If House “Doc Fix” Bill Adds $141 Billion to the Deficit, Can Medicare Survive “Reform?”

The Congressional Budget Office has released its score of the Medicare “doc fix” legislation scheduled for consideration Thursday in the House. Among other things, the score provides some sense of the difficulty in enacting reforms to improve Medicare’s solvency.

CBO projected that the bipartisan legislation to repair Medicare’s physician payment structure would add $141 billion to the deficit. As I wrote in an earlier post, Congress paid for temporary patches in the past in part by cutting spending and in part by planning on bigger payment reductions in future years. While the legislation’s prospective increases in payment levels would be paid for, the future payment reductions already on the books would not be covered, thus raising the deficit. That unpaid-for increase in Medicare spending would also raise the basic Medicare Part B monthly premium by $10 monthly in 2025, CBO concluded.

The bill would make two structural changes to Medicare. CBO found significant savings—more than $34 billion—from reduced subsidies for higher-income earners. But the legislation’s reforms to Medigap supplemental insurance produced comparatively paltry savings: $400 million over a decade. The smaller savings is a result of legislators delaying the Medigap changes until 2020 and watering down the proposed cost-sharing required of Medigap enrollees.

CBO analyzed the bill’s costs and fiscal impact in its second decade, but the budget scorekeepers did not say the bill would reduce the deficit in the budgetary “out-years.” Compared with current law, the bill would increase the deficit, the agency said. And when compared to “freezing Medicare’s payment rates for physicians’ services,” CBO said, “the legislation could represent net savings or net costs in the second decade after enactment, but the center of the distribution of possible outcomes is small net savings.” In other words, even if one considers the scheduled reductions in future payments budgetary gimmicks that will never happen–and thus that they should be disregarded–the bill might not reduce the deficit, and if it did the budgetary savings would be very small.

Medicare needs more than very small savings to remain viable for the long term. The program’s Part A trust fund has run deficits of more than $120 billion over the past six years. And Medicare’s problems will only increase: Urban Institute projections indicate that a married couple earning average wages that retires this year will receive more than three times as much in benefits—$427,000—over their lifetime as they have paid in Medicare taxes. If the price of reforming Medicare is raising the deficit by $141 billion, how much more “reform” can Medicare withstand?

This post was originally published at the Wall Street Journal Think Tank blog.