Ezra Klein has written a post on the doc fix challenge that is worth a look:

In 1997, the Republican Congress created a payment formula meant to govern Medicare called the Sustainable Growth Rate. The formula was supposed to be a little tweak that saved a couple billion dollars. But the formula was wrong, and it quickly proved a wrenching readjustment that would’ve driven physicians out of the program by sharply slashing their payments. But rather than undo it, Republicans in Congress, and then Democrats when they took over Congress, passed temporary fixes, because no one wanted to come up with the money to fix the thing permanently.

This raises an important question — what if the formula in PPACA is also wrong? As Douglas Holtz-Eakin argued in the Times in March,

the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies. But Medicare is already bleeding red ink, and the health care bill has no reforms that would enable the program to operate more cheaply in the future. Instead, Congress is likely to continue to regularly override scheduled cuts in payments to Medicare doctors and other providers.

Richard Foster, chief actuary of the Medicare system, has noted the parallels between the SGR in the Balanced Budget Act and PPACA. Robert Pear of the New York Times summarized Foster’s findings as follows:

Mr. Foster says the law will save Medicare more than $500 billion in the coming decade and will postpone exhaustion of the Medicare trust fund by 12 years, so it would run out of money in 2029, rather than 2017. In addition, he said, the reduction in the growth of Medicare will lead to lower premiums and co-payments for Medicare beneficiaries.

But, Mr. Foster said, these savings assume that the law will be carried out as written, and that may be an unrealistic assumption. The cuts, he said, “could become unsustainable” because they may drive some hospitals and nursing homes into the red, “possibly jeopardizing access to care for beneficiaries.”

This is worth keeping in mind. Ezra continues:

When health-care reform started, Democrats made an admirable effort to end the shell game and just fix the system. But doing so cost almost $300 billion, and Republicans, who caused this mess in the first place, attacked the Democrats’ fix as if it was part of their health-care reform plan rather than part of the Balanced Budget Act that Republicans passed in 1997. So Democrats abandoned the effort and left the fix out of health-care reform.

This is a slightly problematic reading of what happened. An Economics 21 editorial published in February offers a different take:

The Administration and Congressional Democrats first got into trouble on this issue when they tried to pull a fast one, inserting higher physician payments into the early drafts of health care reform bills without offsetting the costs.  The Congressional Budget Office (CBO) blew the whistle on this maneuver, finding that it would result in health care “reform” adding enormously to the federal government’s already-unsustainable deficits.

Proponents then tried what can only be described as a cynical gimmick: they simply split the bills into two parts: a “docfix” bill that would add to the deficit, and a separate health care bill that would be advertised as lowering the deficit.  Taken together, it was always the case that the bills would worsen the fiscal outlook.  But by pointing only to the “deficit-reducing” bill and ignoring the companion “docfix” bill moving through the Congress, disingenuous claims that health care reform would reduce the deficit continued to be made on both ends of Pennsylvania Avenue. 

The House of Representatives played its dutiful role in this charade, separately passing both the health care legislation and the deficit-worsening docfix bill.  The Senate, however, balked.  When Senate Majority Leader Harry Reid attempted the same maneuver there, several Democrats as well as Republicans refused to play along with the game.  Reid’s “docfix” bill – which would have added $247 billion to the debt over ten years – failed on a 47-53 cloture vote last October.  No doubt the Senate was influenced by rising public concern about skyrocketing deficits and irresponsible budgeting.  But the Senate vote didn’t end the “docfix” issue; it merely left it unresolved.  Just how unresolved was revealed again this week with the release of the Administration’s budget.

This gives us a very different impression of how the debate unfolded.

Moreover, my sense is that the Balanced Budget Act of 1997 was not passed on a party line vote. The following is from Govtrack:

Jul 30, 1997: After passing both the Senate and House, a conference committee is created to work out differences between the Senate and House versions of the bill. A conference report resolving those differences passed in the House of Representatives, paving the way for enactment of the bill, by roll call vote. The totals were 346 Ayes, 85 Nays, 4 Present/Not Voting.

Suffice it to say, Republicans did not hold 346 seats in the House in 1996. PPACA is far more accurately described as partisan legislation than BBA. 

I absolutely agree with Ezra on at least one point — we really do have to fix SGR.

At some point, this has to end and we just have to fix the thing. A permanent fix will cost $300 billion (though that’s an imaginary cost, as we were never going to see that $300 billion), and the doctors want it bad enough that you could presumably make some big gains on payment reform as the price for getting it done. It would be nice if the wise men (and women) from both parties were hammering out some private compromise for after the election. All those Republicans who felt that the Affordable Care Act didn’t do enough to move toward pay-for-performance could use this as their opportunity. But if the two sides think it’s more useful as a cudgel than a bargaining chip, it’s hard to imagine anything good coming out of the process.

But it would be helpful if we could least agree on why SGR didn’t work, and why PPACA has made matters worse. PPACA included almost every politically palatable, which is to say opaque, revenue measure available to legislators of either party, including savings from consolidating student loan programs and long-term care insurance premiums.