Permanent repeal of the flawed Medicare payment formula known as the sustainable growth rate just got a lot more expensive.
According to the Congressional Budget Office, which released its new Budget and Economic Outlook report on Tuesday morning, a 10-year repeal of the growth-rate formula that froze doctors' rates at current levels would cost $316 billion, compared with $290 billion when CBO last calculated the rate in November. The difference may make permanent repeal of the formula--always a long shot--even less palatable to lawmakers.
But even with the doc fix on hold, the report projects that spending on health care programs will explode in the coming decade. Assuming that doctors get the pay cut that Congress typically erases, Medicare gross spending is still expected to grow by 90 percent by 2022. The report cites the program's growth, as more Baby Boomers retire.
Medicaid spending is also due to grow--more than doubling in the same period. That program's growth is the result of the 2010 health care reform law, which will expand program eligibility beginning in 2014. Those numbers actually look slightly better than they did in last year's report given the recent lull in health care inflation, but only slightly.
To put the $26 billion doc fix increase into perspective, lawmakers are struggling to find just $21 billion to cover the cost of a one-year freeze in conference-committee negotiations. Medicare doctors will get a 27 percent pay cut if the lawmakers don't reach an agreement before March 1.
The cost of a permanent fix has gotten bigger nearly every year, as the gap between doctors' current pay rates and the rates dictated by the SGR pay formula widen.
There is one silver lining for doctors' lobbying groups hoping for a permanent fix. CBO estimates that reducing the number of troops abroad to 45,000 by 2015, often floated as a potential way to cover the cost of a permanent fix, could save $838 billion. That is well over the cost of a permanent "doc fix." However, House Republicans almost uniformly oppose using defense funds for a Medicare program.
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