The Democrats’ Not-So-Secret Plan to Gut Medicare

March 22, 2011

Rather Than Preserve and Protect Medicare, Democrats Continue Their ObamaCare Agenda of Gutting It


President Obama was widely criticized for his plan to do nothing the preserve and protect Medicare in his FY 2012 budget:


THE LOS ANGELES TIMES: “President Obama’s Budget For Fiscal Year 2012 Landed With A Thud Monday, Laying Out Short- And Long-Term Tax And Spending Plans That Disappointed Lawmakers On Both Sides Of The Aisle. The proposal was a remarkably tame response to Washington’s fiscal problems, not the bold statement about belt-tightening that the White House had suggested was coming. Yet the biggest shortcoming is that it all but ignored the most important long-term financial challenge, which is the growing cost of entitlements such as Medicare and Medicaid.” (Editorial Board, “Obama’s Overly Tame Budget,” The Los Angeles Times, 2/15/2011)


THE WASHINGTON POST: “The president punted. Having been given the chance, the cover and the push by the fiscal commission he created to take bold steps to raise revenue and curb entitlement spending, President Obama, in his fiscal 2012 budget proposal, chose instead to duck.” (Editorial Board, “President Obama’s Budget Kicks the Hard Choices Further Down the Road,” The Washington Post, 2/15/2011)


THE DENVER POST: “Obama called the proposal one of ‘tough choices and sacrifices,’ yet it does not confront entitlements and continues to act as if government spending is the way to prosperity.” (Editorial Board, “Obama Budget Still Falls Short,” The Denver Post, 2/15/2011)


The Democrat proposal for doing nothing, however, does do something. It requires 16 percent cuts in benefits for future beneficiaries, according to the most recent report by the Obama-appointed trustees of Medicare:


MEDICARE PART A BANKRUPT IN 2029: “The HI [Hospital Insurance Trust] fund still fails the test of short-range financial adequacy, as projected annual assets drop below projected annual expenditures…by 2012. The fund also continues to fail the long range test of close actuarial balance.” (Timothy F. Geithner, Hilda L. Solis, Kathleen Sebelius, and Michael J. Astrue, “A Summary of the 2010 Annual Social Security and Medicare Trust Fund Reports,” Social Security Online, Accessed 3/15/2011)


16 PERCENT CUTS TO BENEFITS AND A 23 PERCENT PAYROLL TAX HIKE: “Over 75 years, HI’s [the Hospital Insurance Trust Fund’s] estimated actuarial imbalance is 23 percent as large as payroll taxes, and 16 percent as large as program outlays.” (Timothy F. Geithner, Hilda L. Solis, Kathleen Sebelius, and Michael J. Astrue, “A Summary of the 2010 Annual Social Security and Medicare Trust Fund Reports,”Social Security Online, Accessed 3/15/2011)


LONG-TERM UNADDRESSED COST IMBALANCES: “It is projected that SMI will continue to put increasing pressure on the federal budget and beneficiaries in the years ahead… Over the next 75 years, SMI costs are expected to average 3.3 percent of GDP, which is 1.4 percentage points higher than the SMI share of GDP in 2009.” (Timothy F. Geithner, Hilda L. Solis, Kathleen Sebelius, and Michael J. Astrue, “A Summary of the 2010 Annual Social Security and Medicare Trust Fund Reports,” Social Security Online, Accessed 3/15/2011)


And these planned 16 percent cuts in benefits are a conservative estimate. By Democrats’ own admission, their rosy assumptions may result in far greater cuts to benefits once proven wrong:


THE DEMOCRATS’ PLAN ASSUMPTIONS ARE SO UNTENABLE EVEN THEY ADMIT IT: “Much of the projected improvement in Medicare finances…ispremised on the assumption that productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past. This report notes that achieving this objective for long periods of time may prove difficult, and will probably require that payment and health care delivery systems be made more efficient than they are currently… If health care efficiency cannot be substantially improved through productivity gains or other measures, then over time the statutory Medicare payment rates would become inadequate. In that situation, the payment update reductions might be suspended, in which case actual long-range costs would be larger than those projected under current law.” (Timothy F. Geithner, Hilda L. Solis, Kathleen Sebelius, and Michael J. Astrue, “A Summary of the 2010 Annual Social Security and Medicare Trust Fund Reports,” Social Security Online, Accessed 3/15/2011)


The Democrat plan to cut Medicare is just the latest development in the Democrats’ pattern. Last March, as a part of ObamaCare, Democrats cut Medicare by more than $500 billion:


“The reform plan includes cutting the costs of Medicare, the government-run health plan for seniors, by about $500 billion.” (“Pelosi: GOP Used Fear to Turn Elderly Against Health Care Bill,” CNN’s “Political Ticker,” 3/29/2010)


It would cut an additional $60 billion from Medicare, bringing total cuts to the program to more than $500 billion over the next 10 years. And it would delay a tax on high-cost insurance polices until 2018, replacing the lost revenue by imposing the Medicare payroll tax on investment income for families earning more than $250,000 a year.” (Shailagh Murray and Lori Montgomery, “With Senate ‘Fixes’ Bill, GOP Sees Last Chance to Change Health-Care Reform,” The Washington Post, 3/24/2010)


NURSING HOMES, HOSPICE CARE MEET STEEP CUTS FROM OBAMACARE:“Certain industries stand to face the sharpest cuts in government money, Moody’s says, namely home health, as well as oxygen and durable equipment companies. Hospice care, nursing homes and specialty hospitals are also expected to lose millions off what they receive now. Moody’s says we can expect consolidation in health industries, as providers acquire different health-care entities to diversify….


“Alica Mitchell, a spokeswoman for the American Hospitals Association said: ‘The AHA will remain vigilant against further Medicare and Medicaid reductions, particularly given that hospitals already face $155 billion in cuts as part of health reform.‘ We’ve also reached out to the Federation of American Hospitals and we’ll update the post if we hear back.” (Suzanne Sataline, “A Look Down the Road at Medicare Cuts,” The Wall Street Journal‘s Health Blog, 11/15/2010)


Moreover, ObamaCare will induce steep cuts to the Medicare Advantage program, which will suffer a loss of about $136 billion and reduce enrollment by 7.4 million seniors:


$136 BILLION IN CUTS TO MEDICARE ADVANTAGE: “Another $136 billion comes from reducing payments to private Medicare Advantage health plans, through which about one-quarter of seniors get Medicare benefits.” (Marilyn Werber Serafini, “Some Hill Races Hinge on Seniors’ Anger Over Medicare,” Kaiser Health News, 10/26/2010)


7.4 MILLION SENIORS TO LOSE MEDICARE ADVANTAGE DUE TO OBAMACARE:“The new provisions will generally reduce MA [Medicare Advantage] rebates to plans and thereby result in less generous benefit packages. We estimate that in 2017, when MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).” (Richard S. Foster, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act as Amended,” Centers for Medicare and Medicaid Services, 4/22/2010)