Liberals Should “Cut” Out Their Medicaid Nonsense

Paul Krugman’s Monday New York Times column featured a typical rant – typical not least because it’s just plain wrong.  He talks about the “savage cuts” associated with conservative proposals to block grant Medicaid – except the “cuts” don’t actually exist.

Don’t believe me?  Well, take a look at this chart from the Kaiser Family Foundation’s study on Medicaid, issued last week.  The red line below illustrates the supposed “cuts” associated with block grant proposals – and shows that such “cuts” don’t actually exist, because Medicaid spending will increase each and every year under a block grant:

What’s particularly striking about the above chart is that the Kaiser study modeled a block grant proposal that was less generous than Governor Romney’s plan – the House-passed budget linked the growth of the block grant to inflation, whereas Governor Romney’s plan links the growth of Medicaid to inflation plus one percent.  So the Kaiser researchers, even as they claimed that their modeling was based on a plan “similar to Governor Romney’s,” cherry-picked (false) assumptions in order to portray block grants in the worst possible light.  This partisan hackery also explains why the Kaiser study uses the term “cut” no fewer than 60 times in one 22-page paper – even though both the House-passed budget and Governor Romney’s proposal do NOT reduce Medicaid spending in absolute terms.

Appearing before Congress last year, Secretary Sebelius testified that the Administration believes Obamacare did not “cut” Medicare – it merely slowed the program’s growth rate.  If that’s the case, the Secretary, the Administration, and their liberal allies should adopt a truly novel concept – consistency – and not argue that a slowdown in Medicare’s growth rate under Obamacare is not a “cut,” while a slowdown in Medicaid’s growth rate is a “cut.”

Obamacare’s “Scary” Impact on the Middle Class

In an interview with the Des Moines Register released yesterday, the President claimed that “Obamacare turns out not to be the scary monster that the other side has painted.”  That’s an interesting claim, given that under Mr. Obama’s own standards, Obamacare has failed to deliver on its promises to lower costs.

Candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected President.  In other words, the President’s broken campaign promise has cost every American family an average of $5,565 per year – yet the President doesn’t think Obamacare is “scary”.

If President Obama truly doesn’t believe that forcing struggling families to pay an additional $5,000-plus in health care premiums because Obamacare failed to deliver is “scary,” then it’s worth asking how out of touch this President has truly become.

Another Reason to Oppose Obamacare’s Taxes

An interesting article at the Atlantic’s website last week noted that the Supreme Court’s ruling that Obamacare’s mandate is a tax doesn’t just violate the President’s “firm pledge” not to raise taxes – it could also undermine Obamacare itself.  Based on research in behavioral economics, George Washington University professor Naomi Schoenbaum concludes that calling the mandate a “tax” and not a “penalty” means fewer Americans are likely to comply with it:

If the mandate is framed as a tax, this could cut in several directions, all of which would reduce health insurance coverage.  It could lead people to suspect that others are neither paying the tax nor purchasing health insurance, leading them to try this strategy themselves.  Or, given that purchasing health insurance is several times more expensive than paying the tax (which, in 2014, will be only $95 or 1% of income), people might decide to pay the tax rather than purchase the more expensive health insurance.  And this phenomenon can build on itself: once an impression of low compliance with the mandate is forged, fewer people will comply, further reinforcing the low compliance impression, and so on.

In either situation, the tax label could lead significantly fewer Americans to purchase health insurance than the penalty label would. The success of Obamacare depends crucially on people buying health insurance under the mandate rather than making a payments to the government….The only way to keep costs from skyrocketing or insurance companies from dropping out of the market, or both, is either to get more healthier, cheaper folks to join the insurance pool, or have them pay an equivalent dollar amount.  With the tax frame, though, individuals are less likely to buy health insurance.  And the mandate as currently structured forces them to pay only a small amount for the failure to do so.

The article argues that the difference between the mandate as a “tax” and the mandate as a “penalty” will have a major impact on compliance with the law – with the mandate’s tax status making it more likely the law will be undermined.  But in its re-estimate of the health care law in light of the Supreme Court’s ruling, the Congressional Budget Office said the ruling that the mandate was a tax and not a penalty did not change its assumptions about compliance with the mandate at all:

CBO and JCT’s original assessment of the effects of the coverage requirement was strongly rooted in comparisons with other taxes and penalties, drawing heavily from the academic literature on tax compliance.  In earlier estimates, CBO and JCT expected that individuals would perceive the mandate as a requirement to purchase insurance or pay a penalty tax administered by the Internal Revenue Service.  Because the Court upheld the constitutionality of that arrangement, CBO and JCT continue to expect similar behavioral responses to the insurance requirement.

Put another way, the Atlantic piece emphasizes how CBO’s score of Obamacare – by assuming strong compliance with the unprecedented individual mandate – is an optimistic, and possibly unrealistic, prediction of how the law will be implemented and enforced.

The Chart Barack Obama Doesn’t Want You to See

The flyer released by the Obama campaign this morning includes some soothing rhetoric on health care.  It starts out by noting that “Before President Obama took office, the average cost of health care premiums was growing three to four times faster than inflation.”  But the flyer doesn’t mention the rest of the story – the promise Barack Obama made repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected PresidentEarlier this month, the New York Times noted that “in the 2008 campaign, Mr. Obama often told voters that he would lower premiums by $2,500 a year per family ‘by the end of my first term as president.’  It has not happened…”

When even the New York Times admits that the President’s key promise on health care “has not happened,” it’s a very clear sign that Obamacare has failed to deliver.  And not even the Obama campaign’s gauzy brochures can hide that fact.

Sen. DeMint Letter to AARP on Payroll Tax and Trust Funds

Sen. DeMint has sent a letter to AARP today regarding the organization’s position on the payroll tax holiday.  Press reports from last week indicate that AARP opposes extending the payroll tax holiday because “the group simply does not want to sacrifice the Social Security Trust Fund” to do it.  Officials from AARP claimed an extension would cut short a revenue stream that will be “depleted within the next 25 years….Social Security is a separate, off-budget program, with a dedicated funding source—messing with the formula shouldn’t even be a part of the budget debate.”

As a reminder, Obamacare took a dedicated funding stream for Medicare – the Medicare payroll tax – and used it to finance the new government entitlements created by Obamacare.  That’s why the non-partisan CBO said that the Medicare reductions in Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – because those savings will be used to fund other unsustainable entitlements.

Experts agree that Medicare is in MUCH worse financial shape than Social Security – the program will become insolvent much sooner, has been running cash-flow deficits since 2008, and according to current projections, the program will NEVER come back into balance.  (See, for instance, the chart below.)  Yet AARP opposes the payroll tax “raid” on the Social Security payroll tax – even as it supports Obamacare’s “raid” on the Medicare payroll tax.


Mr. Barry Rand

Chief Executive Officer


601 E Street NW

Washington, DC 20049

Dear Mr. Rand:

I write regarding your October 18, 2012 letter to me and my Congressional colleagues regarding AARP’s opposition to an extension of the payroll tax holiday. Specifically, I am perplexed by AARP’s claim that diverting payroll tax revenue “would undermine confidence in Social Security and put at risk the program’s dedicated funding stream.”

AARP’s position ostensibly protecting Social Security’s “dedicated funding stream” stands in direct opposition to its endorsement of Obamacare – which diverted funding streams away from Medicare. As you know, Obamacare diverted funds from the payroll taxes used to finance Medicare for the first time ever. These funds were used not to improve Medicare’s solvency, but instead to finance Obamacare’s new entitlements. That is why the non-partisan Congressional Budget Office stated that Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – claims from AARP and the Administration notwithstanding.

As you know, budget experts agree that Medicare stands in a much more precarious financial position than Social Security. Medicare spending has consistently outgrown Social Security spending for decades, such that the Congressional Budget Office predicts spending on Medicare will exceed Social Security outlays within the next 25 years. Medicare also faces solvency concerns much more urgent than Social Security: Part A has run cash-flow deficits in the tens of billions of dollars since 2008, and according to the Administration’s own reports, these deficits will continue as far as the eye can see.

Even though Medicare stands in worse financial shape than Social Security, AARP appears focused on protecting the latter to the exclusion of the former. David Certner, your organization’s legislative policy director, claimed that AARP does not want to divert payroll tax revenues from a Social Security program that “will be depleted within the next 25 years.” Yet AARP endorsed Obamacare’s diversion of the Medicare payroll tax – despite the fact that Medicare could become insolvent as soon as 2016.

One simply cannot reconcile these two positions – opposing diversion of Social Security taxes, yet supporting diversion of Medicare taxes – as ideologically consistent. I am therefore concerned that AARP’s positions on these matters are being determined by partisan or economic considerations. As my recent report, “Profits Before Principles,” noted, AARP’s lucrative Medigap business stands to benefit financially from Obamacare’s cuts to Medicare Advantage. And recently released documents reveal AARP staff acting in an apparently non-partisan manner; for instance, one of your senior executives e-mailed the White House’s Deputy Chief of Staff in March 2010 hailing “the new AARP-WH/Hill-LeaMond/Messina relationship.”

Given your organization’s claims that your members’ interests – and not economic or partisan considerations – are at the root of your policy positions, I – and I imagine many of your members – would like to receive a greater explanation and justification of how AARP can reconcile its position opposing the diversion of Social Security payroll tax revenue, while supporting the diversion of Medicare payroll tax revenue as part of Obamacare.

I look forward to receiving AARP’s response on these issues within two weeks. If you have any questions, feel free to contact Alec Aramanda or Chris Jacobs of my staff. Thank you for your time, and I look forward to your reply.

More Misinformation from the Obama Campaign

The President’s campaign is releasing a booklet this morning featuring the President’s re-election “plans.”  Unfortunately, many of them involve funny money and fuzzy math.  Take for instance the section on retirement security, which claims that Obamacare “strengthened Medicare by cutting overpayments to insurance companies and cracking down on billions in health care waste, fraud and abuse.  The President added eight years to the Medicare Trust Fund.”

There’s just one problem with these assertions – they aren’t true.  Take the claims about “waste, fraud, and abuse.”  First, Obamacare’s $300 billion in cuts to Medicare Advantage will reduce the program’s enrollment by half and plan choices by two-thirds.  Moreover, the non-partisan Medicare actuary said that Obamacare would have a direct impact on beneficiaries in traditional Medicare as well.  He has concluded that over the long-term, up to 40 percent of providers would become unprofitable due to Obamacare, and could “have to withdraw from providing services to Medicare beneficiaries.”  Earlier this month, an Alabama hospital took a different course – it decided to shut down entirely, due to the impact of Obamacare on its business model.

As to the claims that Obamacare extends the life of the Medicare trust fund, the Congressional Budget Office takes a dim view toward such statements.  The non-partisan CBO said that the Medicare reductions in Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – because those savings will be used to fund other unsustainable entitlements.  If the President wants to use the Medicare savings provisions to extend the life of the Medicare trust fund – and not to fund the new entitlements created by the law – the Congressional Budget Office previously estimated what the fiscal impact would be:  “A net increase in federal deficits of $260 billion” through 2019.

In 2010, President Obama himself admitted in an interview that Obamacare could not rely on double counting, when he stated that “You can’t say that you are saving on Medicare and then spending the money twice.”  The fact that the President is now reversing his own earlier claims shows how badly Obamacare has failed, and how desperate the President is to win re-election.

Barack Obama’s Tax Cuts — For Insurance Companies

The President’s campaign flyer includes some interesting claims on health care.  It also includes some curious language on taxes: “The President has provided new tax cuts to help the middle class afford higher education and health care.”  We’ve debunked this myth in its entirety here.  But it’s worth reiterating the key point: The President’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

Presidential flip-flops and insurance company giveaways are real signs of change – but they’re certainly not hope and change, and they’re not the true reform our health sector needs.

Does Obamacare Cover “Obamnesia?”

During a campaign speech on Friday, President Obama went on a riff about “Romnesia,” which according to the President is a disease symptomized by frequent reversals of position.  Of course, that diagnosis comes from someone particularly expert at switching positions when it comes to health care.  As the saying goes, let’s go to the videotape:

Barack Obama, February 5, 2008: “If a mandate was the solution, we could try that to solve homelessness by mandating everyone buy a house.”

Barack Obama, January 31, 2008: “I think that it is important for us to recognize that if in fact you’re going to mandate the purchase of insurance and it’s not affordable, then there’s going to have to be some enforcement mechanism that the government uses.   And they may charge people who already don’t have health care fines, or have to take it out of their paychecks.  And that I don’t think is helping those without health insurance.”

Barack Obama, September 20, 2009: “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase….The fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now.”

Barack Obama, September 12, 2008: “I can make a firm pledge: Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

Obama 2008 campaign ad: “[Senator] McCain would make you pay income tax on your health insurance benefits – taxing health benefits for the first time ever….Taxing health care instead of fixing it?  We can’t afford John McCain.”

Barack Obama, September 3, 2007: “It’s a plan that will cover every American and cut the cost of a typical family’s premiums by $2,500 a year.”

Barack Obama, July 21, 2008: “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

Obama 2008 campaign ad: “And that tax credit?  [Senator] McCain’s own website says it would go straight to the insurance companies – not to you.”

The President claimed that Obamacare covers pre-existing conditions like “Romnesia.”  But before making those comments, the President first should have declared his own interest.  Because based on the above, it looks for all the world that President Obama wanted to ram through Obamacare so that his own “Obamnesia” would be covered.

Obamacare’s “Pro-Choice” Agenda

During a campaign event yesterday in New Hampshire, the President made some interesting remarks about choice in health care.  Here’s what he said:

I also believe women should make their own health care decisions.  (Applause.)  I know you’ve got — and it’s not just Washington that sometimes deals with this issue.  You’ve got a state legislature up here that sometimes acts like it knows better than women when it comes to women’s own health care decisions.  My opponent has got the same approach….Do you think, like, your boss, or your insurance company, or some politician in Concord or Washington should get control of your health care choices?…The health care law we passed puts those choices in your hands where they belong.

Some may find the President’s comments slightly ironic – because Obamacare actually takes choices away from individuals and gives them to politicians and bureaucrats.  Under Obamacare’s unprecedented mandate, individuals will have to purchase a “bureaucrat-approved” health insurance policy – or be subjected to billions of dollars in new taxes that will hit the middle class hard.  And thanks to Obamacare, unelected bureaucrats in the District of Columbia have proposed outlawing the private market for health insurance entirely – forcing all individuals to go to a government-run Exchange to purchase coverage.

So to bring it all back to where we started, yes, under Obamacare, you can choose any type of health insurance you like – as long as the President and unelected bureaucrats in Washington approve.