Budget Gimmicks Hide the $213 Billion Cost of Medicare Doc Fix

 

The headline of the Congressional Budget Office’s (CBO) damning assessment of the fiscal damage done by H.R. 2 — the so-called Medicare doc fix negotiated secretly by House Speaker John Boehner and Minority Leader Nancy Pelosi — is that the deal will add $141 billion to the deficit over the next ten years.

Even this appalling outcome is sugarcoated. After unpacking the gimmicks underlying the estimate, the actual result is much worse.

First, the worst gimmick: The bill increases spending on the Children’s Health Insurance Program (CHIP) by almost $40 billion. Yet, the CBO only includes less than $6 billion in its estimate of the bill’s costs. How did over $34 billion of CHIP spending simply vanish into thin air? Easily! Much of it was already in the baseline.

Welcome to the weird world of federal budgeting, where the so-called baseline is the source of much mischief. Recall the entire reason Congress had to patch Medicare payments to doctors at least once a year for over a decade is because the budget baseline was determined by an unrealistic formula called the Sustainable Growth Rate (SGR).

Because that formula would have led to pay cuts that would have made it uneconomical for physicians to see Medicare patients, Congress had to increase physicians’ fees beyond the baseline. Most importantly, until now, those pay increases have been paid for by spending offsets.

Physicians never had their Medicare pay cut to the level dictated by the baseline. There was simply no crisis that had to be averted by last week’s budget busting Medicare doc fix.

Canadians Leave Canada for Medical Care

 

CanadaCanada’s government monopoly of health insurance leads to long waits, and an increasing number of Canadians have to leave the country to get care, according to The Fraser Institute:

In 2014, more than 52,000 Canadians received non-emergency medical treatment outside Canada.

Across Canada, neurosurgeons reported the highest proportion of patients (in a specialty) travelling abroad for treatment (2.6%). The largest number of patients (in a specialty) travelled abroad for internal medicine procedures (6,559).

One explanation for patients travelling abroad to receive medical treatment may relate to the long waiting times they are forced endure in Canada’s health care system. In 2014, patients could expect to wait 9.8 weeks for medically necessary treatment after seeing a specialist—3 weeks longer than the time physicians consider to be clinically “reasonable” (6.5 weeks).

The equivalent number of Americans would be about half a million, given the different sizes of the populations. According to the Centers for Disease Control and Prevention (CDC), 750,000 Americans travel abroad for medical care. However, their needs are very different: Cosmetic surgery, not brain surgery, is the largest reason.

Churn, Churn, Churn: Measuring the Cost of Fragmented Coverage

 

F1Low-income Americans face bewildering bureaucratic requirements when they try to obtain welfare benefits. One of the challenges is that they have to frequently re-apply for benefits because the state needs to know whether their incomes are still low enough form them to remain eligible. This moving in and out of benefits is called churn, and Dottie Rosenbaum of the left-wing Center for Budget and Policy Priorities has written an interesting paper discussing the challenges in measuring and understanding it:

States renew Medicaid and CHIP eligibility once a year, as federal rules require, and federal rules have changed to require a minimum eligibility period of 12 months for child care. Many states still review SNAP eligibility every six months……

States are allowed to recertify eligibility of elderly and disabled households for SNAP every 24 months.

There is trade-off here: If people have too much hassle re-applying for fragmented benefits they might not get them and that will cost taxpayers more down the road. On the other hand, welfare that depends on income demands some burden of re-certifying eligibility on the recipient.

NCPA recently published an analysis of the bewildering array of federally funded safety-net programs, and recommended that state, local, and civic agencies be able to apply for block grants that consolidate funding from multiple programs. This would also reduce the challenge of churn, as applicants would be able to re-certify eligibility at one agency.

Health Insurers Just Fine Under Obamacare

 

New research from the Commonwealth Fund, a pro-Obamacare think tank, shows that health insurers are doing just fine under Obamacare.

Well, the stock market has been telling us that for years. The report’s purpose is to cheer the rebates that insurers which made too much money paid to consumers. Obamacare regulates the Medical Loss Ratio (MLR). If an insurer does not spend enough premium on medical claims, it has to pay a rebate to its beneficiaries.

Rebates have collapsed from over $1 billion in 2011 to $325 million in 2013. The report concludes that Obamacare caused insurers to reduce their overhead expenses and profits. Actually, there is less to this story than meets the eye. Exhibit 5 shows that there has been very little change in insurers’ income statements over the three years.

T5

(Source: Michael J. McCue & Michael A. Hall, The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 3, New York, NY: Commonwealth Fund, March 2015, page 6.)

Honor Roll: 37 Voted Against the Budget Busting Medicare Doc Fix

 

“While I support an SGR replacement, I cannot vote in favor of a bill that costs more than $200 billion, while Congress only pays for $70 billion, leaving more than $130 billion to our children and grandchildren. We cannot continue to solve every problem by adding to the deficit,” Rep. Jim Bridenstine (R-Okla.) said in a statement.

The 37 Congressmen who voted against include high-ranking Republicans Darrell Issa and Jim Jordan.

Cristina Marcos of The Hill reports the entire list.

With Medicare Doc Fix, House Republicans Move Left of Obama on Health Reform

 

StethoscopeThe fallout from yesterday’s House vote to bind our children and grandchildren further into debt servitude to bail out an unreformed Medicare continues.

Before the vote, Chris Jacobs of America Next (Louisiana Governor Bobby Jindal’s think tank) warned that Medicare could not survive reform if the so-called “doc fix” passed. Writing after the unfortunate vote, Jacobs explains that House Republicans have actually moved left of Obama on Medigap reform:

The GOP’s Proposed Budgets’ Effect on Medicare and Medicaid

 

Today’s appalling vote in favor of a so-called Medicare doc fix that will increase the deficit by $141 billion makes it hard to take the House and Senate budget resolutions seriously. Nevertheless, they have a lot of positive reform in them. Sean Parnell of the Heartland Institute interviewed me for the Heartland Institute’s podcast.

The interview happened a few days ago, before we knew that almost all House Republicans were about to vote to endorse Obamacare’s vision of controlling Medicare by federalizing the practice of medicine. Nevertheless, if the Republicans ever re-gather their bearings. maybe they will move their budget forward.

Hear the entire podcast here.

How Conservatives Rationalize the Budget Busting Medicare Doc Fix

 

Opposition to the outrageous so-called Medicare doc fix bill, which will increase the deficit by $141 billion, is growing. Michael Cannon of the Cato Institute explains how this will “bust the budget.” My Forbes editor, Avik Roy, pleads that the Senate stop this monstrosity (which passed the House by a huge majority).

On the other hand, there are those unfortunate conservatives who endorsed the bill before the Congressional Budget Office (CBO) had announced what a budget buster it was. My friend Ryan Ellis of Americans for Tax Reform appreciates that the CBO score could give us a feeling of “whiplash”.

97 Percent of Medicare Doc Fix Deficit Funded

 

Today’s Health Alert warned against the so-called Medicare doc fix that is being jammed through the Congress this week. The Health Alert was written and published before the Congressional Budget Office issued its estimate of the bill’s effect on the deficit.

Here it is:

Over the 2015–2025 period, CBO estimates, enacting H.R. 2 would increase both direct spending (by about $145 billion) and revenues (by about $4 billion), resulting in a $141 billion increase in federal budget deficits (see table on page 2). Although the legislation would affect direct spending and revenues, it would waive the pay-as-you-go procedures that otherwise apply.

Less than three percent of this spending binge is paid for. Over 97 percent is deficit financed. This is how Republicans are showing how they can govern, especially on health reform?

Not in my worst nightmare did I think the bill would be this outrageous. As they say in America: “You gotta be kidding me!”

Any politician who votes for this will surely not be considered a credible voice in the debate over post-Obamacare health reform.

Here is the Heritage Foundation’s take. And AEI’s James Capretta and Scott Gottlieb.

What VA Scandal?

 

Senior Man ThinkingIn 2011, economist Paul Krugman attacked Republican lawmakers for wanting to reform the federal agency responsible for delivering health services to our military personnel. Krugman wrote, “Multiple surveys have found the V.H.A. providing better care than most Americans receive,” and said the VA was “a huge policy success story.” Well, he was wrong.

Today, we know the embattled agency needs an overhaul. When news broke last year that numerous veterans had died while awaiting medical treatment, the public was emphatic in its determination to deliver a message of discontentment to the VA. So, despite Krugman’s fanfare for the VA and despite the media ignoring the ongoing issues, a new report by Heartland Institute indicates at least one national veterans’ organization is still paying attention and thinks reform is necessary.