GOP Warming On Dem Idea To Fund Huge Medicare Hole

House Republicans are coming around to the Democrats’ plan for permanently ending the Medicare “doc fix” problem — a $300 billion and growing albatross around the nation’s neck that virtually everybody believes needs to be fixed. The option is now on the table, key Republicans tell TPM, just one month after some of those same lawmakers dismissed it as a senseless Washington gimmick.

Last fall Democrats began pushing the idea to pay for a full repeal of the Sustainable Growth Rate (SGR) formula with war savings from troop drawdowns in Iraq and Afghanistan. Republicans didn’t much care for it, but Senate Minority Whip Jon Kyl (R-AZ) hopped on board during the Super Committee negotiations, and has since been working behind the scenes to win GOP support.Rep. Phil Gingrey (R-GA), the co-chairman of the GOP Doctors Caucus, which leadership usually defers to on this issue, last month slammed the war savings offset as “funny money” and a “Ponzi scheme.” But Tuesday after the State of the Union, he was singing a different tune.

“The SGR — we need to come up with the money to bring the baseline back to zero,” Gingrey told TPM. “The Overseas Contingency Operation fund [the OCO], you know, could we consider using that money as an offset? I want to look at that very closely. There’s a lot to say for that.”

“You might say that using the overseas contingency fund is a little bit of smoke in mirrors, but quite honestly, the SGR is smoke in mirrors,” he argued. “Let’s trade one flawed system for the other, if you will. Let’s bring it back to zero, and start fresh, and do the right thing.”

House and Senate Democrats strongly support the idea, and Kyl is a close ally of Senate Minority Leader Mitch McConnell (R-KY), which means the Senate GOP isn’t likely to be a problem. So Gingrey and his fellow House GOP physicians may hold the key to the final piece of the puzzle — he said Majority Leader Eric Cantor (R-VA) wants the Doctors Caucus to “take the lead” on this issue.

And he’s not the only key House Republican warming up to the war savings fix.

“I think SGR is getting some legs. We’ve got to find a way to get rid of that,” Rep. Phil Roe (R-TN), vice chair of the Doctors Caucus, told TPM on Tuesday. “Will it be the Overseas Contingency Operations? I’m very strongly leaning in that direction, absolutely.”

The OCO fund is estimated to be between $600 to $800 billion in the upcoming budget estimate, a senior White House official told TPM. President Obama wants to use as much as half of that to fund new infrastructure projects, which would leave enough money to take SGR off the books.

Although the prospect isn’t yet a done deal for the House GOP caucus, “I think there’s been some movement,” Roe said. “I spoke to Senator Kyl’s staff yesterday, and there’s talk going on in our conference now about that very thing.”

So why such a sharp turn in such a short time? A major reason is that doctors and other health industries are growing apoplectic about the uncertainty and price hikes of short-term patches, and they’ve been relentlessly lobbying Congress to adopt the OCO offset for months. As physician lobbyists see it, the war savings fund is a once-in-a-generation opportunity to essentially find that sum of money without having to cut spending or raise taxes.

House Republicans were holding out last year to pay for a “doc fix” with cuts to health care and other programs they’ve long wanted to shrink. But the conversation has shifted away from budget cutting, and it’s dawning on the GOP that their wishes won’t all come true while Democrats control the White House and Senate. So the war savings offset suddenly looks more enticing, particularly considering that Republicans don’t want to damage their image with the influential physician community.

Proponents of the idea also like to point out that House Republicans used war savings as an offset in the Paul Ryan budget they passed last spring.

Congress delayed the SGR’s 27.4 percent doctors pay cut until March in the December payroll tax package. And while another short-term patch may be possible, the urgency of scrapping the formula is growing, and the OCO plan is the only one on the table for doing so anytime soon.

“And so all of us are talking, and we are going to take up the challenge that [Cantor] has issued to us, and we’re going to do it this year,” Gingrey told TPM. “It’s time for us to deliver on that promise.”