The Heritage Foundation

Factsheet #158

April 14, 2015

April 14, 2015 | Factsheet on

The House Medicare SGR Deal: Not Paid For & Not Permanent

H.R. 2, the Medicare Access and Children’s Health Insurance Program Reauthorization Act, otherwise known as the Boehner-Pelosi “doc fix” deal, would replace the flawed sustainable growth rate formula, which mandates a 21 percent cut in Medicare physician payments. The need to fix the sustainable growth rate is widely recognized, but Congress must fix it using reforms that are responsible and sustainable.

The Boehner-Pelosi deal is problematic:

  • Increases deficit in the short term:, The Boehner-Pelosi deal will increase the deficit by $141 billion over the next 10 years.[1]
  • The (un)sustainable growth rate payment formula: According to a report released by Medicare’s Chief Actuary, cuts will need to be revisited in the next nine years even under the House’s “solution” to the SGR. HR. 2 is a temporary patch, not a permanent solution.
  • Budget gimmick: The House deal includes a huge budget gimmick by shifting the timing of doctors’ payments forward and then cutting them drastically after 2025. That’s neither fiscally responsible nor a real solution to the Medicare physician payment problem.
    • As the Actuary’s report demonstrates, over the 75-year period, total spending on Medicare under the House bill will be lower relative to current law. But that estimate is entirely driven by the fact that doctors will be paid much less than they would otherwise be if the House “doc fix” were not enacted by Congress.[2]

Any “deal” should be sustainable and fiscally responsible

  • Any deal, especially one that would increase mandatory spending, as this fix would, must be fully paid for. And that is merely the minimum requirement.
  • In the past, doc fixes almost always have been entirely paid for with offsets elsewhere. [3]
  • When the Senate takes up the House bill, lawmakers should agree to pay for it by removing the pay-as-you-go (PAYGO) exemption.
  • Striking the PAYGO exemption would provide Congress with the opportunity to address Medicare’s unsustainable payment system while improving the program.[4]

The Senate should improve the bill by adopting bipartisan Medicare reforms

  • Raise the Medicare eligibility age gradually from 65 to 68;
  • Extend means testing by reducing subsidies for Medicare Part B and D premiums for wealthiest recipients (about 10% of all participants);
  • Increase competition by allowing health plans to bid for government contributions in Medicare Advantage to lower unnecessary spending;
  • Simplify Medicare by combining Medicare Parts B and D into one uniform deductible that covers catastrophic illness.[5]

About the Author

Show references in this report

[1] Robert E. Moffit, Paul E. Winfree, The Hill, “How the Senate can fix the House’s broken Medicare bill”, April 9, 2015, http://thehill.com/blogs/congress-blog/healthcare/238245-how-the-senate-can-fix-the-houses-broken-medicare-bill

[2] Report,” Estimated Financial Effects of the Medicare Access and CHIP Reauthorization act of 2015 (H.R.2), Centers for Medicare and Medicaid Services, April 9, 2015, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/2015HR2a.pdf; Paul Winfree, The Daily Signal, “Medicare Report: House ‘Doc Fix” Bill Not Permanent Fix, Pays Doctors Less in the Long Run”, April 10, 2015, http://dailysignal.com/2015/04/10/medicare-report-house-doc-fix-bill-not-permanent-fix-pays-doctors-less-in-long-run/.

[3] Romina Boccia, The Daily Signal, “House Bipartisan Deal Would Hike Deficit, Hurt Economy in Long-Term”, March 25, 2015, http://dailysignal.com/2015/03/25/houses-bipartisan-deal-would-hike-deficit-hurt-economy-in-long-term/

[4] Paul Winfree, The Daily Signal, “Medicare Report: House ‘Doc Fix” Bill Not Permanent Fix, Pays Doctors Less in the Long Run” , April 10, 2015, http://dailysignal.com/2015/04/10/medicare-report-house-doc-fix-bill-not-permanent-fix-pays-doctors-less-in-long-run/http://dailysignal.com/2015/04/10/medicare-report-house-doc-fix-bill-not-permanent-fix-pays-doctors-less-in-long-run/.

[5] http://thehill.com/blogs/congress-blog/healthcare/238245-how-the-senate-can-fix-the-houses-broken-medicare-bill.