Friday, August 17, 2012

Public Trustee For Medicare Fund: ObamaCare Cuts Medicare And Adds To The Deficit

Amazing that this still needs to be explained:

One of the enduring mysteries of President Obama's health law is how its spending constraints and payroll tax hikes on high earners can be used to shore up Medicare finances and at the same time pay for a massive new entitlement program. Isn't this double counting?

The short answer is: Yes, it is. You can't spend the same money twice. And so, thanks to the new health law, federal deficits and debt will be hundreds of billions of dollars higher in the next decade alone.

Here's how it works. When Congress considers legislation that alters taxes or spending related to Medicare's Hospital Insurance Trust Fund, the changes are recorded not just on the Hospital Insurance Trust Fund's books, but also on Congress's "pay-as-you-go" scorecard.

The "paygo" requirement is supposed to force lawmakers to find "offsets" for new tax cuts or entitlement spending, and thus protect against adding to future federal budget deficits. Putting the Medicare payroll tax hikes and spending constraints on the "pay-as-you-go" ledger was instrumental in getting the health law through Congress, because doing so fostered a widespread misperception that the law would reduce future deficits.

But the same provisions add to the Hospital Insurance Trust Fund's reserves, which expands Medicare's spending authority. Medicare can only pay full benefits so long as its trust fund has sufficient reserves to meet these obligations. If the trust fund has insufficient resources, then spending must be cut automatically to ensure the fund does not go into deficit. The health law's Medicare provisions prevent these spending cuts from taking place for several more years. {...}

Perhaps the easiest way to understand this is to look at Social Security. If we generate $1 in savings within that program, then that's $1 that Social Security can spend later. If we also claimed this same $1 to finance a new spending program, we would clearly be adding to the total federal deficit. There has long been bipartisan understanding of this aspect of Social Security, which is why Congress's paygo rules prohibit using Social Security savings as an offset to pay for unrelated federal spending.

No such prohibition exists in the budget process against committing Medicare savings simultaneously to Medicare and to pay for a new federal program. It's this budget loophole, unique to Medicare, that gives the health law's spending constraints and payroll tax hikes the appearance of reducing federal deficits. But it is appearance, not reality. If you have only $1 of income and are obliged to pay a dollar each to two different recipients, then you will have to borrow another $1. This is effectively what the health law does. It authorizes far more in spending than it creates in savings.

How much more? Charles Blahous's study, "The Fiscal Consequences of the Affordable Care Act," published last month by the Mercatus Center, found that the health law would add over $340 billion to federal deficits over the next 10 years. Over the longer term, deficits would run into the trillions

Actually, it's worse than that. Defenders of ObamaCare try to spin this as saying it won't matter because 'the savings will come from cuts in payouts to doctors and hospitals, so the full package of benefits will be there.'

Unless the money to fund Medicare is borrowed, the program will simply die. And cutting the amount of payouts just hastens the process.

If a market spends $2 per pound to buy, market and sell a pound of ground beef and needs to sell it for $3 to make a sustainable profit, a 'benefit package' that is willing to pay $2.10 per pound is no benefit at all. The market would simply refuse to accept customers provided with this 'benefit' because it's a way of going broke. Just as some doctors and hospitals now are refusing to accept Medicare patients.

Cut payouts even further, as the Obama Administration and its media shills are suggesting, and you effectively kill medicare and drive seniors into one-size-fits-all Obamacare, where their medical care can be rationed by th eIAMB functionaries with impunity.

Of course, there are some True Believers who this seems to escape. I say 'seems' because it's either that, or they're willfully lying:

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