In a Fix

by The Editors

If the new Republican majorities in Congress have a mandate to do anything, it is not to inflict hundreds of billions of dollars in new entitlement liabilities on the American taxpayer, but that is what they are positioning themselves to do by repealing the “sustainable growth rate” (SGR) rule that requires significant cuts to physicians’ reimbursements under Medicare.

It works like this: SGR has long required incremental reductions to Medicare reimbursements, and Congress has long forestalled those cuts with the “doc fix,” a series of measures that have prevented those cuts from being enacted by making spending reductions elsewhere. The doc fix is not really a doc fix, of course — it is a politician fix. The doctors have an easy and straightforward way to deal with reduced Medicare payments: by refusing to take on Medicare patients. But Washington does not want to see the doctors fix their problem in that way and call down upon itself the wrath of the blue-haired hordes of Medicare patients demanding to know why they cannot find doctors willing to see them. But each time cuts to Medicare reimbursements are put off, the size of the cut needed to satisfy the law grows larger, and the expense of forestalling it and making offsetting cuts elsewhere grows larger: If the current doc fix expires, physicians will receive a 21 percent pay cut on their Medicare patients.

In recent congressional testimony, three witnesses — all of them Democrats, incidentally: former senator Joe Lieberman, former OMB chief Alice Rivlin, and Marilyn Moon of the American Institutes of Research — offered possibilities for offsetting the expense of repealing SGR, a permanent doc fix, in other words. Lieberman and Rivlin endorsed reforms to the entitlement programs, and Moon argued instead for new taxes or cuts to other programs.

Given those choices, congressional negotiators are leaning toward “none of the above.” The compromise under consideration would offset only a small part of the cost of repealing SGR, and would add some $175 billion in new expenses to the federal ledger over the next decade.

The SGR has been denounced as a mere budget gimmick, which in a sense it is, but it is one that has been nonetheless effective: Congress has shown no willingness to actually reduce physicians’ Medicare payments, but it has been surprisingly rigorous about offsetting those doc-fix expenses with other spending reductions. The Committee for a Responsible Federal Budget estimates that more than 90 percent of doc-fix expenses have been offset, mainly with spending reductions in other health-care programs. 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.

But there are limits to what SGR and similar rules can do. 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.