Drs. Coburn and Barrasso releases new health care report, and the consequences of "Patient Protection and Affordable Care Act" worse than anticipated. One section reports on the impact this new law has on jobs. Full report available here.
Medicare began running a cash flow deficit in 2008. To date, Medicare’s total long-term unfunded liabilities total in the tens of trillions of dollars – a gap so big that politicians have no idea of how to resolve it. The federal health overhaul made the prognosis worse by taking nearly $530 million from Medicare to spend on new government programs.
In a December 2009 letter to Senator Sessions, the Congressional Budget Office (CBO) said that the appearance of savings to the Medicare program was because the Medicare trust fund is “essentially an accounting mechanism.” Cuts to Medicare are effectively double-counted, giving the appearance of extending Medicare’s solvency while actually being used to pay for the cost of the new law.
CBO has not only challenged claims of Medicare savings – it has undermined them. The conclusion from the Director of CBO is that the cuts to Medicare cannot “pay for future Medicare spending [and therefore increase its solvency] and, at the same time, pay for current spending on other parts of the legislation…”
The Chief Actuary of the Centers for Medicare and Medicaid Services (CMS), Richard Foster, echoed CBO, stating plainly that the reduced spending resulting from the significant Medicare cuts in the new health care law, "cannot be simultaneously used to finance other Federal outlays (such as coverage expansions) and to extend the trust fund.” In a more recent analysis, the Actuary reiterated that the Medicare “fund is still not adequately financed over the next 10 years.”
In his most recent report on the financial health of Medicare, the CMS Chief Actuary outlined alternate financial scenarios for Medicare, drawing attention to the negative impact to the program under the federal health overhaul. The Actuary concluded that projected savings are not likely to materialize. He judged there is a strong “likelihood that certain of these changes will not be viable in the long range” because “the financial projections shown in [the official] report for Medicare do not represent a reasonable expectation for actual program operations in either the short range … or the long range.”
In fact, if the Medicare reimbursement cuts in the law were allowed to be fully implemented, providers would either drop out of Medicare and jeopardize access for seniors, or Congress would intervene – thus increasing spending. “Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance,” according to the actuary. Medicaid patients have many restrictions on accessing care because of very low reimbursements, so it is difficult to assume Congress would allow rates to be reduced so low. “Well before that point,” the Actuary concluded, “Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”
Both the CBO Director and CMS Actuary agree. Estimated savings from cuts to Medicare are unlikely and it is not possible to double count savings from Medicare.
Other Medicare experts arrive at the same conclusion. Dr. Tom Saving, a former Medicare trustee from 2000- 2007, said that “while some savings are necessary to shore up the Medicare program, we know that the new law’s unrealistic cuts will hurt care for seniors. Instead of reducing the existing program’s tremendous burden on taxpayers, the new law commits future taxpayers to a bigger burden through a bigger trust fund.”
Another former Medicare trustee, David Walker, noted a Medicare dollar cannot be simultaneously spent and saved. If “the Medicare savings are used to pay for expanded health care coverage, the economic capacity of the federal government to meet its Medicare obligations will not be enhanced.”
Independent Medicare and budget experts conclude that the appearance of Medicare’s extended solvency is actually only a mirage. In reality, under the new law, Medicare’s unfunded liabilities will grow worse.
