Unbiased Analysis of Today's Healthcare Issues

A Dishonest Budget?

Written By: Jason Shafrin - Feb• 25•11

The most recent Federal Budget leaves much to be desired.  There are spending cuts.  The Economist reports that although Mr Obama’s team projects that his budget will cause the deficit will fall “…from a post-war record 11% of GDP in the current fiscal year to 3.1% by 2021. That would stabilise the debt, albeit at a still-lofty 77% of GDP.”  However, the CBO believes that a these figures are too rosy, and it is more likely the deficit will only fall to 7% by 2021.

More important, President Obama did little to reduce the looming three-headed budget catastrophe of Medicare, Medicaid and Social Security.  Michael Cannon notes in particular that the President did little to correct the “Doc Fix”.  To reduce physician payments over time, Medicare implemented the sustainable growth rate (SGR) in 1998.  Congress, however, reverses the reimbursement reductions every year.  Thus, if the full SGR would go into place next year, Medicare physicians would receive 25% less revenue per service than the year before.  This is of course untenable.

Michael Cannon explains how President Obama addressed the ‘Doc Fix’ in the FY2012 Budget.

Rather than propose a permanent ‘doc fix,’ the Obama administration proposes a temporary and dishonest one.  As shown by the blue bars in the below graph, the administration proposes to delay these cuts until 2014 at a cost of $54 billion.  As shown by the black line, the administration proposes to pay for this additional spending by reducing the rate of spending growth in other areas of Medicare by $62 billion over the next 10 years.  Note that only 6 percent of these Medicare ‘cuts’ will occur in 2012 and 2013.  The other 94 percent of the ‘cuts’ will come after the administration has spent the $54 billion it wants to spend.  Note also that the vast majority of the ‘cuts’ would take effect after Barack Obama is no longer president.   Finally, the president offers no proposals to deal with the cuts in physician payments during the last eight years of the 10-year budget window (as shown by the purple bars).”

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