Reining in Entitlements

| Fri Dec. 4, 2009 11:51 AM PST

The healthcare legislation winding its way through Congress is chock full of cost-savings measures.  But will they be allowed to take effect, or will Congress cave in and repeal them once they start to bite and interest groups start to squeal?  A new CBPP report suggests the former:

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....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 substantially — at 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 effect — and they differ markedly from the blunt-instrument design of the SGR cut.

....Every significant deficit-reduction package in the last 20 years has included Medicare savings, most of which have been implemented as planned....And most of the savings enacted in 1997 other than the SGR cuts — nearly four-fifths — were implemented as well.

Obviously it's impossible to predict which cost savings measures will work and which ones won't.  But CBPP's summary of past efforts suggests that most of them will be allowed to take effect and most of them will have a noticeable effect.  They're still only small steps in the right direction, but anyone who's serious about reining in entitlement spending should welcome them.  Much more detail at the link.

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