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Is Obamacare a Budget Buster, Medicare Disaster, or Both?

Posted By Conn Carroll On December 24, 2009 @ 2:05 pm In Obamacare | Comments Disabled

This week National Journal Online asked their stable of health experts: Would the leading Democratic health care reform proposals result in a better or worse Medicare? [1]

Heritage Foundation Vice President for Domestic Policy Stuart Butler responded [2]:

On the face of it, the reform proposals would help ease the $37 trillion unfunded obligations of Medicare, making it a tad more viable for current and future seniors. But the savings on one credit card just become new liabilities on another. Moreover, if the key cuts actually went into place it would be a disaster for seniors. In the Reid bill, physician fees are to be cut more than 20 percent in 2011 and kept there indefinitely. That would cause docs to leave in droves and mean care cutbacks from those who remain. And Medicare’s chief actuary says payment rate cuts will cause up to 20 percent of Medicare hospitals to become unprofitable. Medicare Advantage, it’s true, would not cut to the bone, but there will be a significant erosion of benefits and far fewer plans available.

But the “good” news for seniors is that much of this will not actually happen. For instance, AARP and the AMA will as usual make sure those meat axe physician cuts never happen – the Senate, like the House, will simply run up the national credit card via another bill. Many other promised savings will also turn out to be phantom cuts. Congress will never let the Medicare commission, for example, chop away enough to meet the savings target.

So seniors will not encounter the big cutbacks many predict. Instead the long-term financial problem will continue and the new coverage entitlement will add to the total unfunded debt handed to our kids and grandkids. If Congress were serious about reform and fiscal prudence it would move Medicare towards a defined-contribution premium-support system. It would also make each new coverage commitments contingent on first achieving and “banking” Medicare savings. But Congress is not serious.

On Wednesday of this week, the Congressional Budget Office (CBO) confirmed [3] Butler’s analysis, writing about Democrat claim that Obamacare strengthened Medicare:

The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs…To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.


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

URL to article: http://blog.heritage.org/2009/12/24/is-obamacare-a-budget-buster-medicare-disaster-or-both/

URLs in this post:

[1] Would the leading Democratic health care reform proposals result in a better or worse Medicare?: http://healthcare.nationaljournal.com/2009/12/helping-or-hurting-medicare.php

[2] responded: http://healthcare.nationaljournal.com/2009/12/helping-or-hurting-medicare.php#1402322

[3] confirmed: http://www.cbo.gov/ftpdocs/108xx/doc10868/12-23-Trust_Fund_Accounting.pdf

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