The congressional enactment of the Budget Control Act to increase the national debt limit was mostly a triumph of process, not substance. But substance cannot be avoided. The looming question is how this process will deal with the biggest entitlement challenge: Medicare.
On Medicare, Congress has only two options: (1) serious but careful structural reform, or (2) blunt across-the-board cuts that will make matters even worse. After almost 30 years of tiresome debate on this issue, studiously ignoring the findings of independent analysts and presidential commissions alike, Congress has yet another chance to do the hard work on the details of Medicare reform.
The Goal. Following the initial reduction in discretionary spending, the Budget Control Act creates a special bipartisan Joint Select Committee on Deficit Reduction, a “super committee” that would have the “goal” of producing $1.2–1.5 trillion in 10-year savings. Just as there is no cap on budget savings, surprisingly, there is no real floor, either. As Heritage Vice President for Domestic and Economic Policy David Addington observes, the deficit reduction “goal” is not even legally binding. Nonetheless, the committee is to report its recommendations by November 23 and Congress is to enact them, without amendment, by December 23.
This is a very fast-track process for some very big thinking and some very big changes. Serious Medicare reform is going to require hard, fast, and extraordinarily competent policy work.
The Fallback. The bipartisan committee will either reach agreement on how best to reduce the deficit by the target amount or it will not. If it does not, the Budget Control Act authorizes an automatic 2 percent, across-the-board cut in Medicare and other domestic programs (with the exception of Medicaid and Social Security) as well as national security and defense. The across-the-board cuts are to be equally divided between defense and non-defense spending, In the case of Medicare, the budget savings are to come not from benefit reductions but from provider payment cuts.
More Bad Policy. Politicians cannot control the demand for medical services. They can control only the supply of those services by cutting payment for them. The huge cohort of rapidly retiring baby boomers—the first big batch will be eligible for Medicare enrollment this year—will push the demand for medical services to unprecedented levels, but the boomers cannot get more if their doctors and other medical professionals are being paid less and less for delivering them. Physicians can either cut back on their Medicare practice, reducing senior access and adding to hospital emergency room caseloads, or they can crank up their volume, thus spending even more. A formula for failure.
Medicare doctors and hospitals are already facing record-breaking Medicare cuts under current law. The Medicare physician payment formula guarantees a 29.4 percent cut in doctors’ reimbursement in 2012, unless Congress overrides its own stupid formula, as it has done routinely since 2003.
Even so, some seniors are already paying a price. The Medicare Payment Advisory Committee reported a couple of years ago that 28 percent of Medicare patients had problems finding a primary care doctor. Likewise, Obamacare imposes Medicare provider payment cuts that are already projected to yield $575 billion in savings in the first 10 years. Indeed, the Medicare Actuary says that if these Medicare provider payments continue, they will dip below Medicaid levels, where patients routinely struggle to find doctors to take care of them.
When Congress voted to increase the nation’s debt, it also promised to decrease federal spending. If Members are serious, they should reform Medicare on the principles of choice and competition and secure real savings, avoiding the alternative across-the-board cuts that will only jeopardize seniors’ access to care.
This is possible if they don’t blow it. Again.