Medicaid Crisis Shows What’s in Store for Seniors on Medicare

June 23, 2011

As Families and Children on Medicaid Face Benefit Cuts, Seniors are Warned That Democrats’ Plan Will Do the Same to Medicare

The Medicaid program will run out of money at the end of the month, resulting in benefit cuts for millions of children and poor Americans just as enrollment in the program is rising.
These Medicaid benefit cuts foreshadow a disturbing future for Medicare if Democrats have their way and drive the program into bankruptcy. The trustees of Medicare confirmed yesterday in a Ways and Means subcommittee hearing that the Democrat plan for Medicare would indeed “bankrupt” the program and end “Medicare as we know it.”
The trustees also projected that 17 percent benefit cuts would be necessary to avoid Medicare’s looming bankruptcy, and cuts could be even deeper if action to strengthen Medicare is delayed.

BACKGROUND:

Reporting from The New York Times last week revealed that the Medicaid program is on the brink of bankrupting its trust fund, creating a scenario where the program will be forced to cut benefits at a time when enrollment is expected to grow:

“AS NUMBER OF MEDICAID PATIENTS GOES UP, THEIR BENEFITS ARE ABOUT TO DROP” WHEN MONEY RUNS OUT AT “END OF THIS MONTH”: “The Obama administration injected billions of dollars into Medicaid, the nation’s low-income health program, as the recession deepened two years ago. The money runs out at the end of this month, and benefits are being cut for millions of people, even though unemployment has increased.

“From New Jersey to California, state officials are bracing for the end to more than $90 billion in federal largess specifically designated for Medicaid. To hold down costs, states are cutting Medicaid payments to doctors and hospitals, limiting benefits for Medicaid recipients, reducing the scope of covered services, requiring beneficiaries to pay larger co-payments and expanding the use of managed care.” (Robert Pear, “As Number of Medicaid Patients Goes Up, Their Benefits Are About to Drop,” The New York Times, 6/15/2011)

DUE TO GOVERNMENT HEALTHCARE TAKEOVER, “SEVERAL MILLION MIDDLE-CLASS PEOPLE [WILL] GET NEARLY FREE INSURANCE MEANT FOR THE POOR”: “President Barack Obama’s health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed. …

“Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly.” (“A Glitch in ObamaCare Could Give Middle Class Insurance Intended for Poor,” Associated Press, 6/21/2011)

The Medicaid experience raises serious questions about the future of Medicare, which is also facing looming bankruptcy. In fact, at a Ways and Means subcommittee hearing yesterday, the public trustees of Medicare confirmed that Medicare is going “bankrupt” and that the Democrats’ plan to keep it on that path will end “Medicare as we know it”:

TRUSTEES AGREE THAT MEDICARE IS GOING “BANKRUPT”: REP. DAVE REICHERT (R-WA): “Medicare is going bankrupt, do you both agree with that? And it’s accelerating, true?”

BLAHOUS: “Yes.”

REISCHAUER: “Yes.” (Remarks from Charles P. Blahous and Robert Reischauer, “Hearing on the 2011 Medicare Trustees Report,” Committee On Ways & Means, U.S. House Of Representatives, 6/22/2011)

DEMOCRATS’ PLAN FOR MEDICARE WILL END “MEDICARE AS WE KNOW IT”:REP. PETER ROSKAM (R-IL): “In fact, Medicare as we know it will end in 2024 absent some change in policy or some change in moving forward. That’s right isn’t it?”

BLAHOUS: “Yes.” (Remarks from Charles P. Blahous, Committee On Ways & Means, U.S. House Of Representatives, 6/22/2011)

MAY 2011 REPORT: MEDICARE WILL GO BANKRUPT IN 2024, FIVE YEARS EARLIER THAN FORECAST LAST YEAR: “Medicare’s trust fund will run dry in 2024, five years earlier than forecast just last year, and Social Security’s will be exhaused by 2036, adding fuel to the debate over cutting one or both programs to reduce annual budget deficits.” (Richard Wolf, “Medicare, Social Security Money Running Out Faster,” USA Today, 5/13/2011)

In addition, the Medicare trustees reaffirmed the point made in their May 2011 report that Medicare will face severe benefit cuts without actions to forestall bankruptcy. These cuts will only increase in severity because the Democrat plan delays action on strengthening Medicare. Do Democrats want to do to seniors on Medicare what they’re already doing to poor Americans on Medicaid?:

CUT IN BENEFITS UNDER DEMOCRAT MEDICARE PLAN IS REAL, NOT JUST HYPOTHETICAL: ROSKAM: “So that cut just so I’m clear, is not a hypothetical cut, it’s not a hypothetical delay, it’s an actual delay in payment to the point of reaching this 17% number based on your own projections. Is that right?”

BLAHOUS: “That’s right. The Social Security Act which deals with these trust fund issues is very explicit that payments can only be made from the trust funds.” (Remarks from Charles P. Blahous, Committee On Ways & Means, U.S. House Of Representatives, 6/22/2011)

DEMOCRAT PLAN MEANS AN “IMMEDIATE 17-PERCENT REDUCTION” IN BENEFITS OR “IMMEDIATE 24-PERCENT INCREASE” IN TAXES: “The long-range financial imbalance could be addressed in several different ways. In theory, the standard 2.90-percent payroll tax and the additional tax 0.9-percent tax on high-income earners could be immediately increased by the amount of the actuarial deficit to 3.69 percent, or expenditures could be reduced by a corresponding amount. Note, however, that these changes would require an immediate 24-percent increase in the tax rate or an immediate 17-percent reduction in expenditures.” (pp. 28-29, “2011 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” The Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 5/13/2011)

AMERICAN ACADEMY OF ACTUARIES: BENEFIT CUTS COULD BE EVEN HIGHER: “The projected HI deficit over the next 75 years is 0.79 percent of taxable payroll. Eliminating this deficit would require an immediate 24 percent increase in payroll taxes or an immediate 17 percent reduction in benefits—or some combination of the two. Delaying action would require more drastic tax increases or benefit reductions in the future.” (“Medicare’s Financial Condition: Beyond Actuarial Balance,” American Academy of Actuaries, May 2011)

Medicaid Crisis Shows What’s in Store for Seniors on Medicare