Issue: Health Care

The PREP Plan: Paying for Reform and Extension Policies

Congress and the President must decide how to address “Sustainable Growth Rate” (SGR) cuts, which threaten to significantly reduce Medicare physician payments next April, and 55 “tax extenders” that expired at the end of last year. Policymakers could add up to $1 trillion to the debt over the next decade if they address these two issues irresponsibly. They could also use these moments to make a down payment toward tax and entitlement reforms.

As the conferees met yesterday, any doubt that we can afford to wait on the long-term debt problem should have quickly been erased after CBO Director Doug Elmendorf's testimony to the conference committee. While the budget outlook has improved somewhat in the short term, little progress has been made on the long-term problem. And fixing the long term will likely require greater reforms to entitlement programs and the tax code.
With April's updated projections from CBO, spending on major federal health care programs has now been revised downward by $900 billion from 2011 through 2021. Buoyed by a 23 percent drop in the cost of Medicare Part D and a 15 percent decline in the projected costs of the Affordable Care Act's (ACA) new coverage through Medicaid and the exchanges, this remarkable slowdown has been a bright spot amidst an otherwise still dim fiscal outlook.

Medicare Registers Fourth-Lowest Growth Rate in Program History in 2014

Medicare clocked its fourth-lowest annual growth rate in history, at just 2.7 percent. We have been closely following the unusually slow growth of Medicare throughout this year, and also documenting the program's "underlying" growth rate, or what growth would be with temporary or phased-in legislative cuts removed from the calculation.