Offsetting Spending With Phantom War Savings

Thursday, January 26th, 2012 and is filed under Blog

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One of the three major issues that are being negotiated by the payroll tax cut conference committee is Medicare ‘doc fix.’  Every year, due to the lack of free-market healthcare for seniors, Congress must supplement payments to doctors that treat Medicare patients.  Government interventions into the healthcare market have precipitated such inflationary pressure in the healthcare sector that the government reimbursement rate, known as the SGR formula, is insufficient in covering the costs of Medicare payments.  In order to rectify the situation, instead of passing free-market Medicare reform, Congress passes a temporary fix (doc fix) every year to reimburse doctors for the underpayments.

Now, the conference committee charged with extending the annual doc fix is looking to use war savings to offset the estimated $25 billion cost.  What exactly are war savings?

Democrats want to take the hypothetical funds that we would have spent in Iraq over the next ten years and use them for entitlement spending.  This notional offset is akin to using the $25 billion that would have been spent on a mission to Mars that never occurred.  You can’t cut spending on an expenditure that was already aborted.

Only in Washington can such a proposal be taken seriously.  As CQ reports, Democrats are befuddled as to why Republicans won’t go along with the war savings:

House Energy and Commerce ranking member Henry A. Waxman called Wednesday for a permanent repeal of the SGR formula and said the war funding should be considered as an offset, despite Obama’s call for it to be used elsewhere.

“We need a permanent solution to the Medicare physician payment problem. There was bipartisan agreement on this point at the conferee meeting yesterday, and I know the White House shares this view,” said the California Democrat, who is also on the conference committee. “A surcharge on millionaires, closing corporate loopholes, and war savings are all options that should be considered if a pay-for is needed.”

Another conference committee member, Democratic Rep. Allyson Y. Schwartz of Pennsylvania, said Jan. 24 that the war fund would “offer a unique and limited opportunity to resolve this problem that grows every month.”

Instead of an annual circus over offsetting the cost of doc fix, what we really need is a long-term solution – one that will inject free-market innovation into our healthcare sector. [ Here are some free-market healthcare ideas conservatives should pursue)