The Heritage Foundation

The Morning Bell


MONDAY, OCT 19, 2009

Exposing the Obamacare Shell Game

In his primetime health care address before a Joint Session of Congress, President Barack Obama promised the American people: “I will not sign a plan that adds one dime to our deficits – either now or in the future. Period.” But it is hard work adding $1 trillion in government spending while claiming with a straight face that you are not adding to the deficit. Enter White House Chief of Staff Rahm Emanuel who has just the solution: just strip out $247 billion of the spending in the bill, pass it separately, and voila … your job just got one-fourth easier.

The specific issue at hand is the centrally planned price control regime the federal government uses to reimburse doctor’s who participate in Medicare. Medicare reimburses doctors and other medical professionals for their services according to a congressionally created fee schedule that is annually adjusted by the Sustainable Growth Rate (SGR) formula. The idea is relatively simple: If Medicare spending grows faster than our overall economy (which is almost always the case), then payments to Medicare providers are supposed to be reduced proportionately to keep expenditures in line over a period of time.

Problem is every year Congress–under both Democratic and Republican leadership–routinely blocks the cuts from going into effect. Subsequently, the necessary cumulative cut in Medicare payments grows bigger. Without a change to current law, payments to physicians would be reduced by 21.5% as of January 1, 2010. The Senate Finance Committee bill addresses this problem by raising the reimbursement rate for one year and then pretending that Congress will allow massive cuts for the next 9 years. House Majority Leader Steny Hoyer (D-MD) rightfully called the Senate Finance Committee proposal a façade.

The Obama administration’s proposed solution, however, is no more honest. Instead of pretending Congress will cut doctor’s Medicare reimbursement rates, the Senate wants to pretend the doc fix isn’t part of health care reform. So Majority Leader Harry Reid’s (D-NV) dissembled Friday: “Correcting the Medicare doctors’ payment discrepancy is a budgetary problem — health insurance reform tackles a serious regulatory problem. That’s why we need to fix the Medicare doctors’ payments first, outside of health reform.” The Washington Post editorial board responded this morning:

Mr. Reid’s attempt to distinguish the budgetary and regulatory issues is nonsensical. The health reform measure includes all sorts of changes in the ways that various providers are compensated. True, the problem with inadequate Medicare payments is something of a preexisting condition to health reform, but that does not make it unrelated. The so-called doc fix is being rushed to the Senate floor this week in advance of health reform not because it has nothing to do with health reform but because it has everything to do with it.
…A president who says that he is serious about dealing with the dire fiscal picture cannot credibly begin by charging this one to the national credit card, with no concern for the later generations who will have to pay the bill.

And it is the later generations that should be particularly concerned with this shell game. That $247 billion price tag is just the ten year cost of the doc fix. Looking over the long-term, the 75-year cost to our national debt is another $3 trillion. This past Friday the Obama administration admitted that the federal budget deficit for the fiscal year that just ended was $1.4 trillion, nearly a trillion dollars greater than the year before and the largest shortfall relative to the size of the economy since 1945. Just like Obamacare’s massive expansion of the Medicaid rolls, the doc fix shell game exposes the fact that Obamacare is just a continuation of the current budget busting health care system, not real reform.