“NO” $500 Billion Doc Fix Deal (H.R. 2)

On Thursday, the House is expected to vote on the Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2). The bill, negotiated by Rep. John Boehner (R-OH) and Rep. Nancy Pelosi (D-CA) 14%, would permanently repeal Medicare’s Sustainable Growth Rate (SGR) while making some small-scale reforms to the entitlement program and extending other programs such as the Clinton-era Children’s Health Insurance Program (CHIP).  The package will likely increase America’s debt by $500 billion over the next two decades.

Medicare’s SGR is far from a budget gimmick.  Past doc fixes have contained small, but important structural reforms to Medicare as well as reductions in other areas of federal spending. According to the Committee for a Responsible Federal Budget (CRFB), roughly 98% of the doc fix-related spending has been offset.  As Rep. Joe Pitts (R-PA) 65%, chairman of the House Energy and Commerce’s Subcommittee on Health said in January: “[N]ot paying for SGR reform would ignore past precedent from Congress – whether it was controlled by Democrats or Republicans.”

Is the latest plan paid for?  According to the Congressional Budget Office (CBO) the plan would add $141 billion to the federal debt within the traditional ten-year budget window.

Don’t structural changes to Medicare more than offset SGR in the long run? While certain changes to Medicare have major long-term savings, H.R. 2 does not contain reforms of this magnitude.  Instead, it appears that the gap between the costs of SGR repeal and the savings from the accompanying offsets only grows in the out years. A new  estimate from CRFB found H.R. 2 would add $500 billion to our national debt over the next two decades based on a current law baseline, which doesn’t “assume away” the costs of the SGR repeal itself in the out years.

CBO confirmed “Enacting H.R. 2 would raise federal costs relative to current law during the decade after 2025.”  Even under the misleading assumption that there is no cost associated with repealing SGR in the second decade, CBO cautioned “budgetary effects of the legislation could represent net savings or net costs in the second decade after enactment.”

But aren’t the underlying payment reforms in the proposed bill worth supporting?  H.R. 2 includes small reforms that are far from sufficient to justify the elimination of an important cost control mechanism. The Heritage Foundation’s Robert Moffit, Ph.D., describes the reforms as “timid.”  According to Moffit, the “means-testing is slight—much smaller than most other proposals” and “change itself would be not go into effect until 2018.”  The Medigap portion of the deal is, according to Moffit, “paltry and delayed until 2020.”  It does not include some of the real payment reforms conservatives had asked for, such as balanced billing and private contracting in Medicare.

But doesn’t Heritage support the reforms included in the deal? Heritage has long supported increased means testing in Medicare to require high-income seniors to pay for a greater share of their benefits. It has also supported Medigap reforms to limit overutilization of health care services.

However, the combined savings from means testing and Medigap reforms in H.R. 2 would only save a total of $34 billion in the first 10 years. To put that in perspective, the means-testing plan Heritage has supported in the past would by itself save $538 billion over 10 years. As for Medigap reforms, Heritage has pointed to reforms laid out by the Congressional Budget Office, which would save $53-111 billion. The combined 10-year score for reforms similar to past Heritage proposals dwarfs the reforms included in this deal, as well as the cost of the SGR repeal. Heritage has not supported these reforms in exchange for more deficit spending.

Shouldn’t we just get past the SGR so we have more time to work on real reforms?  There is no doubt that Members of Congress and their staffs face significant pressure and are required to devote significant time to addressing the doc fix patches. However, as mentioned above, Congress arguably needs more action-forcing mechanisms like the doc fix, not less. SGR deadlines force Congress to make hard decisions on a consistent basis. Without SGR, Congress will face less pressure to address our growing health entitlement problems until it is too late.

The potential cuts to doctors and the cost of repealing get bigger and bigger, every time Congress punts, right? Not necessarily. In fact, projections of full SGR repeal have been getting less costly on both fronts in recent years. In 2012, CBO estimated that a 10-year freeze would cost much more, at $271 billion, and that would have prevented a higher reimbursement cut of 27%.  Today, those costs are much less. CBO currently projects that a 10-year physician payment freeze would cost an estimated $137 billion and physicians would face a roughly 21% reimbursement cut.

I heard these patches have just turned into logrolling boondoggles for lobbyists…  Like any action-forcing event, there is no doubt that SGR brings K Street out in full force.  But the real cause of a lobbyist feeding frenzy is Congress’ appetite for deficit spending.  Hearing that the SGR is going to be repealed without meaningful spending reductions is music to the ears of lobbyists around the country.

What’s more, the logrolling is literal in H.R. 2 as a two-year extension of a timber payment program was included in the bill.  According to the Congressional Research Service, the oddly named Secure Rural Schools program doled out nearly $300 million in fiscal year 2013, including $97 million to Oregon,  $28 million to California, $25 million to Idaho, and $19 million to Washington State.

Is there anything else in this deal I should know about? Yes, the deal has another feature that makes it worth opposing. The deal would extend the Children’s Health Insurance Program (CHIP) for an additional two years, and it would do so at Obamacare-enhanced spending levels. This is a major priority for the Left as the program’s funding expires later this year.

Heritage Action opposes H.R. 2 and will include it as a key vote on our legislative scorecard.

Heritage Action Scorecard
The Boehner-Pelosi Deal: Timid Changes Won’t Solve Medicare Woes
What They Said on the Doc Fix … in 2009
FAQ: $400 Billion Doc Fix Deal (H.R. 2)
DeMint: Boehner-Pelosi Medicare ‘Reform’ Adds to National Debt
Under an Honest Budget the Doc Fix Plan Adds to the Debt
Committee for a Responsible Federal Budget: SGR Plan Will Likely Increase, Not Reduce, Long-Term Debt
Capretta: An Unappealing ‘Doc Fix’