Hand and grinder with dollars

SGR “Doc Fix” Resource Page

Policy Analysis

Deficit Impact Analysis

Other Analysis

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Hand and grinder with dollars

FAQ: $400 Billion Doc Fix Deal FAQ (H.R. 2)

Status: Congress periodically overrides a 1997 law that attempts to contain the cost of Medicare payments to doctors.  It prevents the cuts from going into effect with legislation called the “doc fix.”  This year, Medicare payments to physicians will be reduced 21 percent if no doc fix passes by March 31st. While Congress normally passes short-term fixes that are paid for, Speaker John Boehner and Minority Leader Nancy Pelosi are attempting to pass a massive package that could increase the debt by more than $400 billion over two decades, according to an estimate by the nonpartisan Committee for a Responsible Federal Budget (CRFB).

Isn’t SGR just a budget fiction?

No. SGR would impose real, immediate cuts in Medicare if Congress doesn’t act.  These are real cuts that are scheduled to go into effect under current law.

How has the SGR been dealt with in the past? What do these “doc fixes” usually look like?

Because SGR was originally intended to bring Medicare costs to a sustainable level, Congress has almost always tried to maintain that spirit by coupling the doc fix with real cuts and reforms elsewhere in the healthcare system, usually through the Medicare program. In fact, the SGR has led to real health care reforms over the years, totaling $165 billion since 2002. An analysis done by the Center for a Responsible Federal Budget (CRFB) indicates that 98 percent of doc fixes have been offset with cuts elsewhere.

But aren’t these doc fix “offsets” usually gimmicks?

No. The same study mentioned above from CRFB estimates that only a fraction of the overall doc fix offsets could be classified as gimmicks.  Past doc fixes have contained small, but important structural reforms to Medicare as well as reductions in other areas of federal spending.

Why is SGR so important?

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Repeal Effort Alive and Well as Obamacare Turns Five

“When I sign this bill, all of the overheated rhetoric over reform will finally confront the reality of reform.”

That was President Barack Obama’s hope five years ago when he signed Obamacare into law.  His claim was not without historical precedent, as Social Security, Medicare and even Medicaid were swiftly accepted by Republicans.  And to be fair, some leading Republicans even said full repeal of Obamacare was “frankly a distraction.”

Fortunately, conservatives all around the country and conservative leaders in Congress refused to accept “no repeal” as the Republican Party’s position.   Five years later, Obamacare’s grip on our economy and health care choices has hardened, but it has not calcified.  The Associated Press casually noted “permanence of the president’s achievement remains in question” to this day.

The law’s future remains uncertain because full repeal has become the Republican Party’s position – a position that delivered a historic majority in the House and the first Senate majority in nearly a decade.  Now it is time for those majorities to continue the fight against Obamacare by sending a bill to repeal all of Obamacare to the President’s desk.

Doing so will send a signal to everyone – hospitals, insurance companies, politicians, lobbyists and voters – that Obamacare will be repealed in 2017 if Republicans hold the House and Senate and win the White House next year.

Obama’s signature achievement, a policy that has hurt millions of Americans, could be wiped from the books in less than two years.  To accomplish that though, Republicans in Congress must begin leading.


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Hand and grinder with dollars

What they said on the doc fix … in 2009

In 2009, conservatives and Republicans were united in their demand that any repeal of Medicare’s SGR be fully offset… 

John Boehner (R-OH): Irresponsible ‘Doc Fix’ Proves Democrats “Cannot Help Themselves” (November 19, 2009)

”This irresponsible ‘doc fix’ proves once again that out-of-touch Washington Democrats simply cannot help themselves when it comes to piling debt on our kids and grandkids. Democrats continue to add tens of billions of dollars to the deficit while promising to eventually end their unprecedented spending binge.”

John Boehner (R-OH): Congressional Record (November 19, 2009)

That’s the real issue here, the fact that there is no pay-for here. There is no offsetting other types of spending. There are no increases in revenue somewhere to cover this. It’s just going to be dumped onto the backs of our kids and grandkids. The American people want us to relearn fiscal responsibility. My colleagues on my side of the aisle over the course of this year have stood up, I believe, for fiscal responsibility. And if we’re going to get our economy going again, we’d better get our fiscal house in order as well.

Joe Barton (R-TX): Congressional Record (November 19, 2009)

Mr. Speaker, the only fix that’s in this bill before us is “the fix is in.” …  It is a wave the magic wand, erase the accumulated deficit of the last 10 years or so in the SGR formula, and let’s kick the can on down the road.

Ed Whitfield (R-KY): Congressional Record (November 19, 2009)

As I have said, both parties have a lot of blame for the debt that we’re in, and the American people want us to be responsible. We have a $12 trillion debt today. Within 10 years, it’s supposed to be $23 trillion. At some point, we have to meet our obligation, meet our responsibility and try to pay for some of these programs. All of us support the purpose of this legislation, but there must be a way that we can do it and have it paid for. So for that reason, I would have great difficulty voting for this legislation without it being clearly paid for.

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Fast Facts: Medicare Doc Fix

The Medicare “Doc Fix”

Status: Congress periodically overrides a 1997 law that attempts to contain the cost of Medicare payments to doctors.  Congress prevents the cuts from going into effect with legislation, called the “doc fix.”  This year, Medicare payments to physicians will be reduced 21 percent if no doc fix passes by March 31st.

Background: When a physician treats a patient on Medicare, the government pays for the services he performs.  In 1997, Congress became concerned with the growing cost of these payments to physicians.  In response, lawmakers included in the Balanced Budget Act a restriction on growth in Medicare payments to doctors.  This cap is called the “Sustainable Growth Rate” (SGR).  The increase in payments could not be larger than the overall growth of the economy.

Since 2003, Congress has passed 17 bills stopping these payment cuts from going into effect.  If Medicare payments are cut too much, physicians may stop accepting Medicare patients.  This creates a major incentive for Congress not to allow the cuts to go into effect.  However imperfect, the SGR acts as a needed brake on exploding Medicare costs.  When it overrides the SGR, Congress normally offsets the cost with spending reductions in other areas.  The bipartisan Committee for a Responsible Federal Budget states that “since 2004, 98 percent of doc fixes have been paid for. And although these doc fixes have cost about $175 billion, the pay-fors have generated roughly $165 billion worth of savings.”

Bipartisan Irresponsibility:  According to Politico, the bill in the House being negotiated between John Boehner and Nancy Pelosi would include roughly $200 billion in increased entitlement spending, with only $70 billion offset with spending entitlement cuts elsewhere.  The bill would eliminate the SGR and replace it with a new payment system.  Another program, CHIP, is also reauthorized for two more years at “the elevated payment rates approved under Obamacare.”  CHIP provides health insurance for children and families with incomes above the poverty line.                                                                             

The deal would be only partially paid for with “structural” changes to Medicare spending.  The specifics of the plan are unclear.  However, reforms are likely to include a reduction in Medicare benefits for the wealthy (an approach known as “means-testing”) and a reform of Medicare supplemental insurance offerings (known as Medigap).  Both reforms are of uncertain size and impact.  What is known is that the up-front savings of the plan are minimal.  Historical patterns of Congressional policymaking suggest that a spending-now, cuts-later approach is ineffective at reducing spending.

House Republicans are trading the repeal of a massive leverage point with a long history of reducing government spending for limited structural reforms.  The extension of CHIP is a major priority of the Left, despite the fact that the program is largely irrelevant within the context of the current healthcare safety net, which currently includes Obamacare and an enhanced Medicaid program.

Long-Term Solutions: Reform is needed to ensure seniors have access to care as well as ensure that Medicare operates in a fiscally sustainable way.  The Heritage Foundation argues that “[a]ny permanent Medicare “doc fix” must be financed with permanent Medicare savings.”  The changes to the SGR must also balance in size and scope with structural changes to Medicare.  A large change to the SGR with only small changes to Medicare is fiscally irresponsible.

While the House proposal does contain reforms, the changes it suggests are hugely disproportionate to the changes it makes to the SGR.  The elimination of the SGR should be paired with major changes to Medicare.  After all, beyond the program’s 10-year costs, SGR actually has a long-term structural impact of $2.3 trillion. The proposal’s $200 billion price tag, bipartisan backing and the fact that the House plan’s savings only begin at the end of the 10-year budget window indicate strongly that its changes to Medicare are minor.

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