GOP Pledge Goes Silent
on Medicare Reform

September 28th, 2010 at 11:06 pm | 28 Comments |

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In 1995, Republicans came under attack from Democrats for proposing significant cuts to Medicare. Newt Gingrich denounced his opponents for attacking his party for having the political courage to touch this third rail of politics. “Think about a party whose last stand is to frighten 85-year-olds, and you’ll understand how totally morally bankrupt the modern Democratic Party is.”

That was 1995. Here is the title of a Heritage Foundation blog post in 2010: “Side Effects: Obamacare Spreads the Wealth by Cutting Medicare

This is the opening sentence: “Is Granny “disposable”? Some seniors may get that impression once Obamacare kicks in.”

Republicans used to be the party of fiscal discipline and tough choices. During the debate over Obamacare, they transformed into defenders of beleaguered senior citizens who were having money taken out of their entitlement program. In a Washington Post Op-Ed, Michael Steele wrote that Republicans must “protect Medicare and not cut it in the name of “health-insurance reform.”” Sarah Palin warned that the elderly would face “death panels.”

The language in the GOP “Pledge to America” shows the end result of this rhetoric. The pledge does not offer a single plan, idea, or even dog whistle for reforming Medicare. Minority leader Boehener was asked why his plan has no solutions for Medicare. He responded that this was intentional:

I don’t have all the solutions. But I believe that if we work with the American people, the American people will want to work with us to come to grips with these challenges that face our country.

But conservatives have been skeptical about Medicare since 1965, and they have worked for nearly half a century to come up with reforms. Yet none of these ideas make it into the pledge at all.

Some of the planned reforms are ambitious, like Rep. Paul Ryan’s roadmap. The plan would be to leave Medicare untouched for anyone over 55. Anyone under 55 would not get the same entitlement currently offered, they would instead receive a voucher that they could use to purchase health insurance.

Liberals have denounced Ryan’s roadmap and Republicans have avoided adopting it, but there are other ideas the GOP could use if it wanted to. AEI promotes a plan to bring competitive pricing to Medicare which would bring some free market dynamics into the system. Applying competitive bidding just to durable medical equipment providers would also be a means to save money. Even raising the eligibility age would achieve some savings.

So why instead, does the Pledge offer nothing? Undoubtedly the older GOP electorate has made the leadership much more cautious heading into the midterm election and they don’t want to gamble away their chance at an overwhelming victory. Republicans are now campaigning on “defending Medicare.”

An equally discouraging answer is that even the best and most thoughtful work of policy analysts stands little chance of getting adopted by the political leadership. Which begs the question, if decades of policy research won’t be adopted by political parties, what should a think tank spend its time and money doing?

The answer might be to play along with the party rhetoric, no matter where it leads. In 2010 the Heritage Foundation spent its resources arguing why Medicare’s new director favors rationing, and making maps to show where seniors will feel Medicare Advantage cuts.

Focusing on criticism while the GOP fails to adopt actual policies may not help America, but it might help Heritage’s bottom line. In 2005, Heritage’s total operating revenue was $39 million. At the end of the Bush presidency in 2008, it had climbed up to $63 million. Just one year into the Obama presidency, the total operating revenue for the end of 2009 was $71 million. (The figures for 2010 haven’t been released yet.) It is unclear whether all these donations will change the course of domestic policy, but the future seems bright in the field of colorful charts! (Heritage’s 2010 Budget Chart Book is reportedly “New and Improved.”)


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28 Comments so far ↓

  • llbroo49

    This should not be that surprising. The Republican Party (as Democrats have in other areas-they will tie their political fate to Americans that came of age during the Clinton Administration) have tied their political fate to a certain group of Americans that at one point in their lives (the 80s – Reagan Administration) felt they were individually rugged and independent. But as time has gone on, increased competiton for jobs with racial minorities and outsourcing, have left them feeling less and less secure in their “independence”. Jobs in manufacturing that provided great middle class benefits are no longer accessible due to increased education requirements and technological advances. Lastly, as they enter retirement age, they fear that their 401Ks, IRAs, and pensions alone, will not be enough to sustain them through their retirement age. And these particular individuals are not merely selfish. They have realistic concerns for their children’s future as fewer companies offer pensions, confidence in the stock market is (relatively) low, and well paying jobs that they could get with little or no high school, now require at least some college, if not a college degree.

    In order to address its core constituents, the GOP has been forced to advocate (or at the very least play down their positions) on Medicare and Social Security. It is easy to rail against entitlement programs like food stamps and welfare, but it will become increasingly difficult for the GOP make entitlement cuts across the board.

    And these changes that the GOP are having to address are not limited to SS and Medicare. Most Republicans have avoided Gay Marriage and abortion as serious issues going in to this mid-term. IMO it is not because they (abortion and same sex marriage) have gotten excessively popular in the American public, but that as many 80′s conservatives age, they are dealing with their own children having to face tough abortion or same sex marriage issues in their respective lives. While these 80′s conservatives may never condone the acts of abortion and and same sex marriage, it is difficult for them to hear their sons and/ or daughters demonized because of private personal decisons.

  • SpartacusIsNotDead

    “Think about a party whose last stand is to frighten 85-year-olds, and you’ll understand how totally morally bankrupt the modern Democratic Party is.”

    It’s too bad FrumForum didn’t have the guts to post this during the HCR debate. This is why I’ve always said Frum is interested in sound public policy only if it doesn’t come at the expense of GOP political gains.

  • SpartacusIsNotDead

    “But conservatives have been skeptical about Medicare since 1965, and they have worked for nearly half a century to come up with reforms. Yet none of these ideas make it into the pledge at all.”

    These reforms didn’t make it into the pledge because there are no longer any intellectually honest conservatives left in the GOP. While there are still many intellectual, and intellectually honest, conservatives still in existence, they are no longer part of the Right/GOP. They’ve left the GOP because the GOP has been taken over by idiots. This is why I keep pointing out how intellectually inferior the Right is to the mainstream and the Left.

  • mickster99

    Too bad when the Republicans forced thru Medicare Plan D the lave didn’t allow americans to take advantage of using their buying power to get better prices from big Pharma. Sorry, Billy Tauzin had his eye on retiring and going to work for Big Pharma so lip service to free market principles will just have to be nice talking points.

    And don’t forget the donut when you get to a certain point in your Medicare out of pocket expenses, benefits, disappear for a while then kick in after you pay 1 grand or so out of pocket.

    Free market is meaningless for the GOP when it means kissing the behinds of their big corporate owners: another one of the key myths of the gospel of Republicanism.

    “Republicans used to be the party of fiscal discipline and tough choice”.

    Ah, when exactly was that? I think that belief lives only in the gospel of Republicanism as one of the key myths: we’re fiscal conservatives.

    Let see Bush inherited a projected 10 year budget surplus and immediately cuts taxes then starts 2 wars and pushes thru the largest increase in entitlements since LBJ in the form of Medicare Plan D.

    Didn’t the deficit double while Bush was prez and the Republicans controlled congress.

    GOP talks the talk but doesn’t walk the walk.

    I am trying to remember what was the name of the last Republican President that passed a Federal Budget that was balanced? Help me out here, anyone?

    Ditto for GOPers that are intellectually honest. Must be the “young guns”.

  • midcon

    Toying with sacred cows does not equate to winning and winning is really the only objective. Did you ever notice that once a party or a candidate wins, the lull begins until it becomes time to organize and plan for the next election to be won? With winning as the only objective all philosophies, principles, and strategies are subordinated to that single focus. There is no real intent or interest in governing, only winning. Until we achieve a mature and intelligent electorate or term limitations in the absence of intelligence, it will remain merely a contest between two opposing sides who spend their time mouthing platitudes in place of good governance. Medicare is a sacred cow that can only be modified in a manner that supports that single objective. Otherwise, any real reform is off the table regardless of whether one is a Democrat or Republican. As I said before, the only thing wrong with America are Democrats and Republicans. An effective progrom to deal with the infestation would do wonders for this country.

  • bamboozer

    It’s absurd to say that the Dems tried to frighten 85 year olds, that award go’s to Sarah “Death Panels!!!” Palin. In addition “conservatives have been skeptical about Medicare since 1965″ tries to put a happy face on the truth: The Republicans have been trying to kill Medicare since 1965, at times they admit it. As for Voucher Boy Paul Ryan he’s becoming a hated man as people realize what he’s actually proposing is a hand out to health insurance co’s and a betrayal for the rest of us. I’m 54, it ain’t gonna happen little man. Finally the one measure that would save billions at no cost to the American tax payer is off the table: Negotiate The Cost Of Medicare Drugs.

  • Oldskool

    No one should be surprised they’re playing three-card monte. The last time they were honest about their intentions was the attempt to privatize Soc Sec and they remember how well that went over. Better to campaign on protecting whatever the base depends on, at least until they regain power. Then they’ll begin to divy up Medicare money among the insurance industry, like Cheney did with the military, and sell it to seniors as a cost-saver. Of course the joke will be on seniors and on taxpayers once again.

  • PracticalGirl

    “…Rep. Paul Ryan’s roadmap. The plan would be to leave Medicare untouched for anyone over 55. Anyone under 55 would not get the same entitlement currently offered, they would instead receive a voucher that they could use to purchase health insurance.”

    THIS is a solution? Somebody 54 years old who has been paying into the medicare system for 3-4 dedcades gets to take a “voucher” to the open market to buy what he can get? Really? So, then, that voucher is going to increase exponentially with the whims of the private insurers as they fill the need to show their shareholders increasing profits while serving a very large, increasingly expensive market segment? HAHAHAHAHAHA! Would LOVE to see the details on this tripe-details I’m sure Paul Ryan hasn’t even considered. Poor Paul….doesn’t seem to realize that the only way this proposition would work would be with a public option…

    But it is the best solution to get Americans to deal with their own mortality as they age. When insurance premiums (at the hands of private insurers) begin to eat half of a retirement paycheck (and then some), Grandma will begin pulling her own plug.

    I’ll jump on this bandwagon just as soon as every past and present Congress person “pledges” to utilize the exact same system-without their fat government pensions.

  • easton

    practical girl, notice the flaw in logic in this: Some of the planned reforms are ambitious, like Rep. Paul Ryan’s roadmap. The plan would be to leave Medicare untouched for anyone over 55. Anyone under 55 would not get the same entitlement currently offered, they would instead receive a voucher that they could use to purchase health insurance.

    If it were a good idea you would propose to do it now, why wait ten years? I am in favor of school vouchers, if someone said wait ten years I would say they were nuts, my kids will be out of school then. The Ryan plan is not serious, at all. If it were he would propose it be done NOW! There is zero reason why there is a ten year window except that he knows older people would go nuts if he proposed it now so saying “in ten years” is just a way of pretending he has a solution. In ten years it would still be “in ten years.” The guy is a hack who loves the press, if he had any real convictions he would propose they do it NOW!!!

  • llbroo49

    easton // Sep 29, 2010 at 11:45 am

    I agree with your positon re: Ryan’s Medicare plan. It is flawed for two reasons. 1) The voucher system will only be effective if insurance companies are required to carry at least one insurance option that is totally covered by vouchers. Vouchers for $5,000.00 do very little if insurance companies will only offer plans starting at $7,000.00. 2) Ryan’s plan is cynical as all it does is ensure the elderly vote.

    I would haveno problem if Ryan were arguing his plan from a fiscal point of view. But his public argument is that his plan is better for Americans than the current Medicare program. Agian as Easton points out, if it was such a great idea and superior to Medicare- why are we forced to wait 10 years to get it?

  • Watusie

    easton, it reminds me of the balanced budget amendment gimmick. The same Republicans who dismantled PAYGO and turned a busdget surplus into a massive deficit say that what we really need is a BBA – which would take years to put in place.

  • TerryF98

    The GOP has zero plans to cut anything to any meaningful degree. They never have so why should they start now?

    History will repeat itself as it has ever since Nixon’s day. They will promise the earth and deliver an asteroid. The deficit will continue to grow. The corporations will accelerate their export of American jobs aided by the GOP. Government will be dysfunctional and chaotic as it was under Bush. Real freedom as against the fake freedom that the teahadists keep going on about will decline.

    If the Neocons get back to a position of power then whatever wealth the top 2% don’t steal from the rest of us will be spent fighting endless wars in the middle east or anywhere else that is the current “enemy”. Get shares in the defense contract industry as that will always be a growth sector.

  • LFC

    Republicans used to be the party of fiscal discipline and tough choices.

    I think Mickster99 put this comment firmly where it belongs, i.e. in the trash can. Gingrich did want to reduce the cost of Medicare, but he also wanted vast tax cuts a la Bush which would have accelerated the schedule of the vast (and continuing) Bush debt.

  • torourke

    easton,

    ” If it were he would propose it be done NOW! There is zero reason why there is a ten year window except that he knows older people would go nuts if he proposed it now so saying “in ten years” is just a way of pretending he has a solution. In ten years it would still be “in ten years.” The guy is a hack who loves the press, if he had any real convictions he would propose they do it NOW!!!”

    I am eagerly looking forward to your denunciation of the health care bill which was signed into law six months ago. I mean, the subsidized insurance pools for the thirty million Americans don’t kick in until 2014! According to the rhetoric of liberals, that means thousands of Americans will die unnecessarily because of the lag time. If insuring thirty million Americans is such a great idea, then why not do it NOW?!?! Where are the convictions of these hacks in the White House and in Congress? I mean really.

    Could it be that they were trying to game the CBO numbers by front-loading the taxes and pushing off the spending by a few years to get under the magic number of one trillion dollars over ten years? No, of course not. Because as everyone knows, Democrats are serious, sober-minded people who only make tough choices for the good of the American people. Don’t believe me? Just ask the typical lefty commenter at this site.

    As a general rule easton, when the jab your at the other team applies to your own side tenfold, then you might want to go easy on the accusations of hackery. Especially since the example I am using has actually been put into law, whereas Ryan’s plan has no chance of becoming law in the foreseeable future. Now Paul Ryan’s roadmap may or may not be wise, but given the fact that the leadership of his own party has distanced themselves from it–well that should grant him some immunity from the charge of hackery.

    Look, both sides need to take political constraints into their policies proposals. You know darn well that if Paul Ryan proposed to do what you would have him do, then you’re side would immediately crank up the Mediscare tactics to a fever pitch. But it’s not only the politics of it. Telling people on the brink of retirement that their Medicare benefits are being replaced with vouchers would cause no small amount of uncertainty. Giving people ten years to purchase their own health insurance, to shop around for the best policy, to wait for the private market to rise up to meet the demand of millions of retirees looking for health insurance…it would take a while. So there are real policy reasons for giving people the time to transition over.

    In the same way, if Obama, Pelosi, and Reid had pushed for the subsidized pools for 2011, then they would never have been able to get the CBO numbers to where they wanted to cover thirty million people. That’s also why the delayed the tax on the gold-plated health plans until 2017, which will probably never materialize anyway.

    I wish the Republicans had come out with bolder proposals for reforming Medicare in the pledge. I wish they would stop simply railing against the cuts in the Medicare advantage program and focus on the fact that Democrats are double-counting the cuts to Medicare as both an entitlement reform and as revenue to help pay for the new entitlement. I wish more Republicans would jump on Paul Ryan’s bandwagon and starting making the case to the American people that our fiscal future is unsustainable, and that if we do not do something with Medicare and Social Security, then we are facing a Greece-style in the not too-distant future. But I also wish that people stopped pretending that their side is the serious one while the other guys are bunch of lying hacks. It’s too easy to refute.

  • TerryF98

    torourke

    You just cannot ramp up the medical establishment to take an extra 30 million patients overnight. The resources have to be built in order to accommodate that number of extra people.

    And please don’t cry me a river over possible deaths. 40,000 people a year die through a lack of healthcare they have year after year for generations. When the Democrats wanted to end those 40,000 a year unnecessary deaths the GOP went all out to stop them. So cease with your fake concern, you are not convincing anyone.

  • balconesfault

    I mean, the subsidized insurance pools for the thirty million Americans don’t kick in until 2014! According to the rhetoric of liberals, that means thousands of Americans will die unnecessarily because of the lag time. If insuring thirty million Americans is such a great idea, then why not do it NOW?!?!

    Infrastructure. Planning. Giving businesses time to work out logistical issues so money isn’t wasted.

    You know – the kind of thing Republicans used to champion.

    I wish more Republicans would jump on Paul Ryan’s bandwagon and starting making the case to the American people that our fiscal future is unsustainable

    Me too.

  • easton

    torouke, my God, you can’t be serious. Democrats had no choice but to do it this way since the few blue dog Senators such as Nelson and Lieberman would have allowed Republicans to filibuster the process. Of course the bill is not perfect, it is just like sausage making, very messy. The original proposal, of course, wanted to insure the people right away. So Democrats started with the ideal then went through the legislative process and ended up with less than the ideal. You have got to be joking if this surprises you.

    “Giving people ten years to purchase their own health insurance, to shop around for the best policy, to wait for the private market to rise up to meet the demand of millions of retirees looking for health insurance…it would take a while. So there are real policy reasons for giving people the time to transition over.” This is utter rubbish and you know it. What insurance company in their right mind is going to insure old people for a measly $5,000 voucher? There will be no mandate for insurance companies to force them to sell to old people and if I were an insurance company I sure as hell wouldn’t. Why the hell do you think Medicare even came about in the first place, it was because even when there were many fewer elderly the insurance companies balked at insuring them. Surely you would understand under a purely utilitarian viewpoint a society would work to ensure that the working age has adequate health care as they are the productive elements of society and would essentially throw the elderly to the wolves. Either this is what Ryan wants to do or he is a hack.

    And 10 years for the market to come into being? On what planet? We went from a small army in WW2 to the greatest military power in history in a few short years, but it would take ten years for…what exactly…they won’t start selling until the vouchers are available, so you would have a crush of retirees all at once.

    “that Democrats are double-counting the cuts to Medicare as both an entitlement reform and as revenue to help pay for the new entitlement” This is without a doubt one of the more retarded Republican talking points. It is not DOUBLE COUNTING. It is insane to think it is. Medicare is part of the entire federal budget. If you cut 500 billion from medicare you are also cutting 500 billion from the entire federal budget. Saying that well, we can only count it as cuts to medicare but not the federal budget is Republican duplicity at its worse. Now, in turn, that 500 billion dollar cut will be used to pay for the entitlement. This is what makes the bill revenue neutral.
    If you cut 500 billion from Medicaid (and yes, the Federal budget) and transfer that money to the entitlement, you are not double counting that 500 billion.

    You have refuted nothing, stating that the legislative process is flawed is no refutation, lying about double counting and pretending that Insurance companies will take measly vouchers, which diminish each year in value, is no refutation.

    Do yourself a favor and read experts on this topic, people like Jonathan Cohn, and not Fox talking points.

  • easton

    Here is a little brief history of Medicare, selected quotes: The notion of limiting health insurance to social security beneficiaries seemed, from the point of view of the administration, to have several merits. For some time, Social Security officials had been troubled by the fact that, as long as the social security system failed to protect against the greatest single cause of economic dependency in old age–the high cost of medical care–it could not really fulfill its basic objective.

    the failure of those who opposed health insurance under social security to enact any adequate alternative to it, during the years when they had an opportunity to do so, contributed significantly to the ultimate revival and final success of the social security approach.

    Also heartening for proponents was the posture of the American Hospital Association, an increasingly powerful voice in the health field. Hospitals bore the brunt of the difficulties aged people were experiencing in meeting health expenses. Many hospital officials viewed this growing problem as a threat to the very existence of the private hospital system. For several years a special AHA committee had been exploring ways of relieving this financial pressure and, for a time in 1958, favored the social security approach

    From 1960 to 1964, average hospital costs increased from about $29 to $40 a day, with no sign of any letup in the rate of increase. As a result, private health insurance carriers were repeatedly forced to increase premium rates (or else “bleed” the coverage of their policies), making private insurance ever more prohibitive (or less adequate) for the many old people who were living on fixed incomes. By 1964 the proportion of the aged who were privately insured for hospital care seemed to be leveling off at about 50 percent. A Senate study that year estimated that only one-half of the policies issued to retirees provided comprehensive coverage (75 percent or more of the average hospital bill). In other words, only about 1 in 4 of the aged had adequate hospital insurance protection.

    Good lord, can you imagine what millions of elderly with capped insurance plans from for profit insurance companies would do to our hospital system? Ryan is a hack since he obviously has chosen to ignore the history of how medicare came about.

    Paul Ryan is either a hack or an evil little troll who deserves to burn in hell. I have the decency to call him a hack.

    So please torourke, I can go all day. There are solutions, Ryan is not it. And stop crying America will go broke because of it. It is tiresome.

  • easton

    One last thing, if Ryan weren’t a hack he would introduce a bill allowing all 64 year old people to be able to continue having their workplace insurance after they retire paid for by a voucher. It would be a reverse public option. Insurance companies not to drop people when they become 65 as well. It would have the benefit of allowing elderly to keep policies that they had for years and would be a way to see which is more efficient and economical. It would not require 10 years to do since these people would already have insurance (10 years to shop for a policy? yeesh)

    Now my proposal is a true Conservative one, one that allows choice and one that would not require any time to implement, simply apply for a voucher at 65 and continue with you policy, forgoing applying for medicare.

  • torourke

    easton,

    “torouke, my God, you can’t be serious. Democrats had no choice but to do it this way since the few blue dog Senators such as Nelson and Lieberman would have allowed Republicans to filibuster the process. Of course the bill is not perfect, it is just like sausage making, very messy. The original proposal, of course, wanted to insure the people right away. So Democrats started with the ideal then went through the legislative process and ended up with less than the ideal. You have got to be joking if this surprises you.”

    Take a deep breath and go back and read what I wrote, because you are only making my point for me. Politicians have to factor political reality into their policy making, which is what the Democrats did with the health care bill, and which is what Paul Ryan is doing with his roadmap. The only difference is that you seem to think that this is vile and disgusting when Republicans do it, but practical and necessary when Democrats do it. Great.

    “This is without a doubt one of the more retarded Republican talking points. It is not DOUBLE COUNTING. It is insane to think it is. Medicare is part of the entire federal budget. If you cut 500 billion from medicare you are also cutting 500 billion from the entire federal budget. Saying that well, we can only count it as cuts to medicare but not the federal budget is Republican duplicity at its worse. Now, in turn, that 500 billion dollar cut will be used to pay for the entitlement. This is what makes the bill revenue neutral.
    If you cut 500 billion from Medicaid (and yes, the Federal budget) and transfer that money to the entitlement, you are not double counting that 500 billion.”

    Easton, you really, really need to calm down because you are making a fool out of yourself. Yes, when you cut over $500 million from the Medicare Advantage program, then you would have that money to pay down the Medicare trust fund for a few more years, if you actually save the money for that purpose. But the Medicare cuts are not being saved for that purpose, as you yourself point out. They are being spent on the new entitlement. You cannot spend the same dollar on two different things. It’s plain logic. And Richard Foster, the chief actuary of the CMS, agrees with me, as does the CBO. I read Igor Volsky over at Wonkroom and Jonathan Cohn over at TNR, and they don’t even begin to dispute this. Their basic response is, well Republicans have done that in the past too, but that’s not much of a response.

    Here’s Megan McCardle with a good roundup:

    http://www.theatlantic.com/business/archive/2010/08/administration-still-double-counting-medicare-cuts/60850/

    Pay close attention to the quote from the CBO, and then ask yourself, which side is the one that is being duplicitous, and um, insane?

    “Paul Ryan is either a hack or an evil little troll who deserves to burn in hell. I have the decency to call him a hack.

    “So please torourke, I can go all day. There are solutions, Ryan is not it. And stop crying America will go broke because of it. It is tiresome.”

    Here is the CBO on our long-term fiscal future which includes the recently-passed health care bill. Read all the way to the bottom and ask yourself whether the fiscal future of this country is sustainable, and one that we should pass on to our kids and grandkids. Or ignore it and keep working on suppressing the desire to consign people who disagree with you to hell.

    http://www.cbo.gov/doc.cfm?index=11579

  • easton

    torourke, you ignored my own more reasonable way too achieve privatization, which is via choice so I am not consigning anyone who is for privatization to hell, I think Ryan is a hack since, again, there is a much easier way to go about this then the publicity seeking crap about it taking 10 years. Do it now and incrementally. Next year every 65 year old person can be given the option to hold onto their own health insurance and be given vouchers or sign up for medicare. As years go by more and more will be in the private system and we can see which is more cost effective. Tell me why this can not work. And mine, of course, has more than a remotest chance in hell of passing, Ryan’s doesn’t. You really think Democrats will go along with kicking all elderly off medicare and giving them vouchers, and you say I am making a fool of myself? I am not saying mine would necessarily work either, we can’t get vouchers for schools, but giving a people a choice is a lot better than not, and can be sold as such.

    As to double counting, again, in a way you can understand it:

    Conservatives are charging the Medicare Trustees report, which says that the Affordable Care Act has extended the life of the Medicare Trust Fund, with double counting.

    Jim Horney shoots this objection down:

    The National League’s home run leader, Washington Nationals slugger Adam Dunn, hit two homers on Wednesday in the Nats’ 7-2 win over the Arizona Diamondbacks. What would you do if a disgruntled Diamondback suggested that Major League Baseball should not count those homers toward his individual home run total and toward the Nats’ run total in their 7-2 win because, somehow, this amounted to “double counting”? You’d laugh, right?

    Well, that’s the same logic that some critics of the health reform law (i.e., the Affordable Care Act) are applying to the conclusion in the new Medicare’s trustees report that the “outlook for Medicare has improved substantially because of program changes made by” health reform. The critics have resurrected an old charge that counting the health reform savings in Medicare’s Hospital Insurance (HI) Trust Fund toward both reducing the overall federal budget deficit (or offsetting the costs of other provisions in health reform) and improving the outlook of the HI’s Trust Fund reflects “double counting.”

    Nonsense. The outlooks for the budget and for the HI Trust Fund are two different things (as are Dunn’s batting statistics and the Nats’ run total for a particular game). Some changes in law may affect one and not the other. But other changes, such as changes in spending and revenues for Medicare HI or Social Security, affect both.

    Under longstanding federal budget and accounting rules, the effects of provisions such as health reform’s Medicare HI changes are incorporated both in deficit projections for the federal budget as a whole and in the financing for the HI trust fund. This is nothing new.

    That’s what happened when the Republican-controlled Congress included HI changes in the 2005 budget reconciliation legislation (consisting of two bills) that reduced spending in Medicare and a number of other programs, cut taxes, and increased the deficit overall. The legislation’s HI savings counted both toward partially offsetting the cost of tax cuts and modestly improving the outlook for the HI Trust Fund. No one said that was double counting.

    That’s also what happened with the 1997 Balanced Budget Act and the 1983 Social Security rescue legislation. In both cases, the legislation simultaneously reduced deficits and improved Social Security or Medicare financing. No one called that double counting, either.

    McCardle is wrong.

    As to long term projections, please, I read long term projections back in the 80′s saying Social Security would be absolutely bankrupt now and yada yada. Simply put you, I, and the CBO has no idea what kind of technological changes will be in effect in 2030 and just how big our economy will be. I am not saying don’t take precautions, which is why I have come out with a much fairer privatization plan (that could pass) over Ryan’s.

  • easton

    And here is more that eviscerates the flawed logic of Megan:

    Megan McCardle is exacerbated at the accusation that the government is double-counting Medicare cuts passed as part of health care reform, because it using them both to extend the solvency of the Medicare Part A trust fund and pay for new medical spending. But wait! Bob Greenstein at CBPP argues that counting Medicare savings this way isn’t double-counting at all and is consistent with way Medicare changes in Administrations past have been scored. So who’s right?

    The real answer is that the federal government falls over itself with so many accounting gimmicks to keep Medicare and Social Security “separate” from the rest of the budget that you really can’t blame anyone for getting confused.

    That said, if you’re judging this argument based on the standards of modern government accounting, then Greenstein’s right and McCardle’s wrong.

    Megan is assuming that the federal government is proposing to swoop in and take future Medicare surpluses without leaving any redeemable assets in its place, and then using the surplus to pay for health care reform. If the federal government actually operated this way, then her double-counting accusation would be spot-on.

    However, Megan’s missing a crucial intermediary step: intragovernmental debt.

    You see, when surpluses accrue to Social Security or Medicare or any other federal trust fund, the federal government does in fact swoop in and transfer the surplus to the general fund, and those trust fund surpluses then reduce the general fund deficit in the year they’re commandeered. However, the trust funds are not stiffed: the federal government leaves an IOU with the trust fund in the form of a Treasury security. These securities are called “intragovernmental debt,” and they’re fully-redeemable assets, just like a savings balance. If Social Security or Medicare were to suddenly run a deficit, as both eventually will in the future absent reform, they would not need to cut benefits right away to stay solvent. That’s because they’ve accumulated significant amounts of intragovernmental debt in the past which the Treasury had traded for their surpluses. The Medicare Part A trust fund currently holds over $300 billion in intragovernmental securities. Social Security has over $4 trillion (this is why, even though Social Security will begin running deficits in the next several years, it will remain solvent until 2037 or so). Medicare will essentially redeem this intragovernmental debt when it starts running deficits in the future, and the federal government will be obliged to transfer back to the Medicare trust fund the surplus (with interest) it borrowed years earlier. That means that whenever a trust fund redeems intragovernmental debt, the budget deficit is higher than it otherwise would have been because the federal government now has to finance the full redemption amount.

    The Medicare trustees forecast last year that the gap between Medicare revenues (mostly premiums) and Medicare Part A spending was such that they would blow through their entire stock of intragovernmental debt by 2017. Now that revenue projections have gone up and spending projections have gone down, mostly as a result of health care reform, the Medicare trust fund will now last until 2029, an extra 12 years.

    However, there’s an effect on the general fund as well: because the Medicare deficit has decreased, Medicare will be redeeming less intragovernmental debt than it had projected last year. Fewer intragovernmental debt redemptions means fewer IOUs being passed on to the general fund. That, in turn, means the general fund deficit will be less going forward than projected last year. And these lower general fund deficits are what’s paying for the exchanges and subsidies in health care reform.

    Sound overly-complicated? It is. The whole rationale behind the trust funds is to give the illusion that Medicare and Social Security are “protected” programs, exclusive of the rest of the budget. Meanwhile, intragovernmental debt acts a ledger or bean counter so that the federal budget can in effect be unified: when trust funds run surpluses, for example, the whole of the budget deficit goes down. What this means is that the “solvency” of the Medicare trust fund is really just an accounting construct. The money health care reform saves by cutting Medicare and growing revenues ultimately goes towards paying for other parts of health care reform, regardless of the intermediary steps it takes to get there.

  • easton

    Now if you can refute the McCardle refutation, please do, but you should understand that it is simple Republicans obfuscation that led to this lack of logic.

    Neither McCardle nor the Republicans have even bothered to refute Bob Greenstein at CBPP which shows that they ignore information that refutes them and simply continue their fallacious logic.

    And why did you lie that no one disputes this, I googled literally tens of thousands of disputations.

    This is from Robert Greenstein, Executive Director on the Medicare Trustees’ Report
    Trustees’ Report on Medicare Shows Benefits of Health Reform, Underscores Need for Further Efforts to Slow Health Costs System-Wide

    The new Medicare trustees report clearly demonstrates that the Affordable Care Act (or ACA, the recently enacted health reform legislation) has strengthened the financing of the Medicare program. It also shows that slowing the growth of health care costs will require substantial additional efforts.
    The trustees now project that Medicare’s Hospital Insurance (HI) trust fund will remain solvent through 2029 — an improvement of 12 years compared to last year’s projection. The improvement reflects the efficiency savings and additional revenues enacted in the ACA. Even under a more pessimistic scenario under which not all of these savings are sustained, the trustees project that the HI trust fund will remain solvent through 2028.
    The health reform law thus aids Medicare in two ways. As the trustees’ report shows, it strengthens the program’s finances. It also improves Medicare’s coverage of preventive services, gradually closes the “donut hole” for prescription drugs, and reduces the premiums that beneficiaries will have to pay for Supplementary Medical Insurance (Medicare Part B).
    The trustees also report that as a result of the health reform law, half to four-fifths of Medicare HI’s long-term shortfall has been closed, depending on the extent to which the ACA’s savings are realized. Under the trustees’ main projection, the program’s 75-year shortfall has shrunk from 3.88 percent of taxable payroll (total earnings subject to Medicare payroll taxes) in last year’s trustees’ report to 0.66 percent in this year’s report. And even under the trustees’ “illustrative alternative” projection, which assumes that only 60 percent of the ACA’s savings are achieved in the long run (the scenario that Medicare actuary Richard Foster prefers), half of the long-term shortfall has been closed by this one piece of legislation.
    As the trustees observe, the new projections emphasize “the importance of making every effort to make sure that ACA is successfully implemented.” The health reform legislation takes important steps to begin restructuring the health care payment and delivery systems to move away from paying providers for more visits or procedures and toward rewarding effective, high-value health care. It also includes an excise tax on high-cost insurance plans that promises to help slow the growth of private health care costs. In addition to faithfully implementing these provisions, further very large steps will need to be taken to curb the growth of health costs system-wide as we learn more (partly from the research and pilot projects that the ACA requires) about how to do so effectively.
    Some critics of the health reform law continue to assert that its Medicare savings have somehow been “double counted.” This claim is without merit. The Congressional Budget Office has estimated that the ACA will reduce the federal deficit by $143 billion over the 2010-2019 period and by approximately $1.3 trillion in the 2020-2029 decade. Today’s trustees report confirms that health reform has extended the life of the HI trust fund by more than a decade. Both of these results flow automatically from the nature of the federal budget and the Medicare trust funds and the normal, longstanding accounting rules that apply to them. No double-counting occurs.
    Deficit-reduction legislation has been accounted for in exactly the same way in previous Congresses under both political parties. For example, both the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005 (both of which were passed by Republican Congresses) included Medicare savings that reduced the federal deficit and improved the solvency of Medicare’s HI trust fund. No claims of double-counting were raised when these bills were enacted. Similarly, the Social Security Amendments of 1983 reduced the budget deficit at the same time as they improved the solvency of the Social Security trust funds.

    And yet you claimed that no one disputes this. This came out but 2 days after McCardle and since then, from Republicans, nada, no attempt at refuting any of this.

  • easton

    One thing I don’t understand is Republican resistance to ever admitting that they are ever wrong.
    Here is an interesting exchange: Meanwhile, intragovernmental debt acts a ledger or bean counter so that the federal budget can in effect be unified: when trust funds run surpluses, for example, the whole of the budget deficit goes down.

    There is a difference between deficits and borrowing. When trust funds run surpluses, borrowing goes down, but the deficit remains unchanged.

    It is technically true, in an accounting sense, that the ACA both reduced the unified Federal budget deficit, and extended the solvency of the Medicare trust fund. But the fact that it is technically true is not really cause for citing it as an achievment, as Sebelius recently did. When the Administration cites both the reduction in the deficit and the extension of the trust fund solvency as achievements, it is making the same claim twice. That is deceptive, and that’s what Megan McArdle takes issue with.

    Reply: Meanwhile, intragovernmental debt acts a ledger or bean counter so that the federal budget can in effect be unified: when trust funds run surpluses, for example, the whole of the budget deficit goes down.
    When trust funds run surpluses, borrowing goes down, but the deficit remains unchanged.

    When trust fund surpluses increase, the unified budget deficit goes down. That’s the point I was trying to make.

    The charge Megan and others were making was more serious than what you describe. They weren’t objecting to the political rhetoric of the White House. They were arguing that from an accounting standpoint you literally cannot both extend Medicare solvency and pay for health care reform.

    The charge that the Administration is double-counting as a actuarial matter is false, for the reasons I outlined in the post.

    Reasonable people can disagree about political rhetoric. I don’t see anything wrong with touting both an aggregate effect (the unified budget deficit in this case) and a subset effect (here, the solvency of the Medicare trust fund). We do that all the time in economics. You and I do agree that Medicare trust fund solvency is a mostly-meaningless accounting measure, with the caveat that it does have policy significance since once the trust fund is depleted Medicare Part A expenditures would have to be cut to equal revenues. In reality, though, this only affects the timing and urgency of the inevitable reforms.

    So who now is making a fool of themselves? No, no one disputes this except I can find thousands of people who did.

    Look, McCardle was eviscerated specifically. If you can rebut this evisceration, be my guest.

  • torourke

    easton,

    It would be a big help if you could provide some links, or at least some quotation marks so I know who is saying what in the above posts. That being said, your posts do not even come close to showing what you think they do, and linking to Robert Greenstein’s spin (he of the left-leaning think tank you are citing) pales in comparison to the non-partisan reports given by both Richard Foster, who is the chief actuary of the CMS (as in, the Centers for Medicare and Medicaid Services), and the CBO, which both flatly state that the administration cannot use the same $500 billion plus to extend the solvency of the Medicare trust fund and pay for the health care law at the same time.

    Ezra Klein agrees with me too:

    http://voices.washingtonpost.com/ezra-klein/2010/08/double_counting.html

    Your above posts either argue that the accounting trick used by the administration has been used in the past by Republicans, which is not a rebuttal at all, or that they can use the trick as long as everyone understands that there are not real assets to fund both, but IOU’s to be drawn from the general revenue fund when the bill finally comes–with interest. So the other team has done it too, and if you go along with the smoke and mirrors accounting scheme, then I guess double counting is fine. Well, it isn’t. You cannot use five hundred billion dollars to both extend the solvency of Medicare and pay for the health care bill at the same time. Period.

  • easton

    So torouke, It is not smoke and mirrors. Do I need to repost what I posted above? Ignoring what I wrote is not rebuttal, it is burying your head in the sand.

    You posted Klein: So: Double-counting happens, but it happens in the administration’s rhetoric about the Medicare trust fund. It does not afflict the CBO’s estimates of how much the bill will save.

    I posted above: When the Administration cites both the reduction in the deficit and the extension of the trust fund solvency as achievements, it is making the same claim twice.

    So you are rebutting me with exactly what I wrote above? I answered it above. The charge that the Administration is double-counting as a actuarial matter is false, for the reasons I outlined in the post.

    Reasonable people can disagree about political rhetoric. I don’t see anything wrong with touting both an aggregate effect (the unified budget deficit in this case) and a subset effect (here, the solvency of the Medicare trust fund). We do that all the time in economics. You and I do agree that Medicare trust fund solvency is a mostly-meaningless accounting measure, with the caveat that it does have policy significance since once the trust fund is depleted Medicare Part A expenditures would have to be cut to equal revenues. In reality, though, this only affects the timing and urgency of the inevitable reforms.

    Look, it is complicated, I get that. As I posted above: The outlooks for the budget and for the HI Trust Fund are two different things (as are Dunn’s batting statistics and the Nats’ run total for a particular game). Some changes in law may affect one and not the other. But other changes, such as changes in spending and revenues for Medicare HI or Social Security, affect both.

    Under longstanding federal budget and accounting rules, the effects of provisions such as health reform’s Medicare HI changes are incorporated both in deficit projections for the federal budget as a whole and in the financing for the HI trust fund. This is nothing new.

    You are arguing about rhetoric in that it confuses you. I am talking about accounting.
    If you don’t like accounting, that is tough, try running a business without one.

    I understand it is deceptive but you can’t ignore the basic actuarial accounting, simply calling it smoke and mirrors is seriously weak, and posting Klein, who says at the end: “It does not afflict the CBO’s estimates of how much the bill will save.”

    Makes me wonder what your point is since you seem to be acknowledging that the ACA does in fact reduce the budget deficit long term.

    And, honestly, did you read what I posted since I pre-rebutted exactly what your rebuttal was.
    And since you state it is the CBO that matters: The Congressional Budget Office has estimated that the ACA will reduce the federal deficit by $143 billion over the 2010-2019 period and by approximately $1.3 trillion in the 2020-2029 decade. Today’s trustees report confirms that health reform has extended the life of the HI trust fund by more than a decade.

    So really, what is your point? You don’t like the fact that the administration used some deceptive rhetoric? shocking. Imagine, politicians using politics. As an actuarial matter your claim is false and since we are talking about accounting that is all that matters.

    And you are making the claim that the double counting somehow means the money is not there, but as the again as The Congressional Budget Office has estimated that the ACA will reduce the federal deficit by $143 billion over the 2010-2019 period and by approximately $1.3 trillion in the 2020-2029 decade.

    So it is Republican use of deceptive rhetoric which is the problem. Or are you going to say “listen to the CBO, except don’t listen to the CBO?”

  • easton

    ok, I am going to make this as simple as possible. The CBO claims that the ACA will reduce the federal deficit by $143 billion over the 2010-2019 period and by approximately $1.3 trillion in the 2020-2029 decade and will add to the solvency of Medicare.

    The 500 billion is part of the money being used to fund the ACA, hence:
    The 500 billion is being used to both extend the solvency of Medicare and pay for the health care bill at the same time. Period.

    This is irrefutable logic. You seem to be insisting that because the money was part of the budget before it should not be counted at all now, in effect you are saying it shouldn’t be counted at all, so it is not a case of double counting, it is you are trying to say there should be zero counting.

    Now if you want to claim the CBO is wrong, fine, but what could I do then? But you can’t claim my basic logic is wrong. Stop saying the 500 billion is part of the medicare budget but not the federal government’s budget. It makes no sense.

  • torourke

    Easton,

    At the risk of triggering another blizzard of posts from you where you seem to be talking out of both sides of your mouth, let me try one more time.

    Here’s you:

    “You posted Klein: So: Double-counting happens, but it happens in the administration’s rhetoric about the Medicare trust fund. It does not afflict the CBO’s estimates of how much the bill will save.

    I posted above: When the Administration cites both the reduction in the deficit and the extension of the trust fund solvency as achievements, it is making the same claim twice.”

    If you are now willing to claim, in agreement with Ezra Klein (who may be the most prominent liberal blogger on all things related to health care, with the possible exception of Jonathan Cohn), in agreement with Richard Foster (again, the government’s point person on this very issue), and in agreement with the Congressional Budget Office in their response to your good pal Congressman Paul Ryan, that both Congress and the White House are double counting $500 billion as both going towards paying for the health bill and expanding the solvency of the Medicare trust fund–then you and I are in agreement. I’d be willing to wrap it up right here and ignore the fact that you originally claimed that this very point I was making was, in fact, insane.

    But then you write this not long after:

    “The charge that the Administration is double-counting as a actuarial matter is false, for the reasons I outlined in the post.”

    So you take contradictory positions within the space of a few paragraphs. The actuarial matter is not false, as the CMS’s chief actuary, Richard Foster has attested to. You cannot claim that the actual $500 billion dollars going into paying for the health bill is the same as $500 billion dollars worth of IOU’s that have to be taken from the general revenue fund (which have to be accounted for either through more borrowing or raising taxes) that are going into the Medicare trust fund. The first one represents real assets while the second does not, which is a pretty massive distinction (I’ll put aside that the administration and Congress were using the same assets to pay for both, which makes the distinction even more glaring). The fact that the government has been using this accounting trick for years does not make it any less of a trick. You seem to be arguing that as a matter of politics what Democrats are doing is deceptive, but that the underlying policy is not. I see this as a distinction without a difference. The reason why the claim is bogus as politics is because it is bogus as policy.

    But then in your next post you write:

    “ok, I am going to make this as simple as possible. The CBO claims that the ACA will reduce the federal deficit by $143 billion over the 2010-2019 period and by approximately $1.3 trillion in the 2020-2029 decade and will add to the solvency of Medicare.

    The 500 billion is part of the money being used to fund the ACA, hence:
    The 500 billion is being used to both extend the solvency of Medicare and pay for the health care bill at the same time. Period.

    This is irrefutable logic. ”

    So in other words, you do not think the government is engaged in double counting, even though you wrote in the previous post that you did think they were double counting, and criticized me for not recognizing this! Do you realize that you have contradicted yourself multiple times now within the span of a few posts–heck even within the span of a few paragraphs?

    The reason the CBO claims that both the health bill reduces the deficit and expands the solvency of Medicare Trust fund is because Congress and the White House relied on…wait for it…double counting!!! The CBO admitted to Paul Ryan later on in a letter that this is what had happened, but the CBO has to score what is placed in front of them even though it is obvious to everyone that the Medicare expansion is bogus. That’s why Ezra Klein admits that double counting took place and that the administration’s and Congress’s claims about expanding the solvency of Medicare are false.

    Since you cannot seem to make up your mind about whether or not double counting is going on, I’m going to suggest that we wrap this up, as we are now well beyond the point of diminishing returns. Cheers.