No, the SGR Replacement Bill is Not Fiscally Responsible

Mar 26, 2015 | Health Care

Despite official estimates tabbing the Medicare Sustainable Growth Rate (SGR) formula replacement bill at a cost of $141 billion this decade and implying it would add upwards of $500 billion to the debt over 20 years, lawmakers have taken to fuzzy math – or simply ignoring math altogether – in order to pretend that the bill is fiscally responsible.

Needless to say, applying that label requires some generous assumptions. Take, for example, a press release from the House Energy and Commerce Committee, which deserves a point-by-point refutation:

  • CBO: “CBO estimates that enacting the legislation would cost $0.9 billion less over the 2015–2025 period than freezing Medicare’s payment rates for physicians’ services”
  • Note: Congress has never allowed a cut to physician payments to go into effect.  A freeze or slight increase on physician payments is the most realistic baseline to measure the bill against, and CBO confirms this bill saves relative to that measure.

Of course, Congress has almost never passed a doc fix without offsetting it either, so measuring against a baseline that assumes unpaid-for doc fixes in perpetuity is not realistic. And as we have pointed out, it is circular to say that a payment freeze does not cost anything because future Congresses may be fiscally irresponsible. CBO uses current law as its standard and only evaluated the bill relative to a freeze because it was asked to. You cannot (against all evidence) assume fiscal irresponsibility in order to justify being irresponsible. Further, even after dramatically lowering the bar for fiscal responsibility, this bill barely clears it.

"The budgetary effects of two [structural reform] provisions of the bill would increase especially rapidly: The effect of the increase in the number of beneficiaries subject to income-related premiums for Parts B and D of Medicare would grow rapidly because the share of Medicare enrollees subject to those surcharges would rise over time; similarly, the effect of the limitation on first-dollar coverage by certain Medigap plans would grow rapidly because the policy would apply only to beneficiaries who enroll after 2019.”

The Energy and Commerce Committee is correct in quoting CBO that savings from these policies would tend to grow over time, but that doesn't change the fact that CBO also says, "Taken as a whole, H.R. 2 would raise federal costs (that is, increase budget deficits) relative to current law in the second decade after enactment." Plus, one policy in the bill on Medicaid DSH works in the opposite direction, producing $4 billion of savings in the first decade but none in the second decade – and its savings are much larger than those of the Medigap restriction.

  • “Compared with the costs of freezing Medicare’s payment rates for physicians’ services, the budgetary effects of H.R. 2 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.
  • Note: Past SGR patches have often increased reimbursements, not frozen reimbursements. Additionally, extraneous provisions have been added to SGR patches, thus increasing overall spending.

Again, E&C significantly lowers the bar and celebrates barely clearing it. Additionally, the first part of CBO's statement indicates there is still a good chance the bill would increase deficits in the second decade above the already fiscally irresponsible scenario. More importantly, CBO unequivocally states that the bill would increase second-decade deficits relative to current law.

No matter how the supporters try to spin it, the SGR replacement is not fiscally responsible by CBO scoring or by historical precedent.