As part of spending reforms included in the Balanced Budget Act of 1997, Congress enacted a sustainable growth rate (SGR) mechanism for Medicare physician payment levels. The SGR mechanism is designed to maintain aggregate growth targets in physician spending. Thus, in light of increased Medicare spending in recent years, the statutory formula has resulted in negative annual updates. While an imperfect formula, the SGR was designed as a cost-containment mechanism to help deal with Medicare's exploding costs, forcing offsets in some years. This week the Democrat majority will bring to the floor stand-alone legislation that is not paid for (H.R. 3691) to permanently re-set the SGR formula at higher 2009 spending levels.
Due to significant concerns about rising deficits and higher federal spending, a bipartisan majority in the Senate recently rejected similar legislation (S. 1776) designed to increase physician payments over the next 10 years that did not include any offsetting spending reductions-meaning any House-passed legislation likely will not advance without curbs on spending.
The Congressional Budget Office earlier this year estimated that a full SGR "fix" would cost $285 billion over ten years. However, the Administration has already begun the process of "reforming" the SGR by hiding approximately $80 billion of that cost into the budgetary baseline as "current law"-even though some have questioned the Administration's authority to do so. Therefore, CBO scores H.R. 3691 as increasing the deficit by nearly $210 billion, though as stated earlier, the full impact of a long-term SGR "fix" approaches nearly $300 billion.
Members may note that because seniors pay for one-quarter of total physician spending through Medicare Part B premiums, passing H.R. 3691 would raise seniors' Medicare premiums by nearly $50 billion over ten years-on top of the up to 20 percent increase in Part D prescription drug premiums in the Pelosi bill (H.R. 3692) proper.
Press reports indicate that the Democrat majority intends to pass H.R. 3691 as a stand-alone bill in order to help facilitate passage of its broader health "reform" initiative. A CQ Today article noted that omitting an SGR "fix" from the larger legislation "could free up billions of dollars that Democratic leaders could apply to make other changes in a health care plan." Therefore, some may view a vote for H.R. 3691 as paving the way for enactment of a government takeover of health care, with all its flaws: More than $700 billion in job-killing new taxes, regulations that will raise premiums for millions of Americans, and creation of a government-run health plan causing as many as 114 million Americans to lose their current coverage.
True Reform Instead:
Many Members may support legislation to address potential future SGR shortfalls, provided the legislation is fully paid for. For instance, a recent Congressional Budget Office report found that enactment of liability reform provisions-another top priority of physician groups-would reduce mandatory spending on Medicare and other federal entitlements by $41 billion over ten years. These changes would represent sound fiscal policy and true entitlement reform. Members may also note that the Administration has already proposed nearly $600 billion in savings from Medicare alone, and that less than half of this supposed "waste, fraud, and abuse" would easily finance SGR reform-if Democrats were not insistent that this money should be re-directed to fund its government takeover of health care.