The Sustainable Growth Rate is an obscure issue that few people really care about. (Except doctors. Doctors care about it a lot.) But it’s an issue with huge budget implications. Here’s how the Cato Institute’s Michael Cannon describes the SGR and the bill that, essentially, junked it:
Congress created the SGR to limit Medicare spending on physician services. The SGR uses a formula to cut Medicare payments to physicians automatically. The formula works too well: It mandates cuts so deep that Congress decides every year it cannot stand for them. That’s why Congress has postponed those cuts some 17 times since 2003. This legislation would eliminate the cuts permanently, which of course would increase federal spending — by the $145 billion mentioned above (over the next ten years).
This legislation was supported by a broad, bipartisan majority, including every member of the Arkansas congressional delegation. Some fiscal conservatives supported it because it included some modest reforms to Medicare, such as requiring wealthier Medicare patients to pay more for their health care.
Michael Cannon isn’t so convinced that this bill is fiscally conservative:
For all its faults, and despite the fact that it has become (in health-policy circles, anyway) a punch line, the SGR forces Congress to confront runaway Medicare spending year after year. If this bill passes, it will be easier for Congress to ignore runaway Medicare spending — and that spending will begin to run away even faster. Reformers might be better off leaving the SGR in place and preserving the leverage it creates until political realities have changed — that is, until there is a president who will support broader Medicare reform.
I don’t know if the situation is quite as bad as Michael Cannon thinks it is. Ending the SGR really just ended the charade that these cuts would ever be allowed to go into effect. I don’t see political reality in the future being much different from the past two decades. Without this legislation, it is almost certain that Congress would continue to do what it has been doing: namely, it would continue to stop these cuts from happening in years to come.
For me, the real tragedy of this legislation is that it represents a retreat from the idea that Congress is actually interested in tackling big spending problems. There was a brief window during the “Republican Revolution” in the 1990s when Congress took serious steps to fix some big problems. The SGR legislation shows that this era is long gone.
So what is the solution? From our experience with the SGR as well as other budget “fixes” such as the Gramm-Rudman-Hollings Act, it is clear that mere legislation is not enough to tame legislators’ appetite to spend. Legislative spending limits may work for a year or two, but Congress eventually bypasses them. Attaching a balanced budget amendment to the Constitution is the only way to impose true fiscal discipline upon Congress. Such an amendment could not be bypassed by mere legislation, as the SGR formula routinely was.
By writing a requirement to be fiscally responsible into the Constitution, a balanced budget amendment would finally force Congress to stop spending tomorrow’s tax revenue today. This idea has been discussed for decades. Unfortunately, it has always been defeated. As the recent SGR legislation shows, a balanced budget amendment is needed now more than ever.