Just Say No to the War Gimmick

Nov 13, 2012 | Health Care| Other Spending

Last week, a letter from six organizations--the AARP, the American Academy of Family Physicians, the American College of Physicians, the American Geriatrics Society, the Center for Medicare Advocacy, and the Medicare Rights Center--urged Congress to override the Sustainable Growth Rate (SGR) formula that is set to cut Medicare physician payments by 27 percent starting January 1. However, they suggested paying for the "doc fix," which would cost about $250 billion over the next ten years, by using savings from drawing down spending on the wars. Here we go again.

The war savings gimmick has been brought up frequently when lawmakers or other groups have been desperate for offsets. Since the war spending projection that CBO is required to make (this year's spending, adjusted for inflation for subsequent years) well overstates the likely path of war spending, it has become an attractive pot of money.

Still, even though CBO may score the savings, that does not make them real savings. The letter itself says that the money is unlikely to be spent, yet it seems to think that fact makes it more justifiable. We think the opposite: if the money won't be spent, there are no savings to be had. One could think of the war gimmick as adjusting the projection of spending down to what it will actually be, similar to when CBO adjusts its budget projections for new economic or other data. Just as lawmakers wouldn't claim savings for more favorable economic projections, they should not claim savings here.

One thing to note about war spending is that it is being drawn down on its own. Last year, CBO projected that the war gimmick would "save" $1.1 trillion (compared to assumptions that war spending perpetually grew with inflation). This year, the total fell to $850 billion, and even then that does not account for the FY 2013 continuing resolution, which lowered war spending further. By our count, incorporating the new 2013 number would mean that the war gimmick would only be about $525 billion. Thus, lawmakers have already reduced the size of the war gimmick in half just by appropriating the necessary funds for overseas operations. Clearly, there is no pot of money here.

Considering that fiscal cliff negotiations will commence soon, there is no need to resort to gimmicks to offset an SGR override. There are plenty of options for savings in health care programs that would more than cover the cost of a permanent doc fix. The use of gimmicks will only create more problems down the road and proposing these gimmicks as possible solutions only shifts the conversation from the real reforms we need.