Congress Prepares to Pass Another Huge Bill No One Has Read. Again.

Stop me if you’ve heard this one before: Congress rams through a massive piece of legislation costing hundreds of billions of dollars without bothering to read it. Meet Congress under a Democratic majority—same as under the old majority.

Late Wednesday evening, congressional leaders still had not publicly released their omnibus appropriations legislation, and were not planning to do so until near midnight—hardly an auspicious time to embark on reading a bill exceeding 1,000 pages.

Those predictions ended up largely on the mark. The bill as introduced amounted to “only” 1,169 pages. But House leaders didn’t post the final version online until 1:20 a.m. on Thursday—the same day as the intended vote.

As Yogi Berra might say, when it comes to Congress’s bipartisan willingness to ram through massive bills, “It’s déjà vu all over again.”

Pelosi Breaks Her Promise

Of all things, Politico reported that one of the major holdups preventing an earlier public release included provisions having nothing to do with government spending—or, for that matter, border security:

“Congressional leaders are still haggling over an extension of the landmark Violence Against Women Act—one of the final hold-ups in a funding deal to avert a shutdown on Friday….One dispute centers on a Democratic push to add protections for transgender people, which the GOP is resisting; meanwhile, Republicans want more time to negotiate a broader deal, according to lawmakers and aides.”

Democrats in the House of Representatives promised that this time would be different. In a summary of their rules package for the 116th Congress—one which they released fewer than six weeks ago, remember—they pledged the following:

“ALLOW TIME TO READ THE BILL Require major bill text to be available for 72 hours before the bill can proceed to the House Floor for a vote. The current House rule only requires slightly more than 24 hours of availability.”

(Emphasis in the original.)

Their rules package did change the prior House rule, which had previously called for a three-calendar-day “reading period”—meaning that a bill promulgated at 11:59 p.m. on Monday could be voted on at 12:01 a.m. Wednesday, barely 24 hours after its release—to allow a full 72 hours for review.

And particularly in this case, Democrats find giving people time to read the bill inconvenient. Even though government funds won’t expire until Friday at midnight—and Congress could always extend that funding temporarily, to allow for more time to review the bill—both chambers want to vote on Thursday. Because heaven forbid Congress 1) do actual work on a Friday and 2) delay their “recess” (read: vacation) and their overseas trips during same. (Democratic leaders claimed their members have been “sufficiently briefed”—because it’s very easy to “brief” someone on most, let alone all, of the contents of a 1,200 page bill.)

In other words, the new House Democratic majority has spent barely one month in office, and we’re already back to Speaker Nancy Pelosi (D-CA), circa 2010: “We have to pass the bill so that you can find out what is in it.”

Garbage In, Garbage Out

After last year’s omnibus fiasco, I wrote that members of Congress only had themselves to blame for the awful process leading to that 2,232 page bill:

“As the old saying goes, the true test of a principle comes not when that principle proves convenient, but when it proves inconvenient. Only when Members find themselves willing to take tough votes—and to abide by the outcome of those votes, even if it results in policy outcomes they disfavor—will the process become more open and transparent.”

This post was originally published at The Federalist.

Ocasio-Cortez Wants Congress to Stop Pretending to Pay for Its Spending

Get used to reading more storylines like this over the next two years: The left hand doesn’t know what the far-left hand is doing.

On Wednesday, incoming House Speaker Nancy Pelosi (D-CA) faced a potential revolt from within her own party. Rep.-elect Alexandria Ocasio-Cortez (D-NY) and several progressive allies threatened to vote against the rules package governing congressional procedures on the first day of the new Congress Thursday, because of proposed changes they believe would threaten their ability to pass single-payer health care.

What’s Going On?

Ocasio-Cortez and her allies object to Pelosi’s attempt to reinstate Pay-as-You-Go (PAYGO) rules for the new 116th Congress. Put simply, those rules would require that any legislation the House considers not increase the deficit over five- and ten-year periods. In short, this policy would mean that any bill proposing new mandatory spending or revenue reductions must pay for those changes via offsetting tax increases and/or spending cuts—hence the name.

Under Republican control, the House had a policy requiring spending increases—but not tax cuts—to be paid for. Pelosi would overturn that policy and apply PAYGO to both the spending and the revenue side of the ledger.

Progressives object to Pelosi’s attempt to constrain government spending, whether in the form of additional fiscal “stimulus” or a single-payer health system.

However, Pelosi’s spokesman countered with a statement indicating that the progressives’ move “is a vote to let Mick Mulvaney make across-the-board cuts.” Mulvaney heads the Office of Management and Budget, which would implement any sequester under statutory PAYGO.

Regardless of what the new House decides regarding its own procedures for considering bills, Pay-as-You-Go remains on the federal statute books. Democrats re-enacted it in 2010, just prior to Obamacare’s passage. If legislation Congress passed  violates those statutory PAYGO requirements (as opposed to any internal House rules), it will trigger mandatory spending reductions via the sequester—the “across-the-board cuts” to which Pelosi’s spokesman referred.

To Pay for Spending—Or Not?

Progressives think reinstituting PAYGO would impose fiscal constraints hindering their ability to pass massive new spending legislation. However, the reality does not match the rhetoric from Ocasio-Cortez and others. Consider, for instance, just some of the ways a Democratic Congress “paid for” the more than $1.8 trillion in new spending on Obamacare:

  • A CLASS Act that even some Democrats called “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of,” and which never went into effect because the Obama administration could not implement it in a fiscally sustainable manner;
  • Double counting the Medicare savings in the legislation as “both” improving the solvency of Medicare and paying for the new spending in Obamacare;
  • Payment reductions that the non-partisan Medicare actuary considers extremely unlikely to be sustainable, and which could cause more than half of hospitals and nursing homes to become unprofitable within a generation;
  • Tax increases that Congress has repeatedly delayed, and which could end up never going into effect.

A Bipartisan Spending Addiction

An external observer weighing the Part D and Obamacare examples would find it difficult to determine the less dishonest approach to fiscal policy. It reinforces that America’s representatives have a bipartisan addiction to more government spending, and a virtually complete unwillingness to make tough choices now, instead bequeathing massive (and growing) amounts of debt to the next generation.

In that sense, Ocasio-Cortez and her fellow progressives should feel right at home in the new Congress. Republicans may criticize her for proposing new spending, but the difference between her and most GOP members represents one of degree rather than of kind. Therein lies the problem: In continuing to spend with reckless abandon, Congress is merely debating how quickly to sink our country’s fiscal ship.

This post was originally published at The Federalist.

Republicans’ Plan to Raise Health Care Costs

Who would purposefully design a legislative strategy whereby whoever wins actually loses? Congressional Republicans, that’s who.

On Tuesday evening, Republican leaders in the House introduced another continuing resolution to fund the federal government for four more weeks (through February 16). In an attempt to win Democratic votes, the bill includes a six-year extension of the State Children’s Health Insurance Program, without any of the conservative reforms congressional leaders said they would fight for back in 2015.

Inane Tax Treatment of Health Insurance

Since an Internal Revenue Service ruling (later codified) during World War II, the federal government has excluded health insurance and other fringe employment benefits from both payroll and income taxes. Economists on all sides of the political spectrum agree that this exclusion encourages workers to over-consume health insurance, and thus health care.

Taxing wages but not health benefits encourages firms to offer more generous benefits—with lower deductibles, co-payments, and so forth—and that lower cost-sharing encourages people to consume extra health care. (“I’m not sure how sick I really am, but because I only have a $10 co-pay, I might as well go to the doctor and find out.”)

Obamacare attempted to change that dynamic through its “Cadillac tax” on “high-cost” employer plans. The tax applied for every dollar of benefits provided over a defined amount, encouraging firms to make their benefits less rich, to avoid exceeding the threshold that would trigger the tax.

As for the Bad Strategy

However, Republicans could easily remedy the “Cadillac tax’s” flaws with another alternative. The alternative could limit the tax preference for employer-provided health insurance—without a punitive 40 percent tax rate, and while not raising any additional revenue over a decade. President George W. Bush proposed this concept more than a decade ago, and the Republican Study Committee and others have since endorsed it.

However, repealing the “Cadillac tax” outright would effectively sabotage any ability to reform or replace it. As with Obamacare’s Independent Payment Advisory Board (IPAB), removing a constraint on health spending now with the intent of replacing it later would almost certainly mean that “later” will never arrive. That of course means Republicans, consistent with their insatiable desire to postpone difficult decisions, want to repeal both the “Cadillac tax” and IPAB without constructing replacements.

Tuesday evening’s spending bill would postpone the “Cadillac tax”—already delayed once, until 2020—for another two years, until 2022. It would likewise suspend Obamacare’s medical device tax for two years, and its health insurer tax for one year. It would also exempt these changes from the Statutory Pay-As-You-Go Act, which requires offsetting spending cuts to fund this tax relief—because heaven forbid Congress be forced to reduce spending.

This post was originally published at The Federalist.

Congress Needs to Eat Its Spinach

The tax bill’s effective repeal of Obamacare’s individual mandate briefly reprised the “broccoli mandate”—whether, as Justice Antonin Scalia asked during Supreme Court oral arguments on Obamacare in March 2012, the federal government could compel individuals to purchase certain foods.

But instead of broccoli, spinach might serve as a more apt analogy, for the way the tax bill came to repeal the mandate demonstrates the ways Congress refuses to eat its policy spinach, following the path of least resistance in making easy choices rather than tough ones.

Avoiding Tough Choices on Taxes

Cotton said the “looks of hesitance and outright terror on the faces of my colleagues” convinced him that Republicans had to repeal the mandate as part of the tax package. Translation: Republicans thought it easier to obtain revenue from repealing the mandate than to weed out the tax code of popular tax breaks—the point of tax reform, which Republicans initially sold as a way to simplify the Internal Revenue Code.

Remember how Speaker of the House Paul Ryan (R-WI) sold tax reform as a way to allow Americans to complete their taxes on a postcard? That type of reform didn’t happen, because enacting that reform would have involved eliminating many more popular deductions than the final tax bill ended.

Revenue Neutrality and Spending

Another key point in the tax debate surrounded the issue of revenue neutrality. The “Better Way” platform released by House Republicans last year not only “envision[ed] tax reform that is revenue neutral,” it included a very clear standard for that metric: “House Republicans measure revenue neutrality by reference to a ‘current policy baseline’—i.e., achieving a level of federal revenues that is approximately $400 billion less over the ten-year [budgetary] window than the current law baseline.”

Congress may have valid justifications for reducing revenues, such as to increase economic growth, or to shrink the size of government. But the fact remains that, when faced with enacting a supposed “parade of horribles” to achieve a revenue-neutral tax bill, Congress chose to change the nature of the bill rather than to make the tough choices needed to achieve its original benchmark.

Likewise on spending reductions arising from the tax bill. Because the tax measure increased the federal deficit, the Statutory Pay-as-You-Go (PAYGO) act would normally require commensurate spending cuts offsetting the revenue loss. However, rather than allow these reductions to go into effect—or replacing the proverbial hatchet of automatic cuts with more targeted spending reductions—both Republicans and Democrats voted to exempt the tax bill from the PAYGO law, ducking another difficult choice.

Repeal Only Unpopular Parts of Obamacare

Repealing only Obamacare’s individual mandate—one of the most loathed parts of the 2010 health care law—echoes a problem Republicans faced during the “repeal-and-replace” debate last year: Many want to retain popular elements of the law, while repealing its unpopular features. Witness Republicans’ statements of support for keeping the status quo on pre-existing condition exclusions.

By repealing the unpopular parts of Obamacare but retaining the popular parts, Congress may have created an incoherent, and potentially unstable, policy that results in premium increases, infusions of taxpayer cash to “stabilize” markets, or both. Senate Republican leaders have already proposed the latter, precisely because they fear the political effects if the former occur.

Therein lies the problem with the congressional strategy: Avoiding tough choices generally only postpones them for a time—not forever. If insurers decide to leave markets after the mandate’s repeal takes effect in 2019, Congress will have to fix a problem it helped create. Likewise attempts by today’s Congress to reduce taxes, and not reduce spending, in shifting the blame to future generations.

At some point those bills will come due, so Congress might want to consider actually making some tough choices now, rather than creating even tougher choices in years to come.

This post was originally published at The Federalist.

Congress’ Bipartisan Spending Addiction

Did you hear the joke that circulated around the Capitol over the holidays? It’s called Congress’ ability to control government spending.

Shortly before departing for their Christmas break, lawmakers of both parties voted to waive provisions of existing law that would have led to spending reductions over the coming decade. The move represented but the latest instance of the bipartisan addiction to federal spending that plagues our nation’s capital.

Because the final tax bill increased the deficit by nearly $1.5 trillion on a static basis—that is, not taking into account the economic growth that tax relief will produce—the PAYGO law would have required commensurate automatic reductions in spending in the coming years had Congress not enacted a waiver. However, as I noted last month, while a $1.5 trillion reduction in spending sounds large, it would represent less than 3 percent of all federal spending over the next decade.

Empty Democratic Threats

Prior to passage of the tax bill, Democrats threatened that statutory PAYGO would result in spending reductions to government programs. In August, the liberal Center for American Progress published a list of all the programs potentially subject to sequester spending reductions. In November, House Minority Whip Steny Hoyer (D-MD) used a Congressional Budget Office analysis he requested to decry “the complete elimination of all funding to dozens of mandatory programs next year” if Congress enacted a deficit-increasing tax bill.

Hoyer added that “while it is possible to avoid the PAYGO enforcement cuts triggered by their added deficits, Republicans would need Democratic votes to do it, requiring them to abandon their go-it-alone partisan strategy.” On that count, Hoyer needn’t have worried. On the spending bill that waived the PAYGO spending reductions, 14 Democrats voted for the measure in the House, and 18 Democrats voted for the bill in the Senate.

However, Senate Democrats could have insisted on the removal of the PAYGO waiver as their price to allow the spending bill to overcome a Senate filibuster. They did not do so. In fact, every Senate Democrat voted to “waive all applicable budgetary discipline” for the spending bill. That motion passed the Senate on a 91-8 vote, with Republicans providing all eight of the nays.

The PAYGO Law Is a Joke

For all their willingness to talk a big game before Republicans passed their tax measure, Democrats folded like a cheap suit on applying statutory PAYGO spending reductions to the tax bill. Earlier in December, their threats rattled moderate Republicans like Sen. Susan Collins (R-ME), who before voting for the tax measure forced Republican leaders to pledge that the spending reductions would never go into effect.

But Republican leaders could only make such a pledge—which, as Hoyer rightly noted in November, required Democratic votes—because they knew Democrats would never follow through on their empty threats to let the spending reductions occur. Liberals love government spending, and their saber-rattling over statutory PAYGO amounted to empty rhetoric towards Republicans: “Don’t pass a tax cut, or we’ll shoot ourselves in the foot by cutting programs we like!”

Only eight of 51 Senate Republicans voted against waiving budgetary discipline for the spending bill, and only two of those, Kentucky’s Rand Paul and Utah’s Mike Lee, voted against the bill’s final passage. Likewise, only 16 Republicans voted against the spending bill in the House, and several of those voted no not because the bill cancelled automatic spending reductions, but because the bill didn’t spend enough on federal defense programs.

The press critics who claim the death of bipartisanship should have watched the debate on waiving PAYGO. Both they and federal taxpayers would benefit from more closely examining the bipartisanship on display in waiving any semblance of fiscal discipline.

This post was originally published at The Federalist.

What’s Wrong with Republicans on Medicare

To demonstrate that most Republicans have no desire to reduce federal spending, one need look no further than a Politico story last Thursday. The article recounted how the pending tax bill could trigger automatic reductions in mandatory spending, including to Medicare, under the pay-as-you-go law. When presented with that scenario, Rep. Phil Roe (R-TN) responded thusly:

Medicare is underfunded as it is. If we have to change the PAYGO [pay-as-you-go] rules [that trigger the spending reductions], we’ll just change ‘em. At the end of the day, we—Republicans and Democrats—have to go home and face our constituents. I wouldn’t want to go home and face my constituents if I’d cut Medicare.

Over and above the obvious fact that Roe expressed less-than-zero interest in actually reducing federal spending, he also showed some tortured and erroneous logic in arriving at his position.

To put Medicare’s spending in another context: According to International Monetary Fund statistics, in 2016, the program spent more than the total economic output of all but 20 nations. That same list demonstrates that Medicare spent more than the entire economic output of New Zealand, Greece, and Portugal combined. Yet Roe considers the program “under-funded.”

But Medicare Is Going Insolvent, and Fast

As I noted last year, the Medicare trustees report issued in 2009, the year before Obamacare’s enactment, predicted the program’s Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—this year. The following year, after Obamacare became law, the trustees postponed the insolvency date from this year to 2029.

But, as the Congressional Budget Office noted, Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.” Put simply, because Obamacare’s re-directed Medicare savings to pay for new entitlements, the provisions improved Medicare’s solvency only on paper. Then-Health and Human Services secretary Kathleen Sebelius admitted as much when, asked in congressional testimony whether the Medicare provisions were being used “to save Medicare or…to fund [Obamacare],” she answered, “Both.”

Substantively, Obamacare’s fiscal schemes did not help Medicare’s solvency one whit. The program was scheduled to become functionally insolvent this year, and because Congress has enacted few meaningful reforms to the program in the time since, can be considered as such. However, because they improved the program’s solvency on paper, Obamacare’s budgetary gimmicks have allowed people like Roe to deny the problem exists, which will only worsen the scale of fiscal adjustment needed when Medicare finally faces its fiscal reckoning.

Reducing Spending Increases Is Not a ‘Cut’

As the New York Times has noted, Republicans argued vociferously—and correctly—earlier this year that slowing the growth of Medicaid spending in their “repeal-and-replace” bills did not represent a “cut” in that program. Yet Roe quickly resurrected the familiar (and incorrect) talking point about budget “cuts” when discussing Medicare.

Over the years, Republicans have spent far too much time demagoguing Obamacare for “cutting” Medicare. (As noted above, the problem with the law wasn’t that it reduced Medicare spending, it’s that it spent those Medicare savings to fund Obamacare, rather than shore up Medicare’s finances.) They now face many of the same opportunistic attacks from the Left regarding the entitlement reform proposals included in the “repeal-and-replace” bills. So why is Roe retreating into that same mindset that a decrease in a spending increase represents a “cut?”

Roe may not want to go back home and explain to his constituents why he reduced Medicare spending. But sooner or later, he and his fellow members of Congress will have to do just that. And the more he and his colleagues continue their pattern of obfuscation and denial through these kinds of ill-informed comments, the worse those spending reductions will end up being.

This post was originally published at The Federalist.

Memo to Congress: It’s the Spending, Stupid!

As Republicans in Congress continue work on tax legislation, reconciling differences between the House and Senate bills, debate continues over the legislation’s fiscal impact. Will an enacted bill end up increasing the deficit—and if so, by how much?

Most experts agree that providing tax relief will increase economic growth, and that growth will deliver additional revenue to the U.S. Treasury. But whether that revenue fully offsets the approximately $1.5 trillion cost of the legislation should miss the point—if Republicans had any sense of fiscal discipline about them.

Unfortunately, at present our country lacks a party that actually wants to reduce government spending. One party wants to spend more, and the other party wants to tax less. Neither party wants to reduce spending—a bad sign for future generations, who will pay the price for current leaders’ profligate ways.

Spending Promises, Then and Now

Back in 2010, upon the expiration of the Bush tax relief, Republican leaders repeated the same mantra: “We don’t have a revenue problem. We have a spending problem,” claimed Sen. Mitch McConnell (R-KY), current House Speaker Paul Ryan (R-WI), and others.

Fast-forward seven years, when Republicans control the elected branches of government, and how are they working to solve that spending problem? Ryan and McConnell issued a joint statement Friday claiming that automatic spending reductions triggered by the tax law “will not happen,” and that “we will work to ensure these spending reductions are prevented.”

So much for Washington “having a spending problem.” Their comments attempted to assuage Republicans like Maine Sen. Susan Collins, who said publicly she “would not even be considering voting for this [tax] bill” if she knew it would result in spending reductions.

To be sure, the spending reductions in question—an automatic fiscal sequester imposed by the statutory pay-as-you-go law—are blunt and arbitrary. Congress would have good reason to replace a meat-cleaver version of these spending reductions with a more surgical approach. But that’s not Republicans’ plan: “Within the GOP, leaders are confident that once the tax bill is passed, they can strike a quick deal to waive the federally mandated cuts.”

Holiday Spending Binge Ahead

But Republicans don’t just want to back off on imposing spending cuts—they affirmatively want to increase spending. On Saturday, Republican leaders released a two-week continuing resolution that would fund the government through December 22—just long enough for them to strike a budget-busting deal to increase spending caps.

Rightly fearing the government giveaways that always happen in a mad rush before Christmas, fiscal conservatives want to extend the continuing resolution into the New Year, preventing a rushed end-of-year process that would increase the urge for a spending binge. But Republican leaders have rejected that approach: They want to increase spending NOW—just in time to give the next generation more debt as a Christmas “present.”

The president’s budget this year notes that, prior to the effects of any policy proposals in that budget, the federal government is on track to spend approximately $53.4 trillion over the coming decade. Reducing spending by $1.5 trillion over a decade (the cost of the tax bill before taking into account economic growth) would therefore require reducing federal spending by approximately 2.81 percent—a level of discipline apparently beyond the comprehension of most congressional Republicans.

If Washington had a spending problem in fall 2010—when McConnell, Ryan, et al. made their comments, and the federal debt was “only” $13.7 trillion—it sure has a spending problem now, with the debt up to $20.6 trillion, up more than 50 percent from when the Republican leaders first spoke. Perhaps Republicans could start acting like it, and stop trying to find ways to circumvent budget caps. When you’re in a hole, stop digging.

Better yet, Republicans could actually embrace a fiscally conservative approach and take affirmative steps to solve the “spending problem” they complained about in 2010, rather than using Republican control of Congress to exacerbate it.

This post was originally published at The Federalist.

Are Cost-Sharing Reductions Subject to the Sequester?

Sen. Susan Collins (R-ME) thinks she has a deal with Senate Majority Leader Mitch McConnell (R-KY) to attach two provisions to a short-term spending bill later this month: The Alexander-Murray legislation to appropriate funds for cost-sharing reduction (CSR) payments to insurers, and a separate bill she and Sen. Bill Nelson (D-FL) have developed regarding reinsurance proposals.

Collins also thinks these two provisions will have a “net downward effect on premiums,” even after repealing Obamacare’s individual mandate as part of the tax bill the Senate is currently considering. However, it appears that Alexander-Murray and Collins-Nelson’s net effect on premiums could end up being a nice round number: Zero.

Cost-Sharing Reductions and the Sequester

The statute that created the budget sequester applies a list of programs and accounts not subject to sequestration spending reductions. For instance, the law exempts refundable tax credits, like those provided to low-income individuals who buy coverage on Obamacare’s exchanges, from sequestration reductions.

However, neither cost-sharing reduction payments nor reinsurance would qualify as refundable tax credits. They are paid directly to insurers, not individuals, and are not part of the Internal Revenue Code. Also, neither cost-sharing reductions nor reinsurance are on a list of other accounts and programs exempted from the sequester.

The Obama administration previously admitted that cost-sharing reduction payments were subject to the sequester, in a sequestration report to Congress in April 2013, and in testimony before the House Energy and Commerce Committee in August of that year. In a separate 2014 report, the Obama administration also admitted that Obamacare’s transitional reinsurance program (which expired in 2016, and which senators Collins and Nelson effectively want to re-create) was subject to the sequester.

However, last year Judge Rosemary Collyer ruled these actions unconstitutional, because the treasury lacks a valid appropriation to pay out CSR funds. The Trump administration last month stopped the CSR payments to insurers, citing the lack of an appropriation. While the Alexander-Murray bill would appropriate funds for the CSR payments, it would do so through the Centers for Medicare and Medicaid Services, not the treasury—meaning that the sequester would apply.

Statutory PAYGO and the Sequester

Earlier this month, the Congressional Budget Office (CBO) released a letter to Rep. Steny Hoyer (D-MD) indicating that legislation increasing the budget deficit (on a static basis, i.e., not accounting for economic growth) by $1.5 trillion would result in a sequester order of approximately $136 billion for 2018. The existing statutory formula would deliver a 4 percent, or approximately $25 billion, reduction in Medicare spending, followed by about $111 billion in reductions elsewhere.

However, because the sequestration statute exempts many major spending programs like Social Security and Medicaid, CBO believes that only about $85-90 billion in existing federal resources would be subject to the sequester. This means an additional $20-25 billion in mandatory spending, if appropriated, would immediately get sequestered to make up the difference.

On the one hand, conservatives who oppose paying CSRs to insurers may support an outcome where insurers do not actually receive these payments. On the other hand, however, some may view this outcome as the worst of all possible worlds: Having surrendered the principle that the federal government must prop up insurers—and Obamacare—without receiving any actual premium reductions, because the payments to insurers never get made.

This scenario, when coupled with repeal of the individual mandate, could result in a legislative outcome that raises premiums next year—a contradiction of the promises Republicans made to voters.

This post was originally published at The Federalist.

The Politics of Paying for the Medicare “Doc Fix”

House members are working on legislation to provide a permanent repeal of provisions capping Medicare reimbursements to physicians. As past debates have shown, failure to identify spending cuts to offset the pay increase to doctors would significantly impact seniors’ Medicare premiums.

Legislative language has yet to be released, but press reports have indicated the outlines of a potential agreement between House Speaker John Boehner and Minority Leader Nancy Pelosi. The proposal is expected to permanently repeal the sustainable growth rate (SGR) mechanism established in 1997 for setting physician payments and overall physician spending within Medicare. After only a few years, spending began to exceed the SGR spending targets, prompting Congress to pass a series of bills—known as the “doc fix”–adjusting the targets upward for short periods.

In general, Congress financed these short-term doc fixes by reducing spending elsewhere in the budget. More than $165 billion worth was covered this way. But lawmakers used two statutory mechanisms to lower the cost of these short-term spending bumps and promised to recover the remaining costs in the future. Each time it has come up, Congress has kicked the proverbial can down the line.

When it comes to physician payment, the agreement being negotiated by the congressional leaders is expected to do two things: First, it would fill in the shortfall from repeated budgetary gimmicks. Maintaining flat payment rates for the future, rather than letting the SGR cuts take effect, would cost $137.4 billion, according to the Congressional Budget Office. This would not be paid for but would be absorbed into the deficit. The second part of the agreement, which provides for modest increases in physician payments in the coming years, would have a net cost of $37.1 billion, according to CBO. This increase in spending would be paid for.

One ramification of the proposed $137 billion increase in deficit spending: Seniors would fund a significant portion. As CBO noted in its 2009 score of an earlier, unsuccessful SGR repeal bill: “Beneficiaries enrolled in Part B of Medicare pay premiums that offset about 25 percent of the costs of those benefits. . . . Therefore, about one-quarter of the increase in Medicare spending would be offset by changes in those premium receipts.”

The House Republican leadership is well aware of the premium effects of an unpaid-for SGR repeal. When then-Speaker Pelosi brought an unpaid-for SGR repeal bill to the House floor in November 2009, then-Minority Leader Boehner called it an “absolute train wreck,” because it “forces seniors to pay higher premiums.” All but one House Republican voted against the legislation—largely because it did not include spending cuts to pay for the repeal.

It remains unclear how many House Republicans today might change their position from 2009, or what their public justification for doing so would be. What is clear is that any unpaid-for legislation would have a fiscal impact on America’s seniors as well as the federal budget.

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

Weekly Newsletter: December 8, 2008

Obama Proposes Massive Government Spending on Health IT

This weekend, President-elect Obama proposed as one of the five components of an economic “stimulus” package new government spending to promote a health information technology infrastructure nationwide. While Saturday’s speech contained no specific dollar amounts or proposals related to health IT, his campaign platform previously committed to spending $50 billion over five years “to move the U.S. health care system to broad adoption of standards-based electronic health information systems.”

While supporting the more widespread adoption of health IT as one way better to manage care and control cost growth, some conservatives may be concerned by both the scale and timing of the Obama proposals. Conservatives may note that the federal government did not need to spend money to develop a nationwide network of ATM machines, for example, and question the need for the significant federal expenditure on health it—particularly if it comes with additional “strings attached” that would result in further federal intervention in the practice of medicine. Instead, some conservatives may support efforts to provide regulatory relief to physicians—including medical liability reform and changes to the “Stark” laws on physician self-referral—that would empower physicians in the private sector to finance their own health IT purchases without the need for more federal spending.

Some conservatives may also be concerned by the implications of the process outlined by the President-elect. Congress has spent many years considering health IT legislation without finding consensus on a way forward, but the timeline envisioned by the incoming Administration would see the years-long impasse brought to a conclusion within a matter of weeks. Conservatives may be concerned that such a rushed process may include provisions advanced by various liberal interest groups—including onerous privacy restrictions that impede efforts to coordinate care, a private right of action related to security breaches likely to breed costly lawsuits, and a patchwork of state and federal laws creating regulatory uncertainty for providers—that may only serve to raise costs and inhibit health IT adoption.

The RSC has released a Policy Brief outlining issues related to health IT implementation, which can be found here.

Baucus Wouldn’t Pay for Health Reform Until After Medicare’s Bankruptcy

Just before Thanksgiving, Senate Finance Committee Chairman Max Baucus (D-MT) spoke with reporters about the comprehensive health reform white paper he released earlier in November. Discussing the possibility floated by some Democrat leaders that Congress should waive pay-as-you-go
requirements for any comprehensive health care overhaul advanced in the 111th Congress, Baucus noted his expectation that such legislation would not be fully paid for in the short-term, but that after a decade “the bulk of the up-front investments will be offset by cost savings and reductions.”

Some conservatives may note an inconvenient truth associated with this statement: In one decade from now—by the time Sen. Baucus envisions actual cost savings from comprehensive reform—the Medicare Part A Trust Fund will be exhausted. The latest Medicare trustees’ report predicted an insolvency date for the Hospital Insurance Trust Fund of 2019—and that date could be moved forward if the current economic slowdown results in an expected decline in payroll tax receipts. If the cost savings from any comprehensive reform legislation will not materialize for a decade, as Sen. Baucus predicted, millions of seniors may face difficult health care choices when Medicare becomes insolvent.

Conservatives may therefore believe that, before even considering whether to expand government programs like the State Children’s Health Insurance Program (SCHIP) or create new health care entitlements, Congress should first work to preserve America’s current entitlements. Failure to do so could unleash a fiscal catastrophe that dwarfs the current economic turmoil, and jeopardize the health care of millions of seniors—not to mention America’s financial security.