'Doc Fix' May End: Real Spending Offset by Fake Cuts

'Doc Fix' May End: Real Spending Offset by Fake Cuts

Only in Washington could something like this happen. Speaker Boehner is asking for an end to fake savings and President Obama is offering him fake budget cuts.

Speaker Boehner has reportedly asked for a repeal of the “doc fix” as part of the fiscal cliff deal. In case you missed it, the “doc fix” is an inside baseball term for Congress’ ongoing decision to ignore required cuts to Medicare payments which Congress set in place back in 1997. That was the year in which the amount doctors were reimbursed for treating Medicare patients was fixed to a “sustainable growth rate.”

What happened (you can read more about it here) is that the law actually resulted in a real cut to doctor’s pay for the first time back in 2002. Doctors didn’t like that very much, and so every year since then Congress has passed a “doc fix” which is just an ad hoc spending bill that restores all the money the 1997 law cuts out.

There’s one more wrinkle which has to do with the way Washington does its budgeting. Congress bases its 10-year budget forecasting on whatever current law says the budget will be. So in the case of Medicare payments to doctors, that means the books reflect billions in savings over the next decade that will never happen (since Congress will keep passing the doc fix). It’s a shell game. We count the savings on the books even though everyone knows the cuts are never, ever going to happen.

Speaker Boehner is right to demand a stop to this gimmick. But according to CBO, a permanent “doc fix” will cost $245 billion over ten years. Since the goal of the fiscal cliff deal is to make cuts to spending (and likely increase taxes) this takes us in the wrong direction. Fortunately, President Obama has a plan.

Since last summer, the President has been proposing that we count savings from war spending as a budget cut. Current law says that the government has a certain minimum amount ($126.5 billion in 2012) to spend on wars in perpetuity. This money, which CBO says totals $1.4 trillion over ten years, is already on the books, even though everyone knows the wars are winding down and most of that money won’t be needed.

So Boehner is asking to take the Medicare savings, that will never happen, off the books. Obama is offering to pay for this very real $245 billion in spending by cutting money that was never going to be spent anyway. Real spending balanced with fake cuts. Welcome to President Obama’s balanced approach.