Supporters of the new health law will argue that the new law extends Medicare’s solvency and point to CBO’s estimate of the legislation as proof. Unfortunately however, claims about extending Medicare’s solvency are inaccurate. CBO Director Doug Elmendorf explained in a December 2009 letter to Senator Sessions, that the appearance of savings to Medicare program was because the Medicare trust fund is “essentially an accounting mechanism.” So the cuts to Medicare are effectively double-counted, giving the appearance of extending Medicare’s solvency while actually being used to pay for the cost of the new law. Media coverage highlighted CBO’s clarification, saying the “budget office challenges [Democrat] claims of Medicare savings.” But the clarification from CBO not only challenged claims of Medicare savings – it largely undermined them. Here’s what CBO said:
“The savings to the HI trust fund under [the new health law] 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.” CBO goes on: “To describe the full amount of [Medicare] 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.”
The conclusion from the Director of CBO is that the cuts to Medicare cannot “pay for future Medicare spending [and therefore increase its solvency] and, at the same time, pay for current spending on other parts of the legislation…” Other official experts arrive at the same conclusion. The CMS Chief Actuary echoed CBO, stating plainly that the reduced spending resulting from the significant Medicare cuts in the new health care law, "cannot be simultaneously used to finance other Federal outlays (such as coverage expansions) and to extend the trust fund.” Both the CBO Director and CMS Actuary are in agreement: it is not possible double count savings from Medicare. So, this means that the appearance of Medicare’s extended solvency is actually only a mirage.
It is deeply troubling that the new health law uses Medicare dollars to pay for new subsidies for Americans who are forced to buy federally-mandated health insurance. The Medicare program is already in dire condition. Medicare faces an unfunded liability of $38 trillion dollars, which is the cost of providing benefits for Americans currently paying into the Medicare system. It is no wonder that, according to the 2009 Trustees’ report on Social Security and Medicare, the Medicare trust fund will be exhausted in 2017. We support common-sense steps to empower seniors and strengthen Medicare. But the new health care law threatens seniors’ access to care and uses Medicare as a piggy bank to fund a new entitlement program. Tragically, this approach breaks the President’s pledge not to cut Medicare benefits, and fails to meet his commitment from September 9, 2009 to “protect Medicare.”
For a summary of Medicare cuts in the Reconciliation health care bill, click here.