Medicare Might Become Congress’s Favorite Piggy Bank

Lobbying groups fear that the program will be raided whenever lawmakers need cash

Demonstrators, including many senior citizens, protest against cuts to federal safety net programs, including Social Security, Medicare, and Medicaid on November 7, 2011 in Chicago, Illinois. 
National Journal
April 26, 2015, 4 p.m.

For a long time, one of Con­gress’s un­writ­ten rules held that law­makers should try to avoid cut­ting Medi­care to pay for oth­er pro­grams un­re­lated to health care. That ax­iom has been flouted in re­cent years, and a law signed by Pres­id­ent Obama just days ago could push it fur­ther in­to the past.

Con­gress has pro­posed a $700 mil­lion Medi­care cut to help pay for ex­tend­ing the Trade Ad­just­ment As­sist­ance pro­gram, which funds job train­ing and place­ment for Amer­ic­an work­ers who have lost their jobs be­cause of for­eign trade, in­to 2021. The bill, a Demo­crat­ic pri­or­ity, is mov­ing in tan­dem with the more high-pro­file fast-track trade au­thor­ity bill, part of a deal ne­go­ti­ated by Demo­crat­ic Sen. Ron Wyden with two top Re­pub­lic­ans, Sen. Or­rin Hatch and Rep. Paul Ry­an.

The size of the cut is a re­l­at­ive drop in the buck­et for a pro­gram that cur­rently spends about $600 bil­lion an­nu­ally, but the trade bill still rep­res­ents a wor­ri­some pre­ced­ent for lob­by­ing groups be­cause it would use Medi­care cuts to pay for non-Medi­care-re­lated spend­ing. There is a small health care com­pon­ent to the bill, but it costs much less than the $700 mil­lion in off­sets taken from the in­sur­ance pro­gram.

“The think­ing be­hind that is we need to find a way to pay for it,” said GOP Rep. Dave Reich­ert, who in­tro­duced the TAA bill in the lower cham­ber. “It’s tough to find pay-fors, so we work hard to find a way to pay for it, and that’s what we came up with.”

This isn’t the first time that Con­gress has pro­posed cut­ting Medi­care to fund oth­er pro­grams, but lob­by­ing groups with Medi­care in­terests are scared it will be­come more and more routine.

Law­makers ap­proved $1.2 bil­lion in Medi­care re­duc­tions to help pay for tax-pre­ferred sav­ings ac­counts for dis­abled people dur­ing last year’s lame-duck ses­sion. The 2013 Ry­an-Mur­ray budget agree­ment also in­cor­por­ated some off­sets from the pro­gram.

One health care lob­by­ist, who asked to re­main an­onym­ous, said Con­gress is us­ing Medi­care as a “f—king piggy bank” to pay for the trade bill, re­peatedly point­ing out that the in­sur­ance pro­gram is fun­ded by taxes spe­cific­ally ear­marked for it.

A co­ali­tion of pro­vider groups, in­clud­ing the power­ful doc­tor and hos­pit­al lob­bies, lamen­ted in a let­ter to sen­at­ors last week that the trade bill would set “a pre­ced­ent that we be­lieve is un­wise” be­cause it uses “Medi­care cuts to pay for non-Medi­care re­lated le­gis­la­tion.” A seni­ors’ group, the Na­tion­al Com­mit­tee to Pre­serve So­cial Se­cur­ity and Medi­care, warned that “the cur­rent course be­ing plot­ted by Con­gress will lead to a death by a thou­sand cuts.”

The new prob­lem for those who want to pro­tect Medi­care cash is, iron­ic­ally, the “doc fix” deal that Con­gress over­whelm­ingly passed this month and many spe­cial in­terests had long sought, which re­pealed the “sus­tain­able growth rate” for­mula for phys­i­cian pay­ments. Be­fore that deal, lob­by­ists could ar­gue that Con­gress needed to save any po­ten­tial Medi­care off­sets to pay for a tem­por­ary or per­man­ent doc-fix patch that would avert deep pay­ment cuts to doc­tors, said Ju­li­us Hob­son, a health care lob­by­ist with the Polsinelli law firm. The per­man­ent fix costs $210 bil­lion over 10 years.

But that’s no longer an is­sue, and the trade bill signaled to K Street that Con­gress is be­com­ing more com­fort­able turn­ing to Medi­care to pay for oth­er pro­grams. “Now what you’re try­ing to do is get them to stop,” Hob­son said.

“It’s cer­tainly pos­sible this will hap­pen more and more in the post-SGR world,” said Loren Adler, re­search dir­ect­or at the Com­mit­tee for a Re­spons­ible Fed­er­al Budget, which fo­cuses on de­fi­cit re­duc­tion and en­ti­tle­ment re­form.

Part of the reas­on, he said, is that Con­gress has already “cut pretty close to the bone” in oth­er areas of the fed­er­al budget. That means Medi­care, which spends a lot of money but which Con­gress has his­tor­ic­ally been re­luct­ant to touch, is be­com­ing a more likely place for law­makers to find sav­ings.

“Hence they’re now turn­ing to Medi­care, which, though pop­u­lar, also presents a lot of op­por­tun­it­ies to find sav­ings in not overly con­tro­ver­sial ways,” Adler said. The cuts in the trade bill, which would in­crease the 2011 auto­mat­ic budget cuts known as se­quest­ra­tion in fisc­al year 2024, would re­duce re­im­burse­ments to pro­viders but not dir­ectly af­fect be­ne­fi­ciar­ies. The lat­ter would be much more of a polit­ic­al risk.

The trade bill presents Demo­crats with a thorny prob­lem that could re­cur as long as the GOP con­trols Con­gress: They are loathe to vote for any Medi­care cuts, but they are also big pro­ponents of TAA; Re­pub­lic­ans are more am­bi­val­ent about the pro­gram. Demo­crat­ic Sen. Robert Ca­sey de­scribed it as a “take-it-or-leave-it” scen­ario.

It is still pos­sible that House Re­pub­lic­ans could ne­go­ti­ate with Demo­crats to either lessen or elim­in­ate the Medi­care cuts in the trade bill, Reich­ert said. Demo­crat­ic Sen. Mark Warner has floated an amend­ment that would swap the Medi­care cuts for tough­er real-es­tate tax-re­port­ing re­quire­ments that would in­crease rev­en­ue, and Warner told Na­tion­al Journ­al that he thought it would at­tract bi­par­tis­an sup­port if it came up for a vote.

Reich­ert also em­phas­ized that the cuts wouldn’t take ef­fect un­til the second half of fisc­al year 2024. “There’s a lot of things that Con­gress does between 2015 and 2024,” he said. “That’s 10 years away.”

But the long timeline wasn’t much solace to those on the oth­er side of the aisle wary of mak­ing it a habit.

“Every­body says we’ll deal with them when we get there, and then all of a sud­den we’re there and you have deep­er cuts,” said Demo­crat­ic Sen. Ben Cardin. “It’s not good.”

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