Faced with a Congressional Budget Office [CBO] cost estimate showing a $239-billion deficit increase in their health care bill, the Democratic Majority appears to be trying to make their problem disappear. The discussion below explains the maneuvers the Majority is likely to attempt to get that result; but in the end, the issue is simple. If Congress passes the health care bill including higher Medicare physician payments than scheduled under current law, Federal spending will be a trillion dollars higher over the next 10 years under CBO estimates, and the deficit will be $239 billion deeper. The debt will rise by $239 billion, along with additional interest expenses, and the Treasury will need to borrow these funds, further increasing the debt.
THE MEDICARE “DOC FIX” AND THE BUDGET
Under the current-law Sustainable Growth Rate [SGR] formula, Medicare payments to physicians are scheduled to be reduced by 21 percent in fiscal year 2010. This reduction is assumed in the current-law baseline used by the CBO for projected Medicare spending, which is rising inexorably at about 7 percent per year.
As part of their health care bill, the Majority increases physicians’ payments, rather than reducing them 21 percent as scheduled in law. This results in a spending increase, compared to CBO’s baseline, of $231 billion over 10 years – and that is how CBO has scored it.
But the Majority wants to contend the $231-billion “doc fix” should be incorporated in the baseline – that it is not additional spending in the legislation – and therefore has no cost. This epiphany lets them claim to nearly eliminate the $239- billion deficit increase from the health care bill.
But such sleight-of-hand cannot change the facts: the “doc fix” is part of the Majority’s health care bill, and it increases spending by $231 billion (see Figure 1 above).