off the charts

Q & A with Jim Horney on Health Reform and the Deficit, Part 4

This Q & A is part four in a series on myths about health reform and its impact on the federal budget deficit with Jim Horney, our director of federal fiscal policy. Jim, some opponents of the new health reform law claim that it is financed with a number of gimmicks and as a result will increase the federal deficit. We’ve looked at each claim of budgetary gimmickry and found each one misleading or inaccurate.  Today we’re focused on a particular claim:  that the estimate for how much the new health reform law costs should include the cost of preventing a cut in the amount that Medicare pays doctors.  First, can you explain this Medicare payment issue?
The Medicare program decides how much to pay doctors using a formula that’s called the sustainable growth rate formula or SGR.  This was enacted in 1997. But, that formula has not worked the way it was intended to. In fact, you could say the formula is broken.  Every year since 2002, that formula has called for cutting doctors’ pay too much and Congress has regularly stepped in to limit the cut.  This is sometimes called the doctor fix.
Critics say the cost of the doctor fix should be included in the cost of the health reform law.  Does this argument have merit?
It does not have merit. The cost of the doctor fix is entirely unrelated to health reform; all of its cost would remain if health reform were repealed tomorrow. Congress likely will never let the full cuts in Medicare payments called for under this formula take effect (at least not permanently), and it probably won’t pay for the cost of scrapping them. But that cost is neither a part of, nor in any way a result of, health reform. The federal government will incur this cost regardless of health reform, not because of it. To be sure, it would be better if Congress offset the cost of cancelling the SGR cuts. But that issue is separate from the question of how much health reform itself reduces the deficit.
Listen to the podcast of this conversation, the third in a series on health reform myths and realities (or find it on iTunes).  To learn more about the new health reform law, check out our special series “Moving Forward with Health Reform.”