Peter Suderman of Reason explained eloquently Tuesday what’s been bugging me about the fiscal cliff, perhaps more than anything else—that it is a huge, high-stakes deal which simultaneously solves exactly none of our long-term fiscal problems. There is so much public agonizing over so very little problem-solving. It means everything and nothing all at once.
Why? Because they want it to. The perpetual state of distraction is helpful for ignoring bigger, stickier wickets. Permanent “temporary” fixes allow them to ignore the cost-cutting measures they’ve imposed on themselves while still getting budgetary credit for them.
The whole thing is well worth a read, as Suderman explains the “Doc Fix Economy.”
The way the doc fix developed is somewhat convoluted. In 1989, Congress set up a fee schedule governing how Medicare pays physicians. In 1997, Congress made those fees subject to something called the “sustainable growth rate” (SGR), which was a formula designed to restrain spending growth in Medicare’s physician reimbursements. The formula tied total spending on physician payments to inflation, in hopes of keeping physician spending from growing faster than the economy as a whole.
No one worried much about tying doctor payments to the economy because at the time the formula was passed, the economy was humming along nicely. But when the economy entered a recession in the early 2000s, something unexpected happened: The SGR’s reimbursement formula suddenly called for physicians to get less than they were expecting. So in 2002, Congress did nothing as the formula cut doctor reimbursements by 5 percent. That never happened again.
The next year, when the formula called for another reimbursement cut, Congress passed an override. And each year since, Congress has followed the same pattern. The SGR calls for a reimbursement cut. Congress either freezes payments or gives physicians a small increase for a short period of time. Sometimes the overrides last for a few months. More often they last for about a year. But a permanent fix never arrives. And each time the formula calls for a bigger cut—because with each override, Medicare’s physician payment levels grow further and further from the trendline called for by the formula. If the doc fix is allowed to occur this year, physicians face a 26.5 percent cut in Medicare fees. At the same time, the long-term cost of a permanent fix grows each year. Last year’s one-year fix cost $18.5 billion. This year’s is expected to cost about $25 billion. Estimates put the cost between $244 and $370 billion over a decade. The ever-rising cost means that with each override the chances of a permanent fix grow even harder.
I’d add that the failure to pass a budget for three years, even though they’re required by law to do so, is a flagrant move to turn all of government budgeting over to this process. Sen. Harry Reid has openly stated he doesn’t care to put his budget down on paper because voters might not like it. This dereliction of duty has gone virtually unremarked upon in the press. The public doesn’t care much for process stories, and therefore won’t care about a lack of budget unless the press floods the zone on the story, as they no doubt would if it were a Republican Senate who’d flouted the law for three years. In the end, however, 2012’s results were a vindication of Reid’s tactics, as illustrated by Sen. Patty Murray’s assurance that there’s no need to have a budget this year, either. Every year without so much as a nod to the budget process (which wasn’t great to begin with) brings more brinks upon which to teeter, more distraction from real problems, and sweet release for politicians who don’t have to own up to their irresponsibility.
Like the casino boss in “Ocean’s Eleven,” we’re stuck watching a flashy pantomime of these arses while they rob us blind. Spoiler alert: Harry Reid does not look like George Clooney.