More Bad News about the Medicare Doc Fix

Opposition to the outrageous so-called Medicare doc fix bill, which will increase the federal deficit by $141 billion, is growing. Michael Cannon of the Cato Institute explains how this will “bust the budget.” My Forbes editor, Avik Roy, pleads that the Senate stop this monstrosity (which passed the House by a huge majority).

On the other hand, there are those unfortunate conservatives who endorsed the bill before they had read it, and before the Congressional Budget Office had announced what a budget buster it was. My friend Ryan Ellis of Americans for Tax Reform appreciates that the CBO score could give us a feeling of “whiplash”. However, he explains:

Let’s start with the CBO score. Under a “current law” baseline (wherein CBO assumes that physician reimbursements will be cut 21 percent next week and stay cut forever), H.R. 2 is a ten-year spending increase of $141 billion, because the law would do away with that 21 percent cut and the government would have to pay doctors more. Under a more realistic baseline in which doctors don’t face a 21 percent Medicare cut next week (or ever), H.R. 2 is a ten-year spending cut of $1 billion. That’s because in this scenario, elimination of the 21 percent cut is already included in the baseline, so it doesn’t count as new spending. So it really comes down to deciding which starting point (another term for baseline) you think is more reasonable. I think the more reasonable starting point is that Congress won’t let next week’s 21 percent reimbursement cut happen (a safe bet, since they’ve avoided it 17 times since 2003).

What Mr. Ellis ignores is that previous patches to the SGR, which only lasted up to a year (not in perpetuity, like this one does) were always paid for by offsets to other spending. The success rate was 98 percent.

If a tenant in an apartment building were to adopt this approach, it would go something like this:

I pay $1,000 month in rent. But I don’t want to accept that reality because I made a commitment many years ago to pay only $750 in rent. I know that is a fantasy, so I only budget one to twelve months in advance, because I know I have to scrounge around and find $250 every month by cutting spending on other things. That has become too painful for me, so starting now I am going to budget $1,000 for rent for the next ten or more years, with no plan to earn more money or cut spending elsewhere.

It may be emotionally satisfying, but it is hardly a solution to the problem.

John R. Graham is a Senior Fellow at the Independent Institute.
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