Tuesday, December 11, 2012

Cliff Notes

Many in Washington are worried that the U.S. will soon do a real life imitation of Thelma and Louise, driving the U.S. treasury off the fiscal cliff created by hundreds of  billions of expiring tax breaks (mainly, the Bush tax cuts) and across-the-board spending cuts (sequestration).

But I think a better cliff metaphor comes from a different movie: the scene when Butch Cassidy and the Sundance Kid, pursued to the edge of a cliff by a relentless Pinkerton man, must decide whether to jump to near certain death or be captured and hung for their crimes.  Here's how their conversation went:

Butch Cassidy: Alright. I'll jump first.
Sundance Kid: No.
Butch Cassidy: Then you jump first.
Sundance Kid: No, I said.
Butch Cassidy: What's the matter with you?
Sundance Kid: I can't swim.
Butch Cassidy: Are you crazy? The fall will probably kill you.
Sundance Kid: Oh, sh . . .

Well, imagine House Speaker John Boehner and President Obama having the same type of conversation in their one-on-one meeting yesterday at the White House.

For a deal to be struck, Obama has to jump off the cliff of accepting hundreds of billions in cuts in entitlement programs--with Medicare topping the list--knowing that this will probably kill his support from unions, AARP and liberal members of Congress.

For a deal to be struck, Boehner has to accept hundreds of billions in tax increases, including raising the marginal tax rate on higher income earners, knowing  that this will probably kill his support among his Tea Party allies and wealthy GOP donors.  

If they don't jump together, taxes will go up on just about everyone and spending will be cut on just about everything, taking hundreds of billions out of the economy and likely plunging it back into recession. 

Of the two, Boehner has the toughest challenge, kind of like the Sundance Kid not being able to swim. 

He and his members have to face re-election and potentially primary challenges from the right if they "sell out" on taxes.  Some say even his speakership could be at risk.  There is no guarantee that if he strikes a deal with the President, he can deliver the votes in his restive and very conservative caucus. 

Obama, of course, doesn't have to face re-election, polls show that the public is on his side and that they will blame failure to get a deal on the GOP, not the President.

We know what Butch and Sundance ended up doing--they jumped over the cliff, and miraculously lived to fight another day.  Whether President Obama and Speaker Boehner can do the same, with only a few legislative days left before the Christmas break, is anyone's guess. 

If they do hold hands and jump together on a plan to raise taxes and reduce entitlement spending, this is what the deal will look like:

1.    The Bush tax cuts will be renewed for people below an agreed upon income level, allowing it to rise automatically for higher income earners on January 1.
2.    The congressional committees with responsibility for tax policy will be instructed to develop legislation to reform and simplify the tax code to achieve hundreds of billions more in increased revenue (how much more still needs to be decided), with details to be worked out next year.
3.    Congressional committees with jurisdiction over Medicare and Medicaid will be instructed to find hundreds of billions in savings to those programs, details to be worked out next year.
4.    The near-30% scheduled Medicare physician payment cut will be put off for another six months or year, perhaps with instructions to the committees to develop legislation to permanently eliminate the Medicare SGR formula and transition to value-based payment models, details to be worked out next year.
5.    The devastating, across-the-board budget "sequestration" cuts to health to defense, Medicare, and other programs will be replaced with instructions to Congress' appropriators to find the same or greater savings through targeted policy changes, again--guess what!--with details to be worked out next year. 

Those are a whole lot of details to be worked out next year! 

But a broad framework agreement is probably about as much as can be realistically accomplished before the end of the year.  And to be clear, the "details" to be worked out next year likely will include consideration of painful cuts that could directly affect physicians--cuts in payments to Graduate Medical Education programs, canceling scheduled increases in Medicaid payments to primary care physicians, reducing payments for so-called "over-priced" procedures, and tightening or eliminating the Stark in-office ancillary services exception have all been discussed as ways to trim entitlement spending.  ACP, for its part, won't go along with cuts that threaten GME and other key priorities--for instance, ACP helped organize a massive effort by organized medicine to persuade Congress to not take money out of Medicaid primary care payments to pay for the fiscal cliff.  At the same time, ACP will continue to press Congress to come up with a fiscally and socially responsible alternative to the fiscal cliff, sequestration and the SGR cuts, focusing on the true cost drivers in American medicine, like over-use of marginal and ineffective medical tests and treatments driven in part by defensive medicine.

So if the country has to go over a cliff, wouldn't you rather it happen the way Butch Cassidy and the Sundance Kid did it, risking everything to take the plunge together and miraculously surviving to fight another day, over how Thelma and Louise did it, accelerating over the edge, roll the credits, the end?

Today's question: Do you think President Obama and Speaker Boehner will channel Butch and Sundance and go over the cliff together, risking it all to agree to tax increases and entitlement cuts? 


Jay Larson MD said...

More than 2 people have to go over the cliff to stave off the sequestration scenario. Unless enough senators and representatives act like lemmings and follow the President and Speaker of the House over the cliff, then it will all just be an act and sequestration will go into effect.

Harrison said...

I think for us the 30% cut in Medicare payments will be much more of a concern than the tax increases.
If I get 30% less pay then I don't think my tax bill will go up at all.
And the government will not get any more revenue from me.


PCP said...

Forget that. If there is a 30% cut, for many solo primary care practices, after the overhead, the principal might have to join in with Mr. Romney's 47%.
Specialists are likely going to take a hit from both ends. Reduced reimbursements and higher taxes at a time of expanded coverage. It's going to be real interesting. I suspect access is going to be a big issue in all but the most physician saturated markets.