The ACP Advocate Blog
by Bob Doherty
Thursday, April 14, 2011
What the budget says about priorities
Many years ago, a professor in one of my political science classes told us to “look beyond the numbers” when trying to make sense of the federal budget. His point was that budget-making is really about making hard policy choices. The dollar numbers reflect the policy choices made by Congress and the President, he said, so if you want to know what their priorities are, follow the money and see which programs get more or less. This may sound self-explanatory—duh!—but I bring it up now because until yesterday, the budget debate often seemed to be more about the dollars than the policy choices involved. That is, the numbers (achieving a pre-determined level of spending cuts) has been driving the policy, rather than policy (deciding what we want, on a program-by-program basis, and then deciding how much of we can actually afford) driving the numbers. Recall that Republicans promised in their pre-election “Pledge to America” to reduce non-defense discretionary spending by $100 billion out of the current fiscal year budget. How they came up with $100 billion—why not $150 billion, or $80 billion?—no one knows. My guess is that it sounded like a nice and high enough number that they could take to voters concerned about federal spending. After winning control of the House of Representatives, Republicans have worked diligently to find a way to get to $100 billion. (And whether you agree with their proposed cuts or not, they deserve credit for trying to deliver on their promises.) On a purely party-line vote with no Democratic support, the House passed a bill in February to cut spending by over $60 billion (GOP leaders explained that because the federal government already was well into its fiscal year, the $60 billion for the remainder of the year was equivalent to $100 billion spread over an entire year). This budget would have rolled back most “discretionary” spending to 2008 levels while sparing national defense. To get to the number, the GOP proposed deep cuts or elimination of many federal programs. The House’s budget—called a continuing resolution, because it provided continued funding for the rest of the government’s current fiscal year, which ends on September 30—was never taken up by the Democratically-controlled Senate, so it went nowhere. (Keep in mind that the reason why the new Congress has had to rely on continuing resolutions to keep the government open is because the 111th Congress, controlled by Democrats, didn’t even bother to pass a budget for this fiscal year.) Later, the GOP-controlled House and the Democratic-controlled Senate negotiated a short-term continuing resolution with about $10 billion in cuts that ran out on April 8, which the GOP House leadership indicated was another step toward getting to the equivalent of $100 billion in cuts. And last week, they reached an agreement on a budget through the end of the fiscal year that would cut another $39 billion, including cuts in funding for some health programs, narrowly averting a partial federal government shut-down. The fight over the current fiscal year budget, though, is small potatoes compared to the battle over future budgets. Last week, the GOP upped the ante by putting forth a budget proposal, authored by budget committee chair Rep. Paul Ryan (R-WI), to cut projected federal spending by $6 trillion, starting with the 2012 federal budget year, which begins on October 1. Unlike the current budget agreement that mostly affects only this year’s discretionary spending—about 12.3% of the budget—the Ryan budget tackles entitlement spending by fundamentally restructuring Medicare and Medicaid. The federal government would give the states the responsibility to run (what used to be) Medicaid as they see fit—states, not the federal government, would decide who to cover and what benefits would be offered. But states would get almost $1 trillion less from the federal government to help pay for health care for the poor. Medicare would be converted from an open-ended entitlement to a defined contribution model: the government would chip in a set amount for seniors to buy coverage from private insurers, and they would be responsible for any medical costs above that amount. (People who today are age 55 and over would still have the option of traditional Medicare when they turn 65.) The federal contribution would be indexed to overall inflation, not to health care cost increases that consistently have out-paced inflation, so the value of the federal contribution would erode over time, putting more of the responsibility on the enrollee to make up the difference. The Ryan budget would also repeal the Affordable Care Act, and with it, the federal government’s promise to ensure that nearly everyone has guaranteed access to coverage. Finally, the Ryan plan puts all of the deficit reduction on the spending side by cutting taxes by over $4.2 trillion and ruling out any future tax increases. Yesterday, President Obama countered by offering a plan to reduce the deficit by $4 trillion over the next decade. He said he would get to this amount by cutting both defense and domestic discretionary spending; increasing revenue through elimination of tax “expenditures” and itemized deductions for high-earners and allowing many of the Bush tax cuts expire; and achieving savings in Medicare and Medicaid. But unlike the Ryan plan, the President unabashedly pledged to preserve Medicare and Medicaid much as they are today, but with more cost savings by controlling health care spending. Among other savings, he proposed to give Medicare the authority to negotiate drug prices and to give an Independent Payment Advisory Board, created by the Affordable Care Act, more authority to impose cost controls if necessary. I expect that much of the coverage following Obama’s speech will again be about the numbers—how much would his plan cut spending and lower the debt compared to the Ryan budget? But the more important thing is that the Ryan budget and the Obama speech begin to frame the policy choices involved, especially when it comes to health care. As Robert Pear wrote in yesterday’s New York Times, lawmakers “face several fundamental questions: Will the federal government retain its dominant role in prescribing benefits and other details of the program, like how much doctors and hospitals are paid and which new treatments are covered? Will beneficiaries still have legally enforceable rights to all those services? Will Medicare spending still increase automatically with health costs, the number of beneficiaries and the amount of care they receive? Or will the government try to limit the costs to taxpayers by paying a fixed amount each year to private health plans to subsidize coverage for older Americans and those who are disabled?” This is a debate worth having, because it gets at the difficult policy questions and the very different policy priorities of each party, rather than looking at the budget simply as a fight over numbers. Today’s questions: What do you think Representative Ryan’s and President Obama’s budget proposals say about the choices that must be made? How would you answer Robert Pear’s “fundamental question” of whether “Medicare spending still increase automatically with health costs, the number of beneficiaries and the amount of care they receive?” or should “the government try to limit the costs to taxpayers by paying a fixed amount each year to private health plans?”
About the Author
Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog
Email Bob Doherty: TheACPAdvocateblog@acponline.org.Follow @BobDohertyACP
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