House Republicans have decided against using savings from war funding to offset a permanent “doc fix,” which means that Medicare doctors could see their reimbursement rates fall as much as 27% by the end of the month. In addition, this only extends the cost of a permanent doc fix over time, because the cost of health care rises with each year, and due to our peculiar budgeting system a “permanent policy change” only has budget implications in a ten-year window. Therefore, doing the doc fix today would only incorporate, in budget terms, the bottom line cost until 2021, whereas waiting a year would add the more expensive year of 2022 in while taking out the less costly year of 2012. So delay has a legitimate budgetary cost, at least for scoring purposes.

The cap on war funding based on the drawdown in Iraq and Afghanistan, which is a legitimate savings, would fulfill the budgetary cost of the doc fix and then some. But Republicans have rejected the pay-for.

The idea of using unspent Overseas Contingency Operation (OCO) funds from troop withdrawals Iraq and Afghanistan has the support of top Democrats as well as influential Republicans like Senate Minority Whip Jon Kyl (AZ) and GOP Doctors Caucus chairman Rep. Phil Gingrey (GA). While President Obama and Dems want to tap into the $838 billion fund for infrastructure as well, GOP backers say it shouldn’t be used for anything other than a doc fix.

But two former Republican staffers turned health industry lobbyists say House GOP leaders are now opposed to tapping into the money even for that.

One of the sources said he heard directly from House Republican leadership that the prospect of using OCO money for a “doc fix” is moot. The second source added that leaders have issues with it from a messaging and process standpoint. Both agreed the GOP caucus is divided on the idea and making things tough for leadership — while also exacerbating headaches for physician and hospital groups that are relentlessly pushing for the offset.

This further strains the possibility of legislation on not only the doc fix, but the payroll tax cut and extended unemployment insurance, all of which expire at the end of February. Republicans in the conference committee on that legislation say that war funding caps didn’t appear in the House or Senate bills on the subject, and therefore fall “outside the scope” of the conference committee. This is in reality an obstacle only in theory, but it forces Democrats to look at Republican-friendly offsets like freeze to federal employee pay.

Meanwhile, while theoretically Democrats could gain in the medical community from Republicans resisting a doc fix, which would lead to a cut to Medicare reimbursement rates, the Obama Administration’s budget could be a setback on that front.

President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans […]

The president will propose cutting spending on Medicare, the federal health program for the elderly, and Medicaid, the joint federal-state program for the poor and disabled. However, he isn’t proposing the structural changes that experts say are needed to control spending in these programs over the long term. For instance, Mr. Obama won’t suggest raising the Medicare eligibility age, as he was willing to do over the summer during bipartisan budget negotiations that failed to produce a deal. He also doesn’t plan to propose changes to Social Security.

Instead, he again will put forward proposals to reduce spending by roughly $248 billion on Medicare and roughly $72 billion on Medicaid. The proposals include higher premiums and deductibles for many beneficiaries and lower payments to drug companies, hospitals and nursing homes.

The President’s budget request has no real chance of becoming law. But if Democrats wanted to argue that Republicans wanted to see lower reimbursement rates for doctors, Republicans need only point to the President’s budget.

That’s the politics of this. On the policy, I’d support lower rates for hospitals and drug companies, as well as doctors. It’s a hidden tax that costs families while protecting the medical industry with the highest rates of pay in the Western world.

David Dayen

David Dayen