Fiscal Commission Plan Fails Despite Winning 11 of 18 Votes

December 03, 2010

December 3, 2010 — A bipartisan presidential commission today failed to pass an ambitious and controversial plan to reduce the federal budget deficit that would also scrap Medicare's sustainable growth rate for setting physician reimbursement.

However, failure is a relative term in Washington, DC. Commission members who opposed the plan as a whole said it nevertheless represents a first step in preventing the nation from plummeting in a downward spiral of government debt and gives Congress numerous options for achieving fiscal soundness.

"This is a plan that is worthy of consideration," said commission member Rep. Xavier Becerra (D-CA), who was against its passage. "This is just one chapter of a very long saga."

The 18-member National Commission on Fiscal Responsibility and Reform, created by President Barack Obama earlier this year, met for the final time this morning without conducting an official vote. The nonbinding report and its recommendations, drafted by cochairs Alan Simpson and Erskine Bowles, would have automatically gone to Congress for approval if it had passed with 14 of 18 ayes. However, commission members had indicated where they stood earlier this week, causing Sen. Kent Conrad (D-ND) to state today that plan had only 11 backers. That tally still gave the plan a 61% majority that would spell success — not failure — in Congress, noted several commission members.

Commission members who opposed the chairmen's report in addition to Becerra, based on public statements and media reports, were Sen. Max Baucus (D-MT), Rep. David Camp (R-MI), Rep. Jeb Hensarling (R-TX), Rep. Paul Ryan (R-WI), Rep. Jan Schakowsky (D-IL), and Andrew Stern, former president of the Service Employees International Union.

Supporters in addition to Conrad included Sen. Tom Coburn (R-OK); Sen. Mike Crapo (R-ID); Sen. Judd Gregg (R-NH); Sen. Richard Durbin (D-IL); Rep. John Spratt (D-SC); David Cote, chairman and CEO of Honeywell International; Ann Fudge, former CEO of Young & Rubicam; Alice Rivlin, a senior fellow at the Brookings Institute and former director of the White House Office of Management and Budget; and chairmen Simpson and Bowles. Simpson is a former Republican senator from Wyoming. Bowles, the president of the University of North Carolina system, was chief of staff to President Bill Clinton during his second term.

Borrowing 40 Cents of Every Federal Dollar Spent Unsustainable, Says Durbin

The 'report proposed a combination of spending cuts and revenue hikes that, together with lower interest payments, would eliminate $3.9 trillion in red ink through 2020. The pain of fiscal austerity was spread around a higher Social Security retirement age for seniors, the elimination of special subsidies for corporate America, and a 15-cent increase in the federal gasoline tax for motorists. Opponents such as Becerra and Schakowsky said too much of the deficit reduction came at the expense of the poor and the middle-class.

On the healthcare front, the report proposed replacing Medicare's sustainable growth rate formula for setting physician reimbursement in 2015 with one that rewards the quality of care as opposed to its quantity. The current formula, which is much detested by organized medicine, will trigger a 25% pay cut on New Year's Day unless Congress acts to avert it. In addition, under the commission plan physicians would have their reimbursement rates frozen through 2013 and then nicked by 1% the following year.

Federal budget projections assume close to $300 billion in savings through 2020 resulting from Medicare pay cuts scheduled for 2011 and beyond. The commission report acknowledged that Congress will never let such drastic cuts take effect, lest physicians close their doors to Medicare patients. It recommended replacing these "phantom savings" with real savings elsewhere in the federal healthcare budget. Economy measures include trimming Medicare payments for graduate medical education and enacting medical malpractice reforms to reduce defensive medicine and its costs.

These and other recommendations technically bit the dust when the commission failed to pass the deficit-reduction plan, but commission members at today's meeting urged Congress and President Obama to continue to address the issue.

"As we evaluate options moving forward, the option of inaction is unacceptable," said Crapo. "We should not let this proposal fall idly by the wayside. We've showed that we can get the majority necessary, the super-majority necessary, to pass this kind of legislation."

Commission members described the need for action in the starkest terms. "When we borrow 40 cents out of every dollar we spend, whether it's in the Pentagon or for food stamps, that's unsustainable, and being indebted for generations to China, and OPEC, and other nations around the world will not allow us to build a fair and just America," added Durbin . For his part, Conrad said that except for terrorism, "this debt threat constitutes the greatest challenge to our country going forward."

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