Romney Medicare Plan Would Hasten Insolvency

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A blog about business and economics.
Aug. 22 2012 9:50 AM

Reversing Obama's Medicare Cuts Makes Medicare Go Bust Faster

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Mitt Romney and Paul Ryan

Photo by John Moore/Getty Images.

One key argument Mitt Romney has been advancing about Medicare is that the Obama administration "raided" the program in order to pay for the Affordable Care Act. Since political journalism tends to exist in a plane of pure rhetoric, a lot of the Democratic pushback on this has focused on the fact that Paul Ryan and other congressional Republicans are banking on these very same cuts in order to make their own budget math add up. But Jackie Calmes' piece in today's NYT makes the more important point that Obama's alleged raid increases the life of the Medicare trust fund, and if Romney reverses the "cuts" the program actually goes bust sooner.

That's because what Obama cut wasn't the flow of revenue into the Medicare piggy bank, it was the reimbursement rate Medicare pays out of the piggy bank.

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If Medicare were a discretionary program funded through the standard authorization/appropriation process, there'd be no distinction between cutting the appropriation for program purchases and cutting the program's funding. But Medicare isn't a discretionary program, so what Obama did was decrease the pace at which the trust fund spends down. At earlier stages in the ACA debate, this was the focus of the great "double counting" debate since the Obama administration likes to say that the cuts both reduce the budget deficit (by reducing federal spending inside a 10-year scoring window) and increase the projected lifespan of the trust fund (because the unspent money is in some sense "in" the trust fund), which is really more a quirk of trust fund accounting than a real feature of the law. But whether one likes trust fund accounting or doesn't, if you're going to run around the country alleging that money is being taken from a Medicare piggy bank then you're necessarily working from within the trust fund accounting framework. And the way it works is that Obama's reductions of reimbursement rates keeps the piggy bank full longer, while if Romney repeals them the piggy bank will expire sooner.

Incidentally, I'm not sure conservatives care what I think, but it seems to me there's a simple way for them to register their fiscal objections to the Affordable Care Act without doing this thing where they constantly get wrapped up in contradictions and misleading rhetoric: Just say the problem with Obamacare is that it increases federal spending a lot. It definitely does that. And everyone understands that conservatives object to high levels of federal spending on social services and why. There's no need to pile on bogus allegations about the deficit and Medicare and CBO scores. It's a big ol' program that spends a ton of money on subsidizing health care for people in the bottom half of the income distribution.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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