"Super Committee" cooking up cuts

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JerrySlaughtercolorJerry Slaughter
Executive Director

Double, double toil and trouble; 
Fire burn, and cauldron bubble.
~from The Tragedy of Macbeth by William Shakespeare

In the farcical theatre that has become Congress' way of dealing with the country's financial mess, the twelve member Joint Select Committee on Deficit Reduction has begun meeting (mostly in private) to see if there is any consensus on how to cut federal spending by $1.2 trillion over the next ten years. If they can't come up with a plan that can pass Congress, a similar amount of across-the-board cuts would automatically go into effect in January 2013, in theory. Those cuts would be divided evenly between military and domestic programs, and would most likely involve at least a cut in Medicare payments to physicians.

Even if the so-called Super Committee doesn't do its job (which is to recommend what are in reality very modest spending spending reductions), the automatic cuts could be overridden by a new Congress and/or president after the 2012 elections. So, in effect, is the work of the Super Committee just for show? Plus, does any sentient being believe for a nanosecond that Congress has the ability to make meaningful spending decisions today that will obligate a sitting congress in 2022? Not so much.

The truth is that the Super Committee was just a convenient escape hatch from the contentious debt ceiling debacle that gripped Congress for weeks this summer. The automatic spending cuts feature gave Congress the appearance of addressing profligate spending without ever having to vote for an actual cut. And, let's keep it real, as they say. The "cuts" if they ever materialize, will represent about 1 percent of total spending in any given fiscal year. Today our country spends nearly $2 for every $1 of revenue; the difference we borrow from friends and neighbors around the globe. Reducing spending by 1 percent may make the folks in congress giddy and cause them to pat themselves on the back, but it will have no measurable impact on the country's financial condition.

And that has implications for Medicare, in particular. Because of the SGR mess, in order to "fix" the physician fee problem, it will take a $300 billion budget offset over 10 years. If Congress waits another four years to fix the problem, it will cost $600 billion. Keep in mind that the current physician fee mess was created by Congress years ago to basically put a lid on physician spending in Medicare. It hasn't worked, and Congress has had to override the SGR calculation 12 times in the past decade to avoid steep fee cuts. Even if Medicare physician fees are frozen for ten years, payments to docs will nearly double from $65 million today to $121 million, driven by growth in both services provided and numbers of patients served by the program.

In short, the Medicare physician fee mess is no longer an obscure footnote in the federal budget debate. It is a major problem with serious implications, both financial and political. And it illustrates why even modest reform of entitlement programs is so needed, yet so difficult to achieve.

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