Senate Medicare Bill Would Undermine Deficit Reduction Efforts
Last week, Senate Majority Leader Harry Reid (D-NV) indicated his plans to bring up the Medicare Protection Act for a vote on the Senate floor. Though sold as a measure to protect Medicare beneficiaries, the legislation would in fact undermine the entire purpose of reconciliation, make deficit reduction and Medicare reform far more difficult, and ultimately threaten the benefits of the very same seniors it is trying to protect.
The Medicare Protection Act (S. 2491), which is sponsored by Sen. Mark Pryor (D-AR) and nine other Democrat Senators, would express the Sense of the Senate opposing increases in the Medicare eligibility age or adopting a voucher or premium support approach to Medicare reform. More significantly, the legislation would change budget rules to prohibit budget reconciliation legislation from including any changes affecting Medicare beneficiaries, deeming them “extraneous” (and therefore not permissible) under the Senate Byrd rule.
While the legislation has been described by some in the press as election-year politics to show the commitment of Senate Democrats to protect Medicare beneficiaries, the substance of the legislation would have a disastrous impact on the ability to move even the most modest and widely supported Medicare policy changes through the reconciliation process in the Senate. Ironically, this could be detrimental to the very individuals it is trying to help, since it would make it more difficult to reform Medicare before the hospital insurance trust fund runs out of money in the mid-2020s. It also would set a dangerous precedent that would undermine the effectiveness of budget reconciliation as a tool for deficit reduction.
This legislation violates the very purpose of reconciliation, limits the role of the authorizing committees with health policy expertise, reduces the ability to pass bipartisan Medicare compromises, and makes the prospects of deficit reduction or Medicare reform legislation harder by taking policies off the table, rather than adding substantive new ideas to the debate.
Reconciliation as a Deficit Reduction Tool
In 1974, the Budget Act created the budget reconciliation process to enforce compliance with the direct spending, revenue, and debt limit levels set forth in the budget resolution agreed to by Congress. Reconciliation was purposefully established by Congress as a powerful procedural tool with special rules to provide for the fast-track consideration of legislation that makes changes to revenue and mandatory spending policies to achieve deficit reduction.
The most well-known reconciliation rule is named after the late Senator Robert Byrd (D-WV) who championed the effort to ensure that reconciliation legislation remains true to its original purpose as a vehicle for budgetary changes, and not used to advance non-budgetary policies. The Byrd rule prohibits “extraneous matter” in a budget reconciliation bill from consideration on the Senate floor, basically prohibiting the inclusion of any legislative provision that would not result in a direct budgetary effect. The Byrd rule also protects against amendments that would increase the deficit over the long-term.
The entire purpose of the Byrd rule itself is to ensure that reconciliation is being used to make changes to mandatory spending and revenue policies, not to prevent such changes from being included. One of the strengths of reconciliation is that it requires authorizing committees, in this case the Senate Finance Committee, to review the programs within their jurisdiction and make choices about which policy changes to make in order to achieve deficit reduction goals. By automatically deeming certain types of changes as “extraneous,” the legislation limits the flexibility of the Senate Finance Committee and the Senate as a whole in putting together legislation to reduce the deficit.
While the nonbinding Sense of the Senate in the Medicare Protection Act specifically indicates opposition to raising the Medicare eligibility age or turning Medicare into a voucher program, the reconciliation language itself is significantly broader. Essentially, the language applies to any change reducing the guaranteed benefit or restricting eligibility to benefits, which potentially could prohibit policies with bipartisan support such as the increase to high-income Medicare premiums supported by President Obama or the cost-sharing reforms in Simpson-Bowles and other plans which would actually reduce out of pocket costs for many beneficiaries.
As we have pointed out in the past, there are many reforms affecting Medicare beneficiaries that protect low-income and vulnerable seniors, and even improve the program in many ways -- in addition to making it financially sound.
The Looming Entitlement Crisis Requires More Ideas on the Table
One of the most disappointing elements of the bill is that it takes policy ideas to reduce the debt off the table, rather than contributing new ideas to help actually build bipartisan consensus to fix the debt. Reaching agreement on a deficit reduction plan will require many tradeoffs and compromises, which will be much more difficult to do if certain options are prohibited from being considered. Moreover, once the door has been opened to changing rules to make certain policies off limits for reconciliation, there will be pressure to add further exclusions for other politically sensitive tax or spending policies.
As the population ages and health care costs grow, the costs of our major entitlement programs threaten to drive up the debt and crowd out other important priorities. By the mid-2030s, CRFB estimates 100 percent of the federal government's revenues will go to Social Security, federal health spending, and interest on the debt – and that assumes revenues continue to grow to record levels.
With Medicare facing insolvency by 2026, those who care about Medicare beneficiaries should help protect and preserve these benefits by bringing reform ideas to the table. By acting today, Congress and the President could gradually adjust the programs to account for people living longer, targeting benefit changes to those most able to bear them, and transition the health care system from one that rewards quantity of care to one that instead promotes quality of care.
By making it harder for Congress to enact Medicare reforms, the Medicare Protection Act makes it more likely that Medicare and its beneficiaries will face a stark crisis where drastic cuts and cost increases may be the only options left. More broadly, by gutting one of the strongest procedural tools Congress has for deficit reduction, this legislation would make the already difficult challenge of enacting a deficit reduction plan significantly harder.