Democrats’ Plan for Medicare: Cut Benefits and Wait for Fiscal Catastrophe

Rather Than Preserve and Protect Medicare Now, Democrats Pick Up Where ObamaCare Left Off by Continuing to Gut Medicare

President Obama was 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 Democrat proposal for doing nothing, however, does do something. Obama’s plan requires an approximately 15 percent cut in benefits for future beneficiaries, according to recent reports from both the Obama-appointed trustees of Medicare and the American Academy of Actuaries. The American people deserve to hear the truth:

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)

AMERICAN ACADEMY OF ACTUARIES: DEMOCRAT PLAN REQUIRES 15 PERCENT CUT TO BENEFITS. “The projected HI deficit over the next 75 years is 0.66 percent of taxable payroll, down from last year’s estimate of 3.88 percent.Eliminating this deficit would require an immediate 23 percent increase in payroll taxes or an immediate 15 percent reduction in benefits—or some combination of the two. Delaying action would require more drastic tax increases or benefit reductions in the future.” (“Issue Brief: Medicare’s Financial Condition: Beyond Actuarial Balance,” American Academy of Actuaries, Nov. 2010)

And these planned 15 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 UNREALISTIC 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 strategy to gut Medicare is just the latest instance of what has become a pattern of behavior. Last March, as a part of ObamaCare,Democrats cut Medicare by more than $500 billion:

“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 policies until 2018, replacing the lost revenue byimposing 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)

The Obama administration even touted these cuts, which could amount to even more in the years to come:

DECEMBER FINANCIAL REPORT ON OBAMACARE “TOUTS THE DRACONIAN MEDICARE CUTS”: “The full extent of the future cuts to Medicare under ObamaCare is revealed in the little noticed 2010 Financial Report of the U.S. Government, released in December by the Treasury Department.  What the data in that report show effectively is that under current law Medicare will be rendered dysfunctional in future years by draconian, arbitrary cuts in payments to doctors and hospitals for the promised health care for America’s seniors.  The essential health care needed by the sickest to save their very lives or their ability to remain functional will not be there, exactly contrary to the original promise of Medicare. …

“The December financial report effectively touts the draconian Medicare cuts due to ObamaCare, stating, ‘The 2010 projection is lower than the 2009 projection in every year of the projection period almost entirely as a result of the Affordable Care Act (ACA), which is projected to significantly lower Medicare spending and raise receipts.’  Later in the report, the data presented discloses over and over the full present value of future cuts in Medicare payments to doctors and hospitals under present law — $15 trillion.” (Peter Ferrara, “Gutting Medicare By Refusing to Pay the Bills,” Forbes, 3/3/2011)

In addition, Medicare’s top actuary noted that the Obama Medicare plan will result in 30 percent cuts for doctors and hospitals serving seniors under Medicare:

MEDICARE CUTS USED TO MASK OBAMACARE SPENDING BINGE: “In his analysis accompanying the recently released Annual Report of the Medicare Board of Trustees, Richard Foster, Medicare’s chief actuary, noted that Medicare payment rates for doctors and hospitals serving seniors will be cut by 30% over the next three years. Under the policies of the Patient Protection and Affordable Care Act, by 2019 Medicare payment rates will be lower than under Medicaid. Mr. Foster notes that by the end of the 75-year projection period in the Annual Medicare Trustees Report, Medicare payment rates will be one-third of what will be paid by private insurance, and only half of what is paid by Medicaid.(Peter Ferrara and Larry Hunter, “How ObamaCare Guts Medicare,” The Wall Street Journal, 9/9/2010)

ObamaCare will also induce steep cuts to the Medicare Advantage program of $136 billion, limiting seniors’ ability to participate in private health plans. The result: 7.4 million seniors will drop enrollment:

$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)