Medicare Doc Fix Could Become Budget Battle

The Medicare physician pay fix may be causing heartburn for fiscal hawks who balk at its $141 billion price tag, but it could also lead to serious headaches as Republicans attempt to draft their first balanced budget resolution in more than a decade.

The House and Senate passed their budgets in March and are expected to appoint members to a joint budget resolution conference when Congress returns next week. There are already plenty of differences to iron out, but the permanent Medicare physician pay fix adds a new twist: accounting for the $141 billion cost of the bill.

The House budget already includes the cost of the Medicare legislation in its baseline. The Senate budget does not. Should the bill become law before conferees reach an agreement – a process that is expected to take weeks and not days—budgeteers will have to find those savings, or risk accusations that they do not have a balanced budget.

The House overwhelming passed the Medicare legislation, 392-37, in March. Senate Majority Leader Mitch McConnell (R-Ky.) said the chamber would take up the Medicare bill as soon as they reconvene on April 13. There is added pressure to pass something immediately, as the 21 percent Medicare physician pay cut already took effect. The Centers for Medicare and Medicaid Services stopped processing payments in anticipation of congressional action to stop the cuts, but the agency said they can only hold out until April 14.

If the Senate responds to this pressure and passes the $141 billion fix before the budget conference convenes, appointees may have to agree to more cuts – and finding additional savings in an already tight budget could prove challenging.

“The reason that the Senate did not include it is because they couldn’t afford it,” Paul Winfree, director of the Roe Institute at the Heritage Foundation, said in an interview. “If they included it, it would take the budget out of balance. If they do assume the cost of a doc fix in the budget, the way the House does, the Senate will have to come up with additional savings within ten years. That might be a fairly large hurdle, because you are asking senators to swallow more savings.”

As of now, the Senate budget includes what’s known as a “deficit neutral reserve fund” or DNRF, for a Medicare doc fix, regardless of whether it is permanent or temporary. But setting up that fund does not identify where budget architects might cut to get those savings, it simply gives the Budget Committee chairman the ability to pass a fix, as long as it doesn’t raise the deficit.

The cost of the Medicare legislation has already ruffled feathers in the conservative arena. Budget hawks on the far right are circulating a memo, seen below, outlining an amendment that would end up requiring an automatic $15 billion cut, largely to mandatory Medicare spending, in 2016 if the cost of the doc fix repeal isn’t fully covered.

Marc Goldwein, senior vice president and policy director at the Committee for a Responsible Federal Budget, said lawmakers didn’t try hard enough to identify cost offsets.

“They wanted to show they could govern,” Goldwein said in an interview. “The biggest praise I’ve seen is that [the bill is] bipartisan. We love bipartisanship here, but it’s pretty easy to add to the debt in the name of bipartisanship.”

If legislators really wanted to find savings, Goldwein said, they wouldn’t need to look far. The offsets identified in the repeal bill are deliberately noncontroversial, intended to garner support rather than make hard choices.

“I don’t think we’re close to the territory where they’re politically toxic,” Goldwein said of the repeal’s offsets. He said Republicans would likely be willing to make deeper cuts to healthcare providers.

Despite those concerns, support for the SGR legislation was widespread in the House. Among the 392 who voted in favor were dyed-in-the-wool fiscal conservatives who were able to stomach the price tag. Reps. Paul Ryan (R-Wis.) and Pete Sessions (R-Texas), both budget hawks, cosponsored the bill.

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