This weekend, The Wall Street Journal announced its support for the permanent Sustainable Growth Rate (SGR) replacement currently being negotiated in Congress. Although full details are not yet available, the legislation apparently has about $200 billion of costs, accompanied with roughly $60 billion of offsets – half from beneficiaries and half from providers. In other words, the legislation is largely unpaid for and would add about $140 billion to deficits through 2025, before interest.
Despite its long-standing support for controlling the growth of Medicare costs, The Wall Street Journal endorses this Medicare spending increase under the premise that the SGR itself is a “fiscal deception,” and that past offsets used to pay for avoiding it “are usually fake.” However, for the most part, these arguments do not stand up to scrutiny.
Below, we explain why many of their claims are either inconsistent with the facts or else counterproductive to achieving the overall goal of reforming Medicare and reducing its future costs.
Claim #1: Ending the SGR does not add to the deficit.
The Wall Street Journal claims that politicians are under a false “impression that the formula leads to real savings, and thus ending it adds to the deficit” and that “the SGR merely lets Congress hide the future spending it is going to do anyway.” Yet while it is true policymakers have continuously prevented the across-the-board SGR cuts from happening, they have also offset the cost of doing so 98 percent of the time. As Margot Sanger-Katz of The New York Times explained, “With only a few exceptions, Congress simply cuts other parts of the budget to compensate for the extra money for the doctors. And that money almost always comes from Medicare or other health care programs."
In fact, our analysis shows that these offsets -- nearly all of which are health-related -- will save about $165 billion (before interest) through 2025.