Health Care Legislation Turns Medicare Into Slush Fund – Pacific Research Institute

Health Care Legislation Turns Medicare Into Slush Fund

President Obama has repeatedly pledged never to sign any proposal that would “add one dime” to the federal deficit, yet he and Congress are finding it impossible to cover millions of uninsured Americans without increasing deficit spending or taking the money from the current Medicare system.

Finding money to achieve the hoped-for dramatic increase in the subsidization of health care has proven difficult for the Democratic leadership in Washington as more Americans grow concerned about the rapid increase of deficit spending and an economic recession discourages tax increases.

Christina Romer, chair of the president’s Council of Economic Advisers, acknowledged the challenge the White House faces.

“We are going to be expanding coverage to some 30 million Americans,” Romer said. “And of course, that’s going to up the level of health-care spending. You can’t do that and not spend more.”

Medicare Honey Pot

Senate Majority Leader Harry Reid recently admitted the spending in his plan is derived from an act of budgetary legerdemain: Stripping billions of dollars in scheduled Medicare payments to physicians out of the total cost of the bill.

Kevin Wrege, former senior regional director at America’s Health Insurance Plans in Washington, DC, believes the Reid plan to cut Medicare physician fees by 20 percent starting in 2011 is not a promise to rely on.

“I don’t buy that the cuts will stick, and I don’t believe they’re fair in any event,” Wrege said. “We’ve seen Congress balk at cuts like these in the past.”

Political Expediency

According to Merrill Matthews, Ph.D., executive director of the Council for Affordable Health Insurance, these payments will still be made, but it has become politically expedient to hide the spending rather than account for it within the reform bill.

“Both the proposed costs and savings in this bill, such as these payment reductions, are a sham,” said Matthews. “Since there will be few real savings to offset the costs, the projected spending will almost certainly exceed estimates, at least until Congress sees the mistake and arbitrarily clamps down on spending, thereby increasing rationing [of health care].”

Sally Pipes, president of the Pacific Research Institute in San Francisco, believes Reid’s proposed health care overhaul will worsen Medicare’s already shaky finances.

“They are proposing to cut Medicare by $450 billion in ten years while simultaneously trying to expand Medicare’s patient services with two to three more million people,” said Pipes. “That’s expanding a program’s responsibilities while cutting its budget. The CBO has already said the program will go bankrupt in 2017, and that’s without these new unfunded mandates.”

‘Signs Are Very Bad’

Ryan Ellis, tax policy director for Americans for Tax Reform in Washington, DC, notes while the Congressional Budget Office has projected the federal deficit to average about $1 trillion annually for the next ten years, the White House could claim to lower the anticipated deficit by raising taxes.

“If you raise taxes by $200 billion and raise spending by $150 billion, you’ve cut the deficit by $50 billion,” Ellis said. “But is that the right solution? A better metric would be asking what this bill does to federal spending, and what this bill does to the federal tax burden—and in both cases, signs are very bad.”

Ellis says Reid’s health care overhaul plan takes the wrong tack, instituting a total of $370 billion in new taxes. Reid’s plan also severs the link between the Medicare payroll tax and its namesake program, instead directing the revenue from the payroll tax increase to the general fund for health care.

Wrege believes that in addition to hiking the deficit and hastening the bankruptcy of the Medicare system Reid’s proposal will ultimately result in higher costs for patients.

“Providers just shift costs to the private market, which will become heavily subsidized by taxpayers under the reform bills,” Wrege said. “In the end, this is just robbing Peter to pay Paul.”

Thomas Cheplick ( writes from Cambridge, Massachusetts. Troy Stouffer ( writes from Baltimore.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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