Why Is Congress Spending $160 Billion to Get Nowhere?

Congress spends billions every year failing to clean up its own mess.

American Action Forum President and former Congressional Budget Office Director Douglas Holtz-Eakin testifies before the Congressional Joint Economic Committee in the Dirksen Senate Office Building on Capitol Hill March 14, 2013 in Washington, DC. The bipartisan committee took testimony from a panel of economists during the hearing, titled 'Flirting With Disaster: Solving the Federal Debt Crisis,' (Photo by Chip Somodevilla/Getty Images) (National Journal)

Let's say you are a person with a normal understanding of math, and your rent is $1,000 per month. The sensible thing to do would be to budget $1,000 each month for rent, right?

But what if, instead of being a normal person, you were Congress? Then, you would budget $800, and at the first of every month you would scramble to cut $200 in other expenses so you could pay the rent.

This, in a nutshell, is what Congress does with Medicare's payments to doctors.

Congress itself passed a law that makes automatic cuts in doctors' payments — but then it blocks those cuts whenever they're supposed to kick in.

Rather than simply acknowledging that it's going to keep spending the same amount it has been spending, Congress has thrown away more than $160 billion through stopgap measures that delay the cuts for weeks or months at a time.

It's a constant and haphazard scramble that often makes real cuts to hospitals and other health care providers, simply to preserve the status quo for doctors. And it has made the underlying problem worse. The automatic cut gets bigger every time it's blocked, and now, after a decade of delays, it's more than 20 percent — a lot more than doctors could absorb.

"This is a problem of their own making," said Douglas Holtz-Eakin, a conservative economist and former Congressional Budget Office director. "You end up in these ridiculous corners."

The endless cycle of temporary "doc fixes" has no supporters. It's a hassle for lawmakers and leaves a sword constantly dangling over doctors. Other health care industries hate it because they end up taking last-minute cuts so doctors don't have to. It even messes up our basic understanding of the federal budget, by making spending look lower than it actually is.

And yet, the cycle continues.

The easiest option for ending it would be as simple as budgeting the right amount for rent each month: Write a new budget and be more honest about what you're actually going to spend. Congress spends about $20 billion on every yearlong doc fix, but it's not increasing doctors' payments by $20 billion. It's essentially a penalty for writing a budget that assumed unrealistic savings.

So why not just wipe it off the books? Simply erase the scheduled cut, leave doctors' payments unchanged — and don't offset it as if it's were an actual increase in Medicare spending?

That idea has been floated before, and plenty of people in the medical community support it. But it's just not considered feasible in the current political climate, because it would create at least the appearance of higher spending.

"I'm not enough of a statistician to understand why that can't be done. Apparently, within their methodology, they're unable to do that," said Ardis Hoven, the president of the American Medical Association.

(For a while, CBO released both a baseline tied to the letter of the law and a separate baseline that reflected what Congress was actually going to spend. And the Obama administration has built a doc fix into its budget proposals, rather than claiming imaginary savings from a cut that will never happen.)

Some lawmakers say building the full cost of doctors' payments into the budget baseline counts as increased spending, and as long as the short-term patches are offset, it'd be a hard sell to not pay for a permanent one.

The earnest search for a permanent doc fix gained steam last year largely because CBO slashed its cost estimate — from roughly $300 billion down to roughly $140 billion, then again to just $117 billion.

In other words, Congress has spent more on a decade's worth of Band-Aids than it would cost to fix the underlying problem. Lawmakers are well aware that the cost could go back up at any time — but they still couldn't come to an agreement on how to offset even the discounted price.

A trio of congressional committees spent months ironing out a replacement for the existing formula, known as the Sustainable Growth Rate or SGR, and House Republicans had hoped to reach an agreement last summer. Instead, we ended up with another year-end patch. This one expires at the end of March.

A permanent doc fix is by far the AMA's top lobbying priority. The group stepped up its efforts after 2010 — the year health care reform passed, without the payment fix House Democrats tried to include. Congress passed five short-term fixes that year alone, some lasting as little as one month.

After years of cajoling, Hoven said, in 2010 the AMA "sat down and said, 'OK we're going to have to tell them what do.' "

The emerging framework for a permanent fix is pretty close to what the AMA wants. It would repeal the existing formula — the SGR — and gradually lay the groundwork for a new system that pays doctors based on their patients' health rather than the number of procedures they perform.

The AMA has some qualms with the bills — it's pushing to get annual payment increases from the House bills into the Senate version, and to adjust some of the metrics used for transitioning into a new kind of payment system.

Mostly, though, doctors want the SGR gone.

"You know what the problem is, you know what to do about, it, so go ahead. Remedy the problem. Repeal the SGR "¦ and let us do other things in this country," Hoven said.