The $1.9 Trillion Gimmick
The Democrats' 'doc fix' for Medicare payments would shock Madoff.
WWW.WSJ.COM
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What passes for a joke on Capitol Hill these days is that Bernie Madoff, given his experience managing Ponzi schemes, should be put in charge of the federal budget. Nancy Pelosi & Co. seem to have taken it as a serious suggestion.
Any day now, the House is expected to vote on a $210 billion fiscal swindle that will prevent automatic cuts in Medicare payments to doctors. The entitlement's price controls are scheduled to fall by 21.5% in January and another 2% every year after that under a formula known as the sustainable growth rate, and eliminating the SGR was the price the American Medical Association demanded in return for its endorsement of the House health-care bill that passed earlier this month.
The "doc fix" was originally part of ObamaCare, until Mrs. Pelosi realized that adding a quarter-trillion dollars to the total tab made it difficult to pretend the bill would reduce the deficit. In the "Fiscal Responsibility" section of the press release announcing the separate SGR package, Democrats insist that it will be subject to "the 'pay as you go' principle of budget discipline," which "requires Congress to find a way to pay for any new spending" with new taxes or cuts.
The Comedy Central punchline: "A previous Congress established the policy for paying Medicare doctors, so the update for 2010 is not a new policy to be paid for. . . . The Medicare Physician Payment Reform Act would not increase total payments to physicians above what they are today and therefore, would not be subject to the paygo requirement." In other words, under the Madoff school of accounting, Democrats rely on straight deficit spending.
Yet even that obscures the true costs. Mrs. Pelosi stripped $35 billion from the original score by changing the way Medicare pays for drugs administered in physician offices and raiding a Medicare reserve fund. President Obama's continued promises that he won't sign a health bill that increases the deficit is by now indefensible.
Everyone agrees that the SGR must be corrected, given that steeper cuts in Medicare's submarket price controls mean that many physicians will refuse to treat seniors—but not without cleaning up the mess created by the prior cost-control inspirations of the political class. A new Heritage Foundation study by the former Medicare trustee Thomas Saving and economist Andrew Rettenmaier finds that eliminating the SGR without offsets will increase Medicare's unfunded liabilities by $1.9 trillion over the next 75 years. Given that the entitlement is already about $39 trillion in the hole (give or take a few trillion), the SGR fix alone is a European-style value-added tax waiting to happen, not including the huge new permanent spending commitments created by ObamaCare.
Senate Democrats already scotched the two-bill approach earlier this month, which is itself a good indication of how reckless Mrs. Pelosi's gambit is. Even Madoff might blush.
Printed in The Wall Street Journal, page A18
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