How a Top Budget Expert Sees the Year Playing Out
Policy + Politics

How a Top Budget Expert Sees the Year Playing Out

Congress will return from a two-week recess next week with a full plate of budget, health care and spending issues to confront.  

The Republican majority must begin taking steps to convert the House and Senate-passed balanced budget plans into law. The plans include major boosts in defense, but $5.5 trillion of cuts and savings in domestic programs and entitlement over the coming decade. First, leaders from the two chambers must meet to reconcile differences in their budget blue prints, amid strong opposition to their policies from the White House and Democrats. 

Related: Will the Medicare ‘Doc Fix’ Lead to Real Entitlement Reform?

The Senate meanwhile will take up an extraordinary bipartisan measure passed by the House a week ago that would make sweeping changes to the Medicare formula for reimbursing doctors --  raising premiums for some higher-income Medicare beneficiaries. The legislation would end Congress’s annual “Doc Fix” ritual of protecting doctors from cuts in reimbursement payments of as much as 20 percent. President Obama has promised to sign the bill if it makes it to his desk.

Republicans and Democrats will likely square off later this year over President Obama’s budget request to break the spending caps imposed by the 2011 Budget Control Act on both defense and domestic discretionary spending next year and increase overall spending by $75 billion. The House and Senate Republican budget plans are designed to circumvent the defense spending caps while preserving the tight constraints on domestic programs.

Republican and Democratic leaders will continue to position themselves for critical decision making late this year or early in 2016 on ways to save the Social Security Disability Insurance fund from tanking. The latest Social Security trustees’ report projects that the fund’s reserves will be depleted in late 2016 – raising the prospects that millions of disable people could lose benefits.

Related: How the GOP Budget Can Help Hillary in 2016

Obama’s proposal to shift $330 billion in Social Security retirement funds around to avert a huge shortfall in the disability insurance program is meeting with stiff resistance from Republicans. House Republicans recently pushed through a rule requiring that any shift of funds to the disability program be paired with reforms designed to bolster the program and encourage beneficiaries to return to work.

Late last week, The Fiscal Times asked a number of budget and policy experts whether they thought the political breakthrough in the House to overhaul the long festering problems with the Medicare doctor reimbursement system might portend other important compromises on entitlement and social welfare programs this year.

One of those experts was Robert Greenstein, the founder and president of the Center on Budget and Policy Priorities -- a liberal, non-partisan think tank that specializes in analyzing budgetary impact on Medicare, Medicaid, food stamps and other anti-poverty programs.

Greenstein said that the breakthrough on the Medicare doctor reimbursement problem – which was engineered by House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) -- was “a small, positive step.”

Related: Obama Budget Adds $6 Trillion to Deficit Over 10 Years--CBO

Greenstein, a 1996 MacArthur Fellowship recipient, is widely considered to be an expert on the federal budget and a wide range of domestic policy, health care, tax and entitlement issues. Here is more of what he had to say:

Do you think the Medicare deal in the House may lead to other important entitlement or spending agreements in the coming months?
I think the bottom line isn’t clear. The fact that the Speaker of the House and the Minority Leader could successfully negotiate an agreement and that the great bulk of both caucuses could then support it is not something that I or hardly anybody else in town would have predicted a month or so ago.

If this plays out as it looks like it will, that people who voted for it are not punished – they don’t feel they have a greater primary threat or whatever because they voted for it -- we can start to establish in at least a very small way that such deals can be negotiated. And you can do it and not get politically hurt for it – and maybe even get a few political points for getting something done.”

Why is a new formula for paying doctors other than the old “sustainable growth rate” approach so necessary?
 Everybody agreed that the existing SGR formula was counterproductive and made no sense – and it was not what Congress intended. The SGR was created in the 1997 Balanced Budget Act when the Congressional Budget Office forecast it would save a grand total of $12 billion over ten years; it amounted to I think less than 5 percent of the Medicare Savings as scored by CBO at the time. It turned out the formula was badly designed and it had effects that no one had anticipated or desired. Namely, that instead of doing what they thought it would do when they enacted it – put modest downward pressure on the Medicare physician payment

reimbursement rate – it instead would result in 20 percent cuts, which could lead to an exodus of doctors from the program.

What negotiations loom this year on fiscal policy?
It’s hard for me to believe that there won’t be a negotiation over sequestration. Both Democrats and many Republicans concerned about defense spending want to ease the sequestration caps. Republicans will want to pay for it entirely with changes in mandatory programs. Democrats will want a broader array of offsets. It should be noted that offsets that are used in this [Medicare doctor reimbursement] deal obviously are then not available for sequestration. So coming up with offsets for sequestration is a little harder now because of the ones that were done and are now off the table.”

What are the prospects for the two parties solving the Social Security Disability Insurance fund problem?
I presume that the negotiations on that don’t occur until early 2016 but I can be wrong. They could occur later this year. In theory you could have a larger negotiation that covers both that and sequestration – and there might be an even larger negotiation if the Supreme Court invalidates some of the subsidies under the Affordable Care Act [in the upcoming King vs Burwell case].   

Do you take seriously the House and Senate-passed Republican balanced budgets, which include deep cuts to Medicare, Medicaid, food stamps and many of the other mandatory programs?
Somewhere in between. I mean, clearly very few things in that package could get 60 votes in the Senate. Yes, you could do a reconciliation bill [containing many of those proposals] and Obama would veto it. Having said that, I think it’s a clear indication of where Republicans would want to go if they retained control of Congress and had control of the White House after 2016. 

What about long-term entitlement problems that need to be addressed?
Several areas stand out. We’re going to need to do a reallocation…with regard to Social Security Disability Insurance. And we obviously need to do full Social Security insolvency legislation. The connection between the two themes is that it is not good policy to make significant changes in disability insurance in isolation from looking at the whole Social Security system because the benefits structures of Social Security Old Age and Survivors Insurance and Social Security Disability Insurance are integrally intertwined. 

At the 10,000-foot level, there is a bipartisan agreement that there are many inefficiencies in the tax code and that we ought to do tax reform. I think it’s inevitable that sooner or later – although it looks more like later rather than sooner – we do a tax reform that raises revenue – not one that is just revenue neutral.  And at some point farther down the road when we have more information, including some research of various demonstration projects … more will need to be done on the payment and delivery side in health care reform. But I don’t think we have the level of knowledge now to do a large amount yet.

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