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Honest Medicare Budgeting in Health Care Reform

Posted By J.D. Foster, Ph.D. On December 7, 2009 @ 5:17 pm In Economics | Comments Disabled

The health care reform wallowing through Congress includes a ploy reminiscent of the “liar loans” prominent during the recent real estate bubble before its collapse. The bill cuts imaginary Medicare spending and uses the funds for real spending elsewhere. Senator Judd Gregg (R-NH) has blown the whistle on this charade. [1] Health care reformers are not amused.

“Liar loans” describe so-called no documentation mortgage loans used to finance home purchases in the worst of the real estate bubble. In qualifying for loans, borrowers were on their honor not to misstate their income, liabilities, and assets. Many proved dishonorable, claiming income they didn’t earn. Few of the homes purchases with these loans escaped foreclosure.

The health care reform bill proposes to pay for new entitlement spending by cutting Medicare. The trouble, of course, is that much of Medicare spending is already unfunded and unaffordable. Even assuming Congress defies steep odds and actually reduces future programmed spending, the Medicare money is not really there to be cut, so it’s not there to be redirected, either — another case of the missing income.

Imagine if you committed to spend $1000 more than you earned every year. Imagine then you found something new to buy, at a price tag of $100. Cutting back your original spending to $900 and then adding the new item for $100 is hardly an act of fiscal prudence.

Senator Gregg as Ranking Member of the Senate Budget Committee has offered an amendment in his role as guardian of budget common sense. His amendment simply says that Medicare savings can only be used for Medicare, and he achieves this result by requiring that the bill be budget neutral exclusive of Medicare savings.

The Gregg amendment corrects only one of the many flaws in the bill, but it is an important step. It says that the bill has to be paid for with real money, not liar loans. If Congress adhered to this kind of honest budgeting more often, it would likely be spared some painful votes like the pending hike in the national debt limit.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/12/07/honest-medicare-budgeting-in-health-care-reform/

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[1] blown the whistle on this charade.: http://www.wmur.com/news/21881677/detail.html

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