EconomistMom.com

Saturday’s Washington Post contained this editorial on the false notion that Congress has come up with any plan for health care reform that is truly deficit neutral.  The basic charge:  neither either house of Congress, nor the Administration, has both (i) admitted that they have repeatedly rejected the current-law Medicare savings mechanism known as the “sustainable growth rate” (SGR) provision and that they will very likely continue to reject it; and (ii) come up with a credible way to make up for that lost savings through other specific policies or otherwise demonstrated that they can, from here forward, somehow find the courage to achieve fiscal discipline in health care spending through other-than-SGR-type means.  The Post editorial characterizes it this way (emphasis added):

THE SENATE Finance Committee’s health-reform bill is fully paid for, according to the Congressional Budget Office; in fact, the CBO says, it would save $81 billion in the first 10 years. The House version of health reform, by contrast, would add $239 billion to the deficit over that period. So the Senate bill is more fiscally responsible, right? Not exactly.

The cost difference stems from the fact that the House measure is honest enough to include the full 10-year cost of the so-called “doc fix” — $245 billion to reverse scheduled cuts in Medicare payments to physicians — although not fiscally responsible enough to pay for it. The Senate just patches the problem for one year and pretends that doctors take a 25 percent cut in reimbursements the following year and then stay at that low level forever. No one believes that will happen, so the money is going to have to be scrounged up later or else add more to the deficit. At least the House makes that unpleasant fact clear, rather than sweeping it under the rug…

[T]here is widespread agreement that the original spending formula turned out to be unreasonable. Congress wasn’t wrong to override it. What is wrong is to pretend the cost doesn’t exist — and to overhaul the health-care system without dealing with this quarter-trillion-dollar expense…

The administration claims credit for honesty in budgeting because it included the cost of the fix in its projections. But it then gives itself an easy out — declaring that this cost should not be subject to pay-as-you go budgeting rules that would require that the fix not add to the deficit. The House has agreed, decreeing that the SGR fix should be exempted from pay-as-you-go…

the cost to federal taxpayers remains — no matter how much budgetary smoke and mirrors are used to make it seem to disappear, or to postpone the check-writing.

But “smoke and mirrors” suggests this issue of the Medicare SGR is just an “illusion”–and it’s not.  Whether policymakers will be able to stick to their current-law commitment about SGR cost savings represents a real policy choice that makes a real and substantial difference.  (CBO wouldn’t score the Senate proposal as “deficit neutral” were it not for the real potential for these real cost savings, and their estimates merely assume that Congress actually sticks to the “plan” as now written.)  The House proposal’s (virtuous-sounding) “honesty” could easily be labeled a “cop-out” or “wimpiness” instead.  The Senate proposal’s (malicious-sounding) “pretending” that the SGR will later be honored could easily be recharacterized as “wishful thinking” or “naivety”–or as just another form of “wimpiness” in kicking the fiscal responsibility can down the road.  The honest and courageous thing for the Administration and Congress to do with this issue would be to start demonstrating that they can save money in the Medicare system by actually complying with the current-law SGR so that the claims that they will stick to the SGR in the future would actually be credible.

But this real issue of real and large policy choices goes way beyond the Medicare SGR.  The SGR is a relatively small part of the broad issue of what it means to be fiscally responsible going forward and whether the “PAYGO” standard that the Administration and Congress have advocated actually encourages (enough) fiscal responsibility.  At $245 billion over ten years, the SGR “doc fix” is less than one tenth the cost of extending the 2001 and 2003 Bush tax cuts and relief from the alternative minimum tax, both of which are exempted from the PAYGO rules and which CBO estimates will cost over $3 trillion over the next ten years.  As I’ve said before, the difference between what is merely “plausible” for the fiscal outlook going forward and what is “probable” or “likely” for the fiscal outlook depends on the courage that politicians can muster when making these huge and real policy choices–and the real range of possibilities spans trillions of dollars and is not just “smoke and mirrors.”