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National Review Online: The SGR Fix Will Bust the Budget

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Washington, March 26, 2015 | comments
The House is expected to vote today on a bill to eliminate the annual cuts in Medicare payments to doctors that Congress has been postponing for more than a decade — the so-called “sustainable growth rate” (SGR) cuts. (UPDATE: The bill passed the House by a 392–37 margin.) The bill would result in $145 billion in new federal spending, above current law. It would also require wealthier seniors to pay for more of their own Medicare coverage, and would restrict the ability of seniors to buy supplemental coverage that completely shields them from the cost of the medical care they consume. (Such comprehensive “Medicare supplemental” coverage tends to increase overall Medicare spending.) 

A number of people have asked me what my take on this legislation is. Basically, it is this: If you’re going to be totally fiscally irresponsible, this is the way to do it.

Congress created the SGR to limit Medicare spending on physician services. The SGR uses a formula to cut Medicare payments to physicians automatically. The formula works too well: It mandates cuts so deep that Congress decides every year it cannot stand for them. That’s why Congress has postponed those cuts some 17 times since 2003. This legislation would eliminate the cuts permanently, which of course would increase federal spending — by the $145 billion mentioned above (over the next ten years). 

As a starting point, we should recognize that the ideal amount the federal government should pay doctors is $0.00. So right off the bat, we know this bill is moving in the wrong direction. The bill compounds this error by not paying for all of that new spending by cutting spending elsewhere or increasing revenues. As a result, it increases the federal debt — which is to say, it imposes a tax burden on future generations who cannot vote or have not even been born yet. So this bill is yet another example of the dessert-first-spinach-later approach to fiscal stewardship that is business as usual in Congress.

Ryan Ellis of Americans for Tax Reform disagrees. He is the most prominent conservative supporter of this bill’s approach. Ellis argues that if we assume Congress has already spent that $145 billion, then this bill is actually a $1 billion spending cut. Well, yes, but Congress has not already spent that $145 billion. If we assume that in fiscal year 2016, Congress will spend 100 percent of U.S. GDP, then President Obama’s proposed budget will be an even bigger spending cut. (The only difference is in the degree of reasonableness of those two assumptions.) That’s not how we do these things. Current law does not provide for that spending. So if you want Congress to spend that money, it counts as a spending increase. 
 
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