of savings to offset a permanent fix.

As the Washington Post put it:

Alas, there is growing sentiment in both parties to depart from this fiscally responsible precedent and pay for only the $37 billion in systemic reforms. The rationale is that any Medicare forecast based on enforcement of the SGR was always phony anyway, so adding to the deficit by replacing it isn’t a real increase, either — and even a sort of victory for truth in budgeting. Congress should resist this temptation; succumbing to it would set back the cause of long-term fiscal reform. To repeat, the sustainable growth rate has not quite worked as intended, but at least its failure never turned into a source of higher deficits. Instead, both parties should treat this as a chance to impose more structural changes, over and above the $37 billion worth contemplated.

The PREP policies are just some of many health care options which could fully offset an SGR replacement. Lawmakers should go further than the current discussions and pay for the entire package, not just a small portion. The way that Congress handles the doc fix could have a big impact on deficits and debt.