Sadie’s suggested read for the day

The latest CBO figures show that under current law—i.e., assuming that everything works as planned under the new healthcare law—the share of GDP devoted to federal spending on mandatory health programs (Medicare and Medicaid) will be 68 percent higher in 2035 compared to 2011. But the CBO recognizes that certain components of the law intended to slow the growth in health costs may not work as planned. Under an alternative, more realistic scenario, the share of the economy absorbed by mandatory federal health programs will be 84 percent higher than this year.

Why is this alternative scenario more realistic? One good reason is that for nearly a decade, Congress has refused to follow its own law to hold down physician spending. In 1997, Congress adopted a “sustainable growth rate” (SGR) formula to ensure that physician payments under Medicare grew at a reasonable rate. This resulted in a 4.8 percent cut in physician fees in 2002, but that was the only year the formula worked as designed. Since then, the same formula has called for continued cuts in physician fees to offset the ever-rising volume of physician services billed to Medicare.