Jonathan Chait

The Myth That Won't Die

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Since the start of the health care debate, I've devoted innumerable items to refuting one particular, utterly false conservative claim. The claim is that the Democrats used unrealistically low payment cuts to physicians to finance the Affordable Care Act. This is totally false in a way that utterly defies any interpretation. And yet conservatives have continued to assert it, even long after the passage of the law.

If you haven't grown tired of my multiple explanations, let me again explain the issue in a nutshell. In 1997, Congress passed a law reducing payments to doctors under Medicare. They bungled the job and accidentally cut payments far more than they intended to. So, roughly every year Congress takes back the unintended payment cut. This ritual is called the "doc fix" on Capitol Hill. Since the payment cut is still on the books for every future year, the baseline budget of Medicare is inaccurateeverybody knows Congress is going to have to find money to cancel out the reimbursement cut.

But this has nothing to do with the Affordable Care Act. When writing the law, some Democrats wanted to also include permanent funds to fix the reimbursement problem. In the end, they decided to only fund the cost of the new coverage expansions. So now they're back to where they were, which is where they've been for a dozen yearslooking to find a one-year doc fix patch.

Got that? Okay. Now here is conservative health care wonk David Grazter, writing yesterday:

How to fund it all? Taxes, penalties, fees. And, yes, a big cut to Medicare reimbursements. Or, to drop the technical Washington speak, doctors serving Medicare patients will get less for their work. To be clear: the White House proposed no new fee cuts, but simply to carry out the programmed cuts mandated by the Balanced Budget Act of 2007.

The Tax Foundation summarizes the financing with this simple pie-chart:

 

healthcare financing Obamacare Needs Lifesaving Deficit Surgery

Notice the big blue slice on the rightthe cuts to Medicare. Roughly half of that is because of the reduction in doctors’ pay. It works out to about 1 in every 5 dollars of the financing of Obamacare. The Medicare “savings” are slated to start this year, with fees down by 21%, and continuing on.

No, no, no. The $416.5 billion in Medicare savings does not include the doc fix. Those savings are entirely different. A couple months ago, ubiquitous conservative health care writer Jeffrey H. Anderson made the same claim. He wrote that he had identified the part of the CBO report that identified the physician reimbursement:

The provisions that would result in the largest budget savings include these: permanent reductions in the annual updates to Medicare’s payment rates for most services in the fee-for-service sector . . . yielding budgetary savings of $186 billion over 10 years.” That’s the physician pay cut.

In fact, the ellipses omitted the passage "(other than physicians' services)." In other words, he took out that part of the passage that specifically said this money did not come from physicians' services, and then wrote, "That's the physician pay cut." It was pretty audacious. When I pointed this out, Anderson followed up with a reply that featured a morsel of confession surrounded by a mountain of conservative vitriol. Part of Anderson's case revolved around his claim that, even of the "doc fix" cuts weren't part of the Affordable Care Act's financing, the cuts that were in the bill would never happen anyway. Gratzer makes the same case:

As I’ve noted before, no Congress in recent years has been particularly effective about reining in Medicare costs. Congress reversed planned cuts in 1999. And 2004. And 2005. And 2006. And 2008. In fact, since 1997, when members of both parties agreed to automatic cuts if spending rose faster than population and economic growth, the program has been cut just once, in 2002.

And in this debate, we can see a predictable result with the Senate voting in the next week or two to scrap the cut. The President’s push to undo the cuts now and not champion a larger reform of Medicaresuggests that Obamacare will not be deficit neutral, or even close to it.

Again, wrong. What he's referring to is the doc fix. And that was not a case of Congress planning cuts and then taking them back. It was Congress mistakenly writing a huge cut into law. It wound up saving more than intended, not less. Indeed, the record of following through on Medicare cuts is very strong, as Jim Horney and Paul Van de Water have explained:

the history of health legislation in recent decades demonstrates that, despite some critics’ charges, Congress has repeatedly adopted measures to produce considerable savings in Medicare and has let them take effect. For example, Congress took such action as part of major deficit-reduction packages in 1990 and 1993 and as part of more modest deficit-reduction packages in 1997 and 2005. Virtually all of the cuts that it enacted in 1990, 1993, and 2005 went into effect. After Medicare spending slowed dramatically after 1997in 1999, it was for the first time lower than it had been the year beforeand the budget was balanced in 1998, Congress did ameliorate some of the Medicare cuts that it had enacted in 1997. But, even in those special circumstances, it allowed four-fifths of the 1997 cuts (other than those described in the next paragraph) to take effect.

In arguing that Medicare cuts never “stick,” critics point in particular to Congress’ repeated refusal to let the reductions in physician reimbursement rates under Medicare’s so-called “sustainable growth rate” (SGR) mechanism, which it enacted in 1997, take full effect. The SGR cuts, however, represented a badly designed measure that was not intended to produce large savings (the projected SGR savings represented less than five percent of total Medicare savings in the 1997 bill), but turned into a blunt instrument that would have produced cuts far in excess of what was anticipated and would have had harsh and indefensible effects. (Moreover, even though Congress did not allow the full cuts required under the SGR formula to take effect, it has still cut the physician reimbursement rate substantiallyat its current level, the reimbursement rate in 2010 will be 17 percent below the rate for 2001, adjusted for inflation.) The SGR mechanism has little in common with most of the other provisions that Congress has enacted over the years to produce savings in Medicare and that have, in fact, taken effect. This distinction is important because most of the Medicare savings provisions in the House and Senate health reform bills are similar in nature to the types of Medicare provisions that Congress has enacted in the past that have taken effectand they differ markedly from the blunt-instrument design of the SGR cut.

Let me make a final point. The problem here isn't merely that the average conservative on the street believes demonstrably false things about the Affordable Care Act. Conservative elites do, too. And not even just members of Congress or conservative pundits but the handful of conservatives who claim to be health care policy experts. Here is Gratzer's bio:

David Gratzer, a physician, is a senior fellow at the Manhattan Institute. He frequently writes on health care and pubic health issues. His most recent book, with a foreword by Nobel laureate Milton Friedman, is The Cure: How Capitalism Can Save American Health Care.

And yet Gratzer plainly has no idea what he's talking about. I know why he says things that are demonstrably false
because other conservatives say them over and over again, and he trusts them because they're fellow members of an ideological movement. But this kind of misinformation appears totally immune to correction.

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