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Understanding $716 billion

Posted by John McDonough  August 19, 2012 07:24 PM

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As of mid-August, Medicare looks to be an enduring issue for the remainder of this national political season. It has strong legs, and neither Party believes it can afford to lose this battle. This past week, an official briefing for Republican Congressional Candidates laid out how Republicans believe they can fight Democrats to a draw on Medicare, which would be a huge GOP win. Key to the strategy -- bring out the moms: "My son/daughter would never do anything to harm senior citizens or Medicare."  Seriously, as Paul Ryan demonstrated with his mom in Florida just yesterday.

Romney got serious this week too, bringing out a whiteboard to replace, at least for now, the Etch-a-Sketch. The Republican Candidate said that President Obama "robbed" Medicare of $716 billion to pay for ObamaCare/the Affordable Care Act (ACA). Sounds serious. Is it true?

According to Romney, Obama went into the "Medicare Trust Fund" room in the Treasury Department walked out with 716 really, really big ones, and leaving the Trust Fund depleted by that amount, jeopardizing its solvency for more than 40 million senior citizens and disabled persons. Sounds nefarious.

Not quite.

No money from the "Trust Fund" was withdrawn. By reducing rates paid to hospitals, health insurance plans, and other medical providers (not physicians, by the way -- a mistake being made by media all over the place), the "draw" out of the fund is reduced by $716 billion between federal fiscal years 2013-22 (it was $449 billion between 2010-19 when the ACA was signed in March 2010). If the ACA is implemented as passed, then $716B less will be withdrawn over those ten years, meaning the Medicare Trust Fund will have about eight more years of solvency than if the ACA had not been signed into law.

That's the truth. Honest.  It's the difference between eating into your savings account (what Romney charges) versus reducing your spending so that you don't have to (what the ACA does). 

Now, it is also true that the $716 billion in unused dollars that otherwise would have gone to pay Medicare bills instead will help to finance the cost of implementing the ACA. That's what President Obama and Congressional Democrats chose to do in passing the ACA. Cong. Paul Ryan, the House Budget Chair and presumptive Republican VP candidate, in his budget plan approved by the House in 2011 and 2012, also proposes to implement the same ACA Medicare reductions, and sought to use the savings to finance new tax cuts. He says the Medicare reductions would be used to balance the federal budget -- but his budget plan doesn't come into balance until 2040, while the tax cuts happen right away -- you do the math.

So we have three sets of ideas on how to use the savings -- help fund the ACA, reduce the federal debt, or reduce federal taxes. All legitimate, depending on the circumstances. It's about values, yours and mine. What do we value more as a society.

The most dangerous thing to do, though, would be to rescind the $716 billion in reductions. Why? Because rescinding those reductions brings the date of non-solvency for the Medicare Trust Fund from 2024-5 all the way back to 2016. So as the U.S. works to dig out of the fiscal and economic mess of the Great Recession, we'll throw a Medicare funding crisis into the mix too. Why the heck not? Nearly every other system is in some form of crisis -- so why leave Medicare out?

But as President Romney and Vice President Ryan will realize, they are putting themselves and their Party in an impossible position by promising to make zero changes for Medicare beneficiaries of any kind. Meanwhile, if they succeed in restoring $716 billion to the provider community, are they going to come back soon thereafter and demand new savings from these same stakeholders to resolve the new Medicare financing crisis of their own making?  Ryan's prior position on the Medicare reductions was at least intellectually honest. This is not.

It is good politics, at least for now. And it will make for messy governing. Mitt Romney is promising not to change Medicare at all for beneficiaries born before 1957. Meanwhile, his tax cut and no-new-taxes agenda, combined with defense spending hikes, guarantee enormous pressure on all other federal spending. Is or is Romney not going to hold Medicare harmless? If any of this comes to pass, it's a self-inflicted wound.

One more thing: Romney said at his Whiteboard Event, that there would be "no changes" affecting current Medicare beneficiaries while he is President. At the same time, he says he's going to repeal the "entire" ACA. But the ACA has already expanded benefits for current Medicare enrollees -- including, closing the Part D drug "donut hole," providing free annual wellness visits for all enrollees, and covering all preventive care services with no cost sharing of any kind.

Governor Romney is saying two different things at once -- I will not cut benefits for existing Medicare enrollees, and I will cut benefits for existing Medicare enrollees by repealing the ACA.

Could someone please call the folks working in Downtown Boston at Romney headquarters and get an explanation? I admit it.  I am confused.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »


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