SENATE VOTES FOR PARTIAL PAYGO EXEMPTION FOR SGR REPEAL
On January 28, the Senate passed H.J. Res. 45, a resolution to raise the federal debt limit. Included in the resolution was a provision that reinstitutes pay-as-you-go, or PAYGO, rules for new federal spending. Under PAYGO terms, any new spending or tax cuts passed by Congress would have to be offset by corresponding spending cuts or tax increases. Importantly, several limited exemptions were made to the PAYGO rule, including one for addressing the Medicare physician payment cuts being produced by the sustainable growth rate (SGR) formula.
Some have characterized the SGR exemption as a five-year freeze. While the exemption reflects the amount that could be used to fund a five-year freeze with larger cuts and a higher cost for repealing the formula in the out years, the actual exemption does not implement new Medicare physician payment policy. Instead, this action means that up to $82 billion spent for an SGR fix would not have to be offset by other revenue or cuts..
The House of Representative is expected to pass H.J. Res. 45 with the PAYGO and SGR provisions. Congress must still enact separate legislation to stop the SGR cuts prior to March 1. To obtain permanent repeal of the flawed payment formula, the PAYGO exception must be accompanied by an additional $130 billion in budget offsets.