Topline Summary of President’s Health Care Budget Proposals
The President’s fiscal year 2012 budget request is now online and can be viewed here. As has been indicated over the past several days, the budget includes $62 billion in mandatory health care savings that would pay for approximately two years of a Medicare “doc fix.” That $62 billion in savings comes from a “grab bag” of relatively minor tweaks to entitlement spending – the largest of which are $18 billion in savings from a reduction in Medicaid provider taxes and $12.9 billion in savings from the pharmaceutical industry, including a shorter exclusivity period for follow-on biologics and provisions to end so-called “pay-for-delay” arrangements. (Information on the offsets can be found on pages 194-96 of the budget document tables; we’ll get more details about the specific proposals as they become available.)
It’s important to remember two key facts in the context of this proposal, and specifically the “doc fix” provisions. First, while the President has outlined SOME of the cost of SGR “reform,” he hasn’t proposed NEARLY ENOUGH savings to offset a long-term fix. The budget estimates the full ten-year cost of a “doc fix” at $369.8 billion – and the White House’s suggested changes offset only one-sixth of that total. Moreover, a 2009 Heritage Foundation study (based on data from the 2009 Medicare trustees report) calculated the 75-year cost of a “doc fix” as costing up to $1.9 trillion. Even if some of the President’s proposals yield savings beyond the 10-year budgetary window, it’s clear that the proposed savings are FAR outweighed by the scope of the deficit spending being contemplated (because the President doesn’t want to specify exactly how he wants to pay for long-term SGR reform).
The second point is that if the Medicare savings provisions included in the health care law had been re-directed to finance SGR reform – rather than creating new entitlements – the above discussion would be unnecessary. As an analysis by former CBO Director Doug Holtz-Eakin has demonstrated, Congress could easily have paid for a generous “doc fix” using the more than $500 billion in savings proposals included in the law. So the opportunity cost of using Medicare savings to fund new entitlements is a $315 billion “black hole” in the ten-year budget that the Administration wants to just wish away.