Biden’s student loan ‘fix’ will likely make the problem worse

Megan McArdle:

There are so many things wrong with President Biden’s newly unveiled policy on student loans that one hardly knows where to begin. So I might as well start with … the Medicare doc fix.

In 1997, Congress became alarmed by the rising cost of health care, which was particularly concerning because it was amping up the cost of Medicare. So when Congress passed the Balanced Budget Act, it created something called the Sustainable Growth Rate (SGR), which was supposed to keep physician reimbursements from growing faster than gross domestic product.

That was all well and good until 2003, when the federal government realized it would need to actually impose significant cuts on those reimbursements. Physicians squealed, and a wincing Congress passed the first “doc fix,” temporarily suspending the caps. Freed from the constraints of the SGR, physician reimbursements continued to grow faster than GDP — which meant that every year, the cost of actually imposing the SGR got bigger.

The “doc fix” became a regular ritual in Washington, because the alternative became increasingly unthinkable: By January 2013, doctors were facing a potential pay cut of 26.5 percent. Unwilling to anger doctors, or to anger seniors whose doctors stopped taking Medicare, Congress kept granting reprieves, until the Obama administration finally bit the bullet and pushed through a (now very expensive) reform in 2015.

Notes and links, here.