Tuesday, September 4, 2012

The Medicare Cuts in the PPACA

Lately, Republicans have been decrying the 716 billion dollars of spending cuts in Medicare. Politifact rates that claim as "Mostly False". And it's a terrific example of political bias. You can actually see the blatant contradictions within the actual "refutation":

Ryan’s comments are highly misleading. Neither Obama nor his health care law literally cut funding from the Medicare program’s budget. Still, the number has a slight basis in fact.

The health care law instituted a number of changes to try to bring down future health care costs in the program. The total anticipated savings comes to $716 billion over the next 10 years, as determined by the nonpartisan Congressional Budget Office.

We should note that both parties agree Medicare spending is increasing too fast as baby boomers retire and medical costs increase. The government needs to find savings so those costs don’t overwhelm the federal budget in the future.

So, yes, Obama’s law did find $716 billion in spending reductions. They were mainly aimed at insurance companies and hospitals, not beneficiaries. The law made significant reductions to Medicare Advantage, a subset of Medicare plans run by private insurers. Medicare Advantage was started under President George W. Bush, and the idea was that competition among the private insurers would reduce costs. But the plans have actually cost the government more than traditional Medicare. The health care law scales back the payments to private insurers.
If you read the entire article, the comments they are "fact checking" don't contain "spending cuts" or "cut funding". That's their interpretation. And yet, three paragraphs later, they admit that there were "spending reductions".

The issue revolves around Federal accounting practices. Because many Federal programs have plans that span years (even decades), their budgets are more or less on autopilot. So for certain programs (like Medicare), the Federal government already knows what it's going to spend next year. And it'll be more than what it spends this year. In nominal terms, Medicare spending will grow next year.

A spending cut in this circumstance can then be defined as a reduction in future spending. The reason why Politifact is saying Ryan's comment is false is because Medicare spending still grows. It just doesn't grow as much as it would have grown without the law. Under CBO scoring rules, Politifact is actually incorrect.

What's even worse is that they justify those "spending reductions" as things that don't matter to beneficiaries on Medicare, since those 716 billion dollars in "spending reductions" raid money mostly from Medicare Part A (hospital trust fund) and Part C (Medicare advantage).

Reducing payments to hospitals and insurers will directly hurt beneficiaries. Think about what they are saying: "Reductions in payments to insurers and hospitals will not harm beneficiaries on Medicare".

Apparently they think that hospitals and insurers are making so much money on Medicare that they'll be able to take less in payments over time. The actual answer is they'll just drop Medicare patients.

Because Medicare has strict payouts for services to physicians and hospitals, if they reduce those payouts (due to health cost inflation), it will force more independent practices and hospitals to stop accepting Medicare patients. If that doesn't hurt beneficiaries, I don't know what does.


  1. Except the Ryan Budget and Obama's budget are nearly identical in cuts made to medicare (same exact number), they both project the same exact projected growth in medicare spending, and the same taxes.

    Talk about partisan analysis.

  2. Medicare advantage is a failed experiment which should be ended. I don't understand why you're decrying it.

    Unfortunately competitive bidding doesn't control costs.

    1. It's easy to say it doesn't control costs, but we already know that Medicare itself can't control costs. It has grown at an 8% clip for the past 20 years. There is no way we can sustain our current level of obligations once every baby boomer retires.

  3. Medicare controls costs more effectively than Medicare Advantage. Private insurance companies just can't compete with the government when it comes to containing overhead.

    Extending Medicare to everyone, plus other cost control measures, seems to be the model which works best when we look at other OECD nations.

    1. I spent about an hour trying to navigate the HHS' website for data on the current and historical costs of Medicare, found a few relevant bits, then gave up. Agency/Department websites are almost always a pain in the ass when it comes to actually finding the information you need.

      I simply don't have the time or inclination to find the cold hard facts about who's right on this topic. I refuse to accept your argument (made without evidence) that the traditional fee-for-service Medicare insurance plan is more robust at cost control than Medicare Part C. And I suspect the feeling is likewise.

      I guess we'll have to agree to disagree on this.

  4. If you care about providing UHC. (which I do)