On Saving Medicare, Democrats Stand as the “Party of No”

Today’s release of the annual Medicare trustees report paints a stark picture of the entitlement “time bomb” facing American seniors—the trustees project total unfunded liabilities of nearly $38 trillion, and project that the Hospital Insurance (Part A) Trust Fund will be exhausted in 2017, two years earlier than last year’s estimate.  But while President Obama speaks of reforming entitlement programs, the actions of the President and Democrats in Congress have not solved Medicare’s shortfalls—and could increase them.

No to Spending Restraint:  President Obama’s budget actually proposed an overall increase in Medicare spending—by failing to find any offsets for increases in physician reimbursement levels that Congress has frequently paid for in the past.  Particularly given the program’s unfunded obligations, Members may agree with Senate Budget Committee Chairman Conrad that “It’s very hard for me to understand why the answer is to put more money into the system.”

No to Saving Medicare First:  While the President’s budget did propose some reforms to the Medicare program, every penny of these savings—much of which are derived from cuts to Medicare Advantage plans popular with seniors—are re-directed into a “reserve fund” designed to pay for expanded entitlement coverage for younger Americans.  Some Members may question both the wisdom and fairness of re-directing money designed to bolster Medicare—including the use of a fund designed specifically “to make improvements under the original Medicare fee-for-service program”—to create new federal entitlements of undetermined cost.

No to Solving the Problem:  President Obama’s full budget submission to Congress did not include legislative proposals on how to address Medicare’s funding shortfalls—even though according to the Medicare Modernization Act, the President is required to submit such legislation every year the Medicare trustees have issued a funding warning for the program.  Some Members may question the level of the President’s commitment to Medicare reform if he failed to comply with a law designed to accomplish that very purpose.

No to Letting Others Solve the Problem:  The first action taken by Speaker Pelosi and the Democrat majority in the 111th Congress was a procedural vote turning off the expedited procedures under which a Medicare reform bill could be considered in the House of Representatives.  Some Members may be concerned that the Democrat leadership’s inaction not only does not fix Medicare’s funding shortfalls, it hinders those Members of both parties who wish to make a serious effort at entitlement reform from doing so.

No to Admitting the Scope of the Problem:  Although President Obama has paid lip service to the idea of reforming entitlements like Medicare, many Democrats in Congress have made statements indicating that the program does not need changes.  Responding to last year’s Medicare trustees report, Ways and Means Health Subcommittee Chairman Pete Stark asserted that “I don’t think it makes any difference what [the trustees] say” and that “Medicare is not in crisis.”  Similarly, last July Rep. Alcee Hastings (D-FL) noted that “the perceived problem with Medicare funding has already been addressed.”  Given these and other similar statements, some Members may question how high Medicare’s unfunded obligations must rise before Democrats in Congress begin to take them seriously.

While Republicans have offered a budget alternative that fully resolved Medicare’s long-term funding shortfalls, Democrat proposals for “entitlement reform” have thus far focused around spending over $1 trillion to create a new government-run health plan.  Given this record, and the warning issued by the Medicare trustees today, some Members may therefore believe that Democrats should spend more time solving America’s current health entitlements rather than creating a new entitlement that will cause as many as 120 million Americans to lose their current health coverage.

Weekly Newsletter: July 28, 2008

Tobacco Bill Coming Soon

This week the House could consider legislation (H.R. 1108) granting the Food and Drug Administration (FDA) the authority to regulate tobacco, possibly under suspension of the rules. The bill would establish a new center within FDA to regulate tobacco products and assess tobacco companies more than $5 billion in “user fees” over the next ten years to pay for this regulation.

Some conservatives may be concerned by the regulatory regime the bill would establish, which would require an agency charged with promoting food and drug safety to regulate a product inherently unsafe and unhealthy. Some conservatives may also object to the multiple layers of regulation the bill would create, by leaving intact the Federal Trade Commission’s ability to regulate tobacco advertising and distribution and providing only limited pre-emption against additional state-based regulations and restrictions. Some conservatives may question whether the highly prescriptive restrictions in the bill— including advertising limitations on the use of color advertising and regulation of the font size of tobacco disclaimer warnings, all of which raise significant constitutional questions about their free-speech implications—constitute good public policy, particularly as the Congressional Budget Office estimates that H.R. 1108 will reduce smoking levels by only 2% over 10 years.

Lastly, some conservatives may object to provisions in the bill that could prompt an international trade dispute. Last week, HHS Secretary Leavitt wrote to Energy and Commerce Committee Ranking Member Barton about H.R. 1108, observing that, because the bill prohibits all tobacco flavorings except menthol, foreign countries which manufacture clove or other flavored cigarettes may take action against the United States for providing unfair and disparate treatment for a particular type of manufactured cigarette. As press reports indicate that H.R. 1108 may be considered under suspension of the rules, some conservatives may be concerned by the lack of procedural opportunities available to address this disparity, such that the United States can live up to its obligations under international free-trade agreements.

A Policy Brief on H.R. 1108 (as reported by the Energy and Commerce Committee) can be found here.

Democrats Ignore Medicare Funding Warning

Last week Democrats responded to the Medicare trustees’ finding that the Medicare program faces significant future funding shortfalls—by resolving to ignore the problem. The resolution concerned a provision inserted into the Medicare Modernization Act at the behest of the RSC, which provided for the President to submit, and Congress to consider under expedited procedures, legislation to remedy Medicare’s funding problems when the program is projected to consume more than 45% of its funding from general revenues (as opposed to the Medicare payroll tax and beneficiary premiums). The Democrat majority’s action turned off this funding “trigger” for the balance of the 110th Congress, preventing those who believe in entitlement reform from taking action to force a House floor vote on Medicare reform legislation.

Many conservatives may be disappointed by the actions of Congressional Democrats, which prevented the President’s reasonable and modest proposals for Medicare reform—means testing that would make wealthier individuals like Warren Buffett and George Soros pay $2 per day more in Part D prescription drug premiums and liability reform to reduce the costs associated with defensive medicine practices— from receiving a vote in Congress. Many conservatives may believe that solving Medicare’s $86 trillion in unfunded obligations—and a Hospital Trust Fund scheduled to be exhausted in little more than a decade—will not be helped by Democrats’ apparent eagerness to ignore the problem. However, when Democrats like Florida’s Alcee Hastings note that “the perceived problem with Medicare funding has already been addressed,” many conservatives may be concerned that this lack of awareness will only hasten the day when Medicare’s funding shortfalls jeopardize the viability of the program—and wonder what policy-makers will tell their senior constituents when it does.

There are RSC Policy Briefs related to the Medicare trigger: Legislative Background; Talking Points on Trigger; Questions for House Democrats; Size of Medicare Program; White House Trigger Bill; Medicare Trustees Report

Article of Note: Fuzzy Math

Last Wednesday the New York Times reported on the many financial discrepancies surrounding the health care plan of Sen. Barack Obama (D-IL). While Sen. Obama has been consistent in saying that his health plan would save every American family $2,500 per year, many observers have come to question the factual basis for a “best guess” assertion by his advisers early last year. Independent estimates, including those by the Congressional Budget Office, have questioned whether the savings from such initiatives as health information technology and chronic care management will materialize, particularly in the four-year timeline Sen. Obama has promised—such that even a statement by Obama’s own advisers backtracked from any assertions that the purported savings would materialize by a date certain.

Many conservatives may be skeptical of Sen. Obama’s claims, particularly as the liberal Commonwealth Fund released a report in December with a menu of options for savings that would by their estimates achieve a total reduction in spending of only 6% in 10 years. Some conservatives may also be concerned that, in an attempt to reduce health care costs—whether by 8%, 6%, or some lesser amount— Sen. Obama would rely first and foremost on imposing price controls on physicians, pharmaceutical manufacturers, and insurance companies, along with rationing care through a government-controlled comparative effectiveness institute. Many conservatives may believe that such bureaucratic restrictions would in the long run prove far more effective at growing the size of government than slowing the growth of health care costs.

Read the article here: New York Times: “Health Plan from Obama Sparks Debate