Double-Counting Medicare “Savings”

In my January 7th post, Correcting the Left’s spin on repealing Obamacare, I covered the gimmicks (the “trickery”) being used by the Democrats to claim the 2010 health care legislation would reduce our national debt over time. The bar graph is worth displaying here again because it shows that Medicare costs of over $500 billion were double-counted by said Democrats:

And lo and behold in her testimony before Congress yesterday, HHS Secretary Kathleen Sebelius admitted exactly that: the administration had/has double-counted Medicare (you can watch the exchange between her and Rep. John Shimkus here). Contacted after the hearing, a spokesman defended the action:

“The scoring of the Affordable Care Act is entirely consistent with how legislation has been scored for the 30 years, under Presidents of both parties, and Congresses of both parties.  Savings in programs like Medicare and Social Security are scored as improving the solvency of those programs and reducing the deficit.”

However, the CBO had another opinion of the practice:

“[…] They cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs … To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings,” said the CBO memo.

Back in March 2010, just after the health care bill was signed into law, Roger Feldman, an expert in health care economics, also stated that double-counting health reform’s Medicare cuts gave impression of “savings” that weren’t really there. He wrote:

The CBO did not make a mistake in its arithmetic. By law, it must estimate the effect of proposed legislation on the federal deficit, and … [not on] other federal programs [that] must be cut.

The president, however, does not have to follow the same rules as the CBO. He could have told us that Medicare spending cuts can be used to fix Medicare or to pay for health insurance expansion, but not both. Instead, he chose to maintain the fiction that Medicare savings can be counted twice.

… Congress should address Medicare reform and health insurance reform separately in future legislation. … However, the CBO should not change its method of scoring proposed legislation. The CBO is not responsible for maintaining the fiscal soundness of Medicare. But another federal agency, the Office of Management and Budget, should publish a budget that shows the future liabilities for all entitlement programs and these should be included in the president’s annual budget.

Until we meet this challenge, we will continue to use bad arithmetic and budgetary tricks to hide the cost of health care reform.

And in “Why the Health Care Law Increases the Gross Federal Debt.” a research fellow at the Hoover Institution named Charles Blahous gave further information about why double-counting can mislead the public. It has to do with two ways of calculating our national debt and how these bump up against our debt ceiling (which as we all know, is subject to being raised by Congress when it is reached). I won’t reproduce the details here, but please read Mr. Blahous’ explanation. His point, with regard to double-counting Medicare though is:

For better or worse, the federal debt now subject to statutory limit is very similar to the gross debt. And the reason that the health care law causes us to reach the debt limit more quickly has to do with the law’s double-counting of Medicare savings.The recently enacted health care law used savings in the Medicare program to finance a new federal health entitlement. But at the same time, the government claimed that the Medicare savings produced an extension of Medicare solvency, in turn reflected in the issuance of more debt to the Medicare Trust Fund. In effect, the savings were double-counted – once as a means of offsetting the costs of the new entitlement, a second time as a means of financing future Medicare benefits.

It’s this double-counting that causes debt subject to limit to rise under the new health care law. New debt will be issued under the law to the Medicare Trust Fund. But the savings from Medicare don’t result in an equivalent reduction in public debt, because most of that savings was used to pay for a new health program. This double-counting means that Trust Fund debt rises more than public debt would fall – and consequently, that the gross debt subject to limit rises.

This issue of double-counting, then, is not new. It has been discussed and roundly criticized in many circles since before this health care bill became law. What is new is that Sec. Sebelius admitted in a public forum that the administration was doing that: double-counting. Fox News amusingly wrote this online headline: Sebelius Cracks! Admits the Obamacare Books were Cooked. But it’s no laughing matter: Obamacare will increase our national debt and our health care costs, not decrease them as the Democrats have claimed.

Of course, the facts won’t stop the claims. Our own 6th District representative often repeats her party’s refrain that the new health care law will save money and that repealing it would increase the national debt. But she — and her colleagues — are wrong. And whatever Congress can do to defund the bill and prevent it from being enacted, it should do. We can’t afford the boondoggle that is Obamacare.


About district6voter

A concerned Northern California citizen who believes Representative Lynn Woolsey ought to be replaced in November, 2010.
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8 Responses to Double-Counting Medicare “Savings”

  1. nyp10025 says:

    It is a little hard to get the thread of the dialogue since the Republican Congressman gives Ms. Sibelius so little time to respond and cuts her off, but she appears to be saying that reductions in the growth of the wasteful Medicare Advantage program cut the Medicare growth rate and thus extend the solvency of the fund. It is true that as an accounting matter under unified government accounting the full amount of trust fund savings cannot be counted towards the cost of funding healthreform. That is why the official CBO cost estimates for healthreform do no such thing. They don’t engage in any “double counting.” Even Representative Paul Ryan admits that:

    So the accusation about “double counting” goes to past Democratic political rhetoric, but has nothing to do with the official cost scoring of the healthcare reform law.

    Perhaps if the Congressman had given Ms. Sibelius enough time to explain that would have come out in the testimony. But getting the soundbite for use in the echo chamber was too important for that.

  2. Thanks for your comment.

    I think Sebelius ought to have been given the chance to explain herself — I wanted to know how she would. But regardless of any explanation she might have posed (and which supposedly was later supplied by the spokesman I quoted further on in the post), the fact remains that by double-counting the administration has promoted the perception that this health care law is reducing our debt in a way it is not. This is the key point that voters need to absorb and then should tune out their politicians when they continue to make this misleading claim.

  3. nyp10025 says:

    Any alleged “double counting” has never been part of the Administration’s cost estimates and is certainly not part of the official CBO estimates of the deficit reduction effects of healthcare reform..

    • The CBO is not double-counting — no one said it was. The CBO is taking issue with the double-counting of the administration. The CBO and the administration are not handling the accounting the same way. The administration is double-counting projected “savings.” Here’s another explanation:

      “Last year, the administration grew fond of “double counting” the savings from the Medicare cuts in health care reform–claiming that they’d reduced the deficit, paid for reform, and extended the life of the Medicare trust fund. Eventually, Republicans got around to asking for an analysis from the CBO, which told us what anyone who ever took first year accounting already knew: this is not true. If you used the savings to “pay for” the new spending, you can’t also say that you’ve used them to shore up the finances of Medicare.”
      Read more:

  4. nyp10025 says:

    good to see we agree that the official estimates on which health reform is based do not depend in any way on Medicare “double counting”

  5. nyp10025 says:

    I’ve never seen any statement from the Administration – and certainly none since the passage of healthreform – that engages in “double counting” of Medicare Advantage savings. And the cost projections upon which the legislation are based have absolutely nothing to do with such “double counting”

    • The administration has admitted to double counting. The CBO disagrees with what the administration has been doing. So do many economists and other financial experts. That’s what this post was all about. Sorry you don’t see that. I’m closing this conversation now since we are getting nowhere. Thanks for participating.

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