How Joe Biden Deliberately Avoided Paying Obamacare Taxes

In the campaign for the 2020 Democratic presidential nomination, Joe Biden has portrayed himself as Obamacare’s biggest defender. His health care plan, released this month, pledges to “protect the Affordable Care Act” and states that he “opposes every effort to get rid of this historic law.”

However, his campaign rhetoric in support of Obamacare overlooks one key fact: For the past two years, Joe Biden structured his financial dealings specifically to avoid paying a tax that funds “this historic law,” along with the Medicare program.

While the Bidens paid federal income taxes on all their income, they did not have to pay self-employment taxes on these millions of dollars in profits. The Bidens saved as much as $500,000 in self-employment taxes by taking most of their compensation as profits from the corporation, as opposed to salary.

The Journal cited multiple tax experts who called the Bidens’ move “pretty aggressive,” and a “pretty cut and dried” abuse of the system. Given that most of their income came from writing and speaking engagements, one expert called that income “all attributable to [their] efforts” as individuals and thus wage income, rather than a broader effort by any corporation resulting in profits.

Most important to Biden’s political future is what that foregone self-employment tax revenue would have funded. Section 9015 of Obamacare increased the tax’s rate from 2.9 percent to 3.8 percent for all income above $200,000 for an individual, and $250,000 for a family. By taking comparatively small salaries from their S corporations and receiving most of their income as profits from those corporations, the Bidens avoided paying a tax that funds an Obamacare law Joe Biden claims he wants to defend.

Moreover, the other 2.9 percent in self-employment tax helps finance the Medicare program, which faces its own bleak fiscal future. According to the program trustees, the program will become insolvent by 2026, just seven years from now. If people like Joe Biden use tax strategies to avoid paying self-employment taxes, Medicare’s date of insolvency will only accelerate.

During the last presidential election cycle, Sen. Bernie Sanders repeatedly returned to Hillary Clinton’s paid speeches before companies like Goldman Sachs. Both the more than $100 million in income Bill and Hillary Clinton generated from their speeches, and Hillary Clinton’s insouciance at the vast sums she received—“That’s what they offered,” she said of the $675,000 sum Goldman Sachs paid her to give three speeches—made her look out-of-touch with the concerns of families struggling to make ends meet.

Likewise, Biden’s 2020 competitors almost certainly will use the questions about his taxes to undermine his image as “Middle Class Joe.” Few middle-class families will make in a lifetime the $15.6 million in income that the Bidens received in but two years. Moreover, how can Joe Biden claim to defend Obamacare—let alone Medicare—when he created a tax strategy specifically to avoid paying taxes that fund those two programs?

In 2014, Barack Obama, whose administration proposed ending the loophole the Bidens used to avoid self-employment taxes, attacked corporations for seeking to migrate to lower-tax jurisdictions overseas: “It is true that there are a lot of things that are legal that probably aren’t the right thing to do by the country.” In Joe Biden’s case, his tax behavior probably wasn’t the right thing to help his political future either.

This post was originally published at The Federalist.

Medicare Trustees Report Exposes Sanders’ Socialist Delusions

Many of the left’s policy proposals come with the same design flaw: While sounding great on paper, they have little chance of working in practice. Monday brought one such type of reality check to Sen. Bernie Sanders (I-VT) and supporters of single-payer health care, in the form of the annual Medicare trustees report.

The report once again demonstrates Medicare’s shaky financial standing, as the retirement of 10,000 Baby Boomers every day continues to tax the program’s limited resources. So why would Sanders and Democrats raid this precariously funded program to finance their government takeover of health care?

Medicare’s Ruinous Finances

Before even dissecting the report itself, one major caveat worth noting: The trustees report assumes that many of the Medicare payment reductions, and tax increases, included in Obamacare can be used “both” to “save Medicare” and fund Obamacare. In practice, however, sheer common sense suggests the impossibility of this scenario—as not even the federal government can spend the same dollars twice.

The last trustees report prior to these Obamacare gimmicks, in 2009, predicted that the Medicare Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—two years ago. To put it another way, under a more accurate accounting mechanism, Medicare has already become functionally insolvent. Obamacare’s accounting gimmicks just allowed politicians (including President Trump) to continue to ignore Medicare’s funding shortfalls, thus making them worse by failing to act.

Even despite the double-counting created by Obamacare, the Part A Trust Fund faces significant obstacles. Monday’s report reveals that the trust fund suffered a $1.6 billion loss in 2018. This loss comes on the heels of a total of $132.2 billion in trust fund deficits from 2008 through 2015, as payroll tax revenues dropped dramatically during the Great Recession.

Worse yet, the trustees report that trust fund deficits will continue forever. Deficits will continue to rise, and by 2026—within the decade—the Trust Fund will become insolvent, and unable to pay all of its bills.

Replacing One Decrepit Program with an Even Worse One

In 2003, House conservatives included this mechanism in the Medicare Modernization Act, which requires the trustees to make an annual assessment of the program’s funding. If general revenues—as opposed to the payroll tax revenues that largely cover the costs of the Part A program—are projected to exceed 45 percent of total program outlays, this provision seeks to prompt a debate about Medicare’s long-term funding.

Compare this provision, which triggers whenever general revenues (i.e., those not specifically dedicated to Medicare) approach half of total program spending, with single payer. As these pages have previously noted, here’s what Section 701(d) both the House and Senate single payer bills would do to Medicare:

(d) TRANSFER OF FUNDS.—Any amounts remaining in the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) or the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t) after the payment of claims for items and services furnished under title XVIII of such Act have been completed, shall be transferred into the Universal Medicare Trust Fund under this section.

Both bills would liquidate both of the current Medicare trust funds—and abolish the current Medicare program—to pay for the new single-payer plan. But how do Democrats propose to pay for the rest of the estimated $32 trillion cost of their program? Sanders referenced a list of potential tax increases (not drafted as legislative language), but the House sponsors didn’t even bother to go that far.

This post was originally published at The Federalist.

Three Elements of a Conservative Health Care Vision

Recently I wrote about how conservatives failed to articulate a coherent vision of health care, specifically issues related to pre-existing conditions, in the runup to the midterm elections. That article prompted a few Capitol Hill colleagues to ask an obvious question: What should a conservative vision for health care look like? It’s one thing to have answers on specific issues (i.e., alternatives to Obamacare’s pre-existing condition regulations), but what defines the vision of where conservatives should look to move the debate?

Henceforth, my attempt to outline that conservative health-care vision on a macro level with three relatively simple principles. Others may express these concepts slightly differently—and I take no particular pride of authorship in the principles as written—but hopefully they will help to advance thinking about where conservative health policy should lead.

Portable Insurance

Conversely, conservatives believe in insurance purchased by individuals—or, as my former boss Jim DeMint likes to describe it, an insurance policy you can buy, hold, and keep. With most Americans still obtaining health coverage from their employers, a move to individually owned coverage would mean individuals themselves would decide what kind of insurance to purchase, rather than a business’s HR executives.

Conservatives should also promote the concept of portable insurance that can move from job to job, and ideally from state to state as well. If individuals can buy an insurance policy while young, and take it with them for decades, then much of the problem of covering individuals with pre-existing conditions will simply disappear—people will have the same insurance before their diagnosis that they had for years beforehand.

I wrote approvingly about the Trump administration’s proposals regarding Health Reimbursement Arrangements precisely because I believe that, if implemented, they will advance both prongs of this principle. Allowing employees to receive an employer contribution for insurance they own will make coverage both individual and portable, in ways that could revolutionize the way Americans buy insurance.

A Sustainable Safety Net

As it is, the Medicare program became functionally insolvent more than a year ago. The year before Obamacare’s passage, the Medicare trustees asserted the program’s hospital insurance trust fund would become insolvent in 2017. Only the double-counting included in Obamacare—whereby the same Medicare savings were used both to “save Medicare” and fund Obamacare—has allowed the program to remain solvent, on paper if not in fact.

Reasonable people may disagree on precisely where and how to draw the line at the sustainability of our entitlements. For instance, I hold grave doubts that able-bodied adults belong on Medicaid, particularly given the way Obamacare’s expansion of Medicaid has encouraged states to discriminate against individuals with disabilities and the most vulnerable.

But few could argue that the current system qualifies as sustainable. Far from it. With Medicare beneficiaries receiving more from the system in benefits than they paid in taxes—and the gap growing every year—policy-makers must make hard choices to right-size our entitlements. And they should do so sooner rather than later.

Appropriately Aligned Incentives

Four decades ago, Margaret Thatcher hinted at the primary problem in health care when she noted that socialists always run out of other people’s money. Because third-party insurers—in most cases selected by HR executives at individuals’ place of business rather than the individuals themselves—pay for a large share of health expenses, most Americans know little about the price of specific health care goods and services (and care even less).

To state the obvious: No, individuals shouldn’t try to find health care “deals” in the ambulance on the way to the hospital. But given that much health care spending occurs not for acute cases (e.g., a heart attack) but for chronic conditions (i.e., diabetes), policymakers do have levers to try to get the incentives moving in the right direction.

Reforming the tax treatment of health insurance—which both encourages individuals to over-consume care and ties most Americans to employer-based insurance—would help align incentives, while also encouraging more portable insurance. Price transparency might help, provided those prices are meaningful (i.e., they relate to what individuals will actually pay out-of-pocket). Giving individuals financial incentives to shop around for procedures like MRIs, or even surgical procedures, also would place downward pressure on prices.

This post was originally published at The Federalist.

No, Nancy Pelosi, Republicans Aren’t “Cutting” Medicare — But They Should

In a many-layered case of irony, House Minority Leader Nancy Pelosi (D-CA) attacked Republicans on Wednesday for doing something they didn’t do—but she did. In a letter to her Democratic colleagues, Pelosi wrote the tax reform bill “will lead to devastating cuts to Medicare and Medicaid.”

First things first: A slowdown in a program’s projected growth rate does not constitute a “cut.” That fact applies just as much to Republican spending proposals as Democratic ones. You don’t have to take my word for it: Multiple fact check articles discussing Obamacare’s reductions in Medicare spending pointed out that under Democrats’ law, “Medicare spending will increase each year but at a lower rate.”

Pelosi’s 2011 phraseology hit the nail on the head, because Democrats did “take” money out of Medicare to fund Obamacare’s new entitlements. While on paper the spending reductions extended the life of the Medicare trust fund, the Congressional Budget Office concluded that Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.”

While the Democrat record on Medicare leaves much to be desired, so too does the Republican one. Whereas Democrats reduced Medicare spending, then diverted those savings to fund another new and costly entitlement, Republicans just last month turned around and increased Medicare spending.

In the February budget “deal,” Republicans repealed the Independent Payment Advisory Board (IPAB). While Obamacare created this unelected, unaccountable board of bureaucrats to make binding rulings regarding Medicare, it did so for a worthwhile purpose: To cap Medicare spending. As I noted last fall, Republicans could have kept the caps in place, while repealing the board. They chose not to do so. As a result, the budget “deal” raised entitlement spending rather than lowering it.

As it stands now, the “devastating cuts to Medicare and Medicaid” that Pelosi claimed to warn her colleagues about on Wednesday seem inevitable—not because Republicans will soon pass legislation slowing the growth of entitlements, but instead because they refuse to do so. Because some Republicans remain under the misapprehension that Medicare “is underfunded,” and because liberals love running “Mediscare” campaigns designed to frighten seniors into voting Democratic, Republicans seem poised to do exactly nothing on entitlement reform for the foreseeable future.

At least, until the debt crisis arrives—which it will, and sooner than many think. With the imminent return of trillion-dollar deficits, and the federal government already $21 trillion in debt, China and other nations may not take kindly to the bipartisan profligacy perpetrated by Democrats and Republicans alike.

As I noted two years ago, if not for the double-counting fiscal gimmicks included in Obamacare, the Medicare Hospital Insurance Trust Fund would already have been exhausted, putting the program’s solvency quite literally on borrowed time.

Last month, in typically understated fashion, Pelosi tweeted about how Republicans were “plotting to destroy your Medicare, Medicaid, and Social Security.” That claim implies a level of intent—that Republicans actually have a plan to reform entitlement spending—that quite clearly does not exist.

Instead, Republicans and Democrats will continue to destroy Medicare, Medicaid, and Social Security in the same way they have over the past several decades. Both parties will ignore the problem and do nothing until it’s too late. It’s the most insidious type of “bipartisanship,” but in Washington, also the most common.

This post was originally published at The Federalist.

Paul Ryan Flip-Flops on Fiscal Responsibility to Prop Up Obamacare

What a difference eight years makes. In February 2010, Rep. Paul Ryan (R-WI), then Ranking Member of the House Budget Committee, spoke at the White House health care summit decrying Obamacare as “a bill that is full of gimmicks and smoke-and-mirrors.” His comments became a viral sensation, so much so that the Wall Street Journal published a condensed version of his remarks as an op-ed. (Here’s the video.)

Reporters confirmed as much on Monday, when an article claimed that the Congressional Budget Office (CBO) believes appropriating funds for cost-sharing reduction payments (CSRs) for three years would save the federal government $32 billion, when compared to a scenario in which Congress does not appropriate CSR payments. Not coincidentally, the article noted that a separate bill by Rep. Ryan Costello (R-PA) — “which House leaders have embraced” — would create a $30 billion “Stability Fund” for insurers, purportedly paid for by the $32 billion in “savings” caused from appropriating CSRs.

The article doesn’t say so outright, but it’s not hard to figure out what happened behind the scenes:

  1. House Republican leadership directed CBO to score the fiscal effects of making CSR payments to insurers compared to not making the payments.
  2. House Republican leaders leaked results of the score to insurer lobbyists.
  3. Those insurer lobbyists then leaked the results to reporters — to claim their bill would generate “savings” for the federal government.

The end result sounds like a Broadway musical: “How to Spend $60 Billion in Taxpayer Funds without Really Trying.” If insurers have their way, Congress would spend roughly $30 billion in CSR payments for the next three years, and that $30 billion in spending would “save” another $32 billion — which Congress would turn right around and send to insurers, via the $30 billion “Stability Fund.”

Compare this maneuver to Obamacare — or, more specifically, Paul Ryan’s 2010 critique of Obamacare. At the White House health care summit, Ryan told President Obama in regard to Obamacare’s proposed reductions to Medicare: “You can’t say that you’re using this money to either extend Medicare solvency and also offset the cost of this new program. That’s double counting.” If claiming that Medicare savings both enhance Medicare’s solvency and pay for Obamacare constitutes double counting — and it does — then what exactly is jiggering the budgetary baseline solely to generate “savings” that Republicans can turn around and spend…?

There’s another problem too: The fraudulent “savings” are also illegal. As I previously noted, the Gramm-Rudman-Hollings statute requires CBO to assume full payment of CSRs — meaning the scenario that House Republicans asked CBO to score violates the statutory requirements.

Some might claim that, since President Trump stopped making CSR payments last October, a scenario in which CBO does not assume the federal government makes those payments represents a more realistic fiscal approach than that currently required by Gramm-Rudman-Hollings. To which I have one simple retort: If you don’t like the law, then Change. The. Law.

Ryan and House Republican leaders don’t want to change the Gramm-Rudman-Hollings law — just like they don’t want to pay for the insurer bailout. Such efforts would take time and effort, necessitate legislative transparency — as opposed to closed-door meetings and selective leaks to K Street lobbyists — and require difficult decisions about how to pay for new spending. Why make those tough choices now, when Republicans can just charge the tab for the insurer bailout on to the national credit card, and let the next generation pay the bill instead?

Congressional Republicans spent eight years decrying Obamacare’s fiscal gimmickry, and President Obama’s executive lawlessness. If they follow the example of the House Republican leadership, and engage in their own illegal budgetary gimmicks, they will have no grounds to complain about Democrats’ spending sprees or overreach. And they shouldn’t be surprised if no one believes their claims of fiscal responsibility come November 6.

This post was originally published at The Federalist.

Why Medicare Reform Can’t Wait

In an interview with “Good Morning America” on Wednesday, House Speaker Paul Ryan (R-WI) cast doubt on the prospect for comprehensive Medicare reform on the congressional agenda in 2018: “There are some provider issues that we may be addressing as you know. Some providers in the Medicare field in some cases are getting overpaid. We want to make sure that’s being dealt with. But as far as you’re talking about beneficiaries, we’re not focused on that.”

Unfortunately, however, if Congress fails to address comprehensive Medicare reform, beneficiaries will miss out on significant savings in their pocketbooks, and taxpayers will miss out on the opportunity to slow the growth of the program’s expenses. This “win-win” proposition—seniors save money, as do taxpayers—could help the federal government solve its growing entitlement shortfalls, but only if Congress has the courage to act.

How Medicare Reform Would Work

To the uninitiated, premium support would transform Medicare into a program roughly akin to the federal employee health benefit plan, or the Obamacare exchanges established in 2014. Insurers, including traditional government-run Medicare, would bid against each other to offer the usual complement of Medicare services.

In each bidding area, whether a county, state, or region, officials would determine a “benchmark” bid—based on, for instance, the average of all plan bids, or the second-lowest plan bid. (Obamacare exchanges use the second-lowest plan bid.) Beneficiaries would receive a sum from the federal government to cover the cost of a benchmark plan in their area. If a senior selected a plan costing less than the benchmark amount, he or she would receive the difference in savings; conversely, if a senior selected a plan costing more than the benchmark, he or she would pay the difference in higher premiums.

New Report Shows Increased Savings

Compared to an earlier CBO report released in September 2013, the updated analysis shows greater savings from implementing premium support. In ten-year budget terms, the second-lowest bid option would save $419 billion, while the average bid option would save $184 billion—up from $275 billion and $69 billion, respectively, four years ago.

The October report cited several factors that put both upward and downward pressure on the amount of federal savings. In general, however, two factors stood out. First, Congress passed a law repealing the Medicare sustainable growth rate mechanism in 2015. That law increased projected spending in traditional fee-for-service Medicare, making it less financially competitive when compared to private Medicare Advantage plans.

Second, the Medicare Advantage plans have become more efficient, reducing their bids when compared to traditional Medicare. With plans already operating in a more competitive environment, the federal government could achieve greater savings by altering the bidding structure to harness that competitive environment.

Let’s Compare the Two Options

In general, while the second-lowest bid option would achieve greater savings for the federal government, the average bid option seems the likeliest to achieve the political consensus necessary to ensure its enactment. Setting a lower benchmark, as the second-lowest bid option would do in most if not all markets, would require more seniors to pay additional premiums, as more plans would exceed the benchmark.

To this conservative, the average bid option seems much more politically palatable. While any plan will result in confusion and controversy, one that will save both taxpayers and seniors money provides a strong incentive to transition to a new system. Congress can adjust the formula over time as needed, to reflect any difficulties in implementation and changes in our fiscal outlook. But the transition should happen—sooner rather than later.

Republicans Need to Combat ‘Mediscare’ Tactics

Of course, enacting Medicare reform involves overcoming partisan attacks and demagoguery—as the ads depicting Republicans throwing granny off a cliff so vividly illustrate. Democrats ran those ads against Ryan in the past, and no doubt will do so again the minute conservatives contemplate a serious effort to reform Medicare.

But conservatives—and Congress as a whole—have no choice but to reform entitlements. As previously noted, Medicare would already be financially insolvent but for Obamacare’s fiscal gimmickry—the accounting scheme that allows Medicare savings simultaneously to make Medicare solvent and fund Obamacare.

This post was originally published at The Federalist.

What’s Wrong with Republicans on Medicare

To demonstrate that most Republicans have no desire to reduce federal spending, one need look no further than a Politico story last Thursday. The article recounted how the pending tax bill could trigger automatic reductions in mandatory spending, including to Medicare, under the pay-as-you-go law. When presented with that scenario, Rep. Phil Roe (R-TN) responded thusly:

Medicare is underfunded as it is. If we have to change the PAYGO [pay-as-you-go] rules [that trigger the spending reductions], we’ll just change ‘em. At the end of the day, we—Republicans and Democrats—have to go home and face our constituents. I wouldn’t want to go home and face my constituents if I’d cut Medicare.

Over and above the obvious fact that Roe expressed less-than-zero interest in actually reducing federal spending, he also showed some tortured and erroneous logic in arriving at his position.

To put Medicare’s spending in another context: According to International Monetary Fund statistics, in 2016, the program spent more than the total economic output of all but 20 nations. That same list demonstrates that Medicare spent more than the entire economic output of New Zealand, Greece, and Portugal combined. Yet Roe considers the program “under-funded.”

But Medicare Is Going Insolvent, and Fast

As I noted last year, the Medicare trustees report issued in 2009, the year before Obamacare’s enactment, predicted the program’s Part A (Hospital Insurance) Trust Fund would become insolvent in 2017—this year. The following year, after Obamacare became law, the trustees postponed the insolvency date from this year to 2029.

But, as the Congressional Budget Office noted, Obamacare did not “enhance the ability of the government to pay for future Medicare benefits.” Put simply, because Obamacare’s re-directed Medicare savings to pay for new entitlements, the provisions improved Medicare’s solvency only on paper. Then-Health and Human Services secretary Kathleen Sebelius admitted as much when, asked in congressional testimony whether the Medicare provisions were being used “to save Medicare or…to fund [Obamacare],” she answered, “Both.”

Substantively, Obamacare’s fiscal schemes did not help Medicare’s solvency one whit. The program was scheduled to become functionally insolvent this year, and because Congress has enacted few meaningful reforms to the program in the time since, can be considered as such. However, because they improved the program’s solvency on paper, Obamacare’s budgetary gimmicks have allowed people like Roe to deny the problem exists, which will only worsen the scale of fiscal adjustment needed when Medicare finally faces its fiscal reckoning.

Reducing Spending Increases Is Not a ‘Cut’

As the New York Times has noted, Republicans argued vociferously—and correctly—earlier this year that slowing the growth of Medicaid spending in their “repeal-and-replace” bills did not represent a “cut” in that program. Yet Roe quickly resurrected the familiar (and incorrect) talking point about budget “cuts” when discussing Medicare.

Over the years, Republicans have spent far too much time demagoguing Obamacare for “cutting” Medicare. (As noted above, the problem with the law wasn’t that it reduced Medicare spending, it’s that it spent those Medicare savings to fund Obamacare, rather than shore up Medicare’s finances.) They now face many of the same opportunistic attacks from the Left regarding the entitlement reform proposals included in the “repeal-and-replace” bills. So why is Roe retreating into that same mindset that a decrease in a spending increase represents a “cut?”

Roe may not want to go back home and explain to his constituents why he reduced Medicare spending. But sooner or later, he and his fellow members of Congress will have to do just that. And the more he and his colleagues continue their pattern of obfuscation and denial through these kinds of ill-informed comments, the worse those spending reductions will end up being.

This post was originally published at The Federalist.

AARP’s Amnesia on “Raiding” Medicare

Based on its statements the past few weeks, if Obamacare extended to non-profit organizations, AARP might need to seek coverage for memory loss. While the seniors’ group opposes House Republicans’ extension of children’s health insurance because it includes provisions means-testing Medicare benefits for wealthy seniors, the Obamacare legislation it endorsed in December 2009 did the very same thing.

Obamacare Included Means-Testing

A letter the AARP sent to the House Energy and Commerce Committee last week objected to the House’s proposals to increase Medicare means-testing, noting that wealthy seniors already pay a greater share of their Part B (outpatient care) and Part D (prescription drug) premiums. That statement is true—in part because of Obamacare, which AARP endorsed.

In addition, Section 3308 of Obamacare applied means-testing for affluent seniors to the Part D prescription drug program for the first time.

Obamacare Used Medicare Savings

Last week’s AARP letter also claimed that “not only is it wrong to continue to ask Medicare beneficiaries to shoulder the burden for non-Medicare expenditures, but it will make it harder to finance actual improvements and address long-term challenges in the Medicare program.” That statement contains no small amount of irony, considering that Obamacare, as House Minority Leader Nancy Pelosi herself admitted, “took half a trillion dollars out of Medicare in [Obamacare], the health care bill”—to spend on new entitlements.

Moreover, by using savings from the Medicare Part A (hospital insurance) trust fund, Obamacare gamed the accounting to make the program’s shortfalls look less severe. When then-Secretary of Health and Human Services Kathleen Sebelius was asked whether the Medicare savings were being used “to save Medicare, or to fund health reform [Obamacare],” Sebelius replied, “Both.”

Some would argue that Obamacare’s financial chicanery has actually undermined Medicare’s solvency by giving lawmakers an excuse to postpone needed reforms. While this year’s Medicare trustees report claimed the Part A trust fund would become insolvent in 2029, the last trustees report released prior to Obamacare measured the program’s insolvency date at 2017—this year.

If it weren’t for the double-counting in Obamacare—a bill that AARP proudly endorsed—lawmakers would likely be confronting Medicare’s structural deficits this year. Instead, comforted by the false hope of Obamacare’s accounting gimmicks, Congress seems unlikely to embark on comprehensive Medicare reform to solve those deficits in the near future, which will only exacerbate the impact of legislative changes when they do take place.

The history of Obamacare lends support to AARP’s current argument that Medicare savings not finance other government spending. But given its own history in supporting Obamacare, AARP seems singularly unqualified to make it.

This post was originally published at The Federalist.

Bernie Sanders’ Single Payer Bill Provides Benefits for Billionaires

On Wednesday, socialist Sen. Bernie Sanders plans to introduce the latest version of his single-payer health-care program. If past practice holds, Sanders will call his plan “Medicare for All.” But if he wants to follow Medicare as his model, then the Sanders plan could easily earn another moniker: Benefits for Billionaires.

An analysis released by the Congressional Budget Office (CBO) in August demonstrates how Medicare currently provides significant financial benefits to seniors at all income levels, including the wealthy. Specifically, the CBO paper analyzed lifetime Medicare taxes paid, and lifetime benefits received, by individuals born in the 1950s who live to age 65.

The CBO analysis confirms prior work by the Urban Institute—no right-wing think tank—that Medicare pays out more in benefits than it receives in taxes at virtually all income levels. For instance, according to Urban’s most recent study, a high-earning male turning 65 in 2020 will pay in an average of $123,000 in Medicare taxes, but receive an average of $222,000 in benefits.

Melinda Gates Doesn’t Need Government Health Care

Some may quibble with the work by CBO and Urban Institute for containing an important oversight. In analyzing only Medicare benefits and Medicare taxes paid, the two papers omit the portion of Medicare’s financing that comes from general revenues—including the income taxes paid primarily by the wealthy. While it’s difficult to draw a precise link between Medicare’s general revenue funding and any one person’s income tax payments, it’s possible that—particularly for one-percenters—income taxes paid will offset the net cost of their Medicare benefits.

But regardless of those important details, the larger point still holds. Even if her taxes do outweigh the Medicare benefits received, why does Melinda Gates need the estimated $300,000 in health care benefits paid to the average high-income woman born in the 1950s? Does that government spending serve a useful purpose?

We Don’t Have Money to Subsidize the Rich

Yes, Medicare currently does include some means testing for wealthy beneficiaries, in both the Part B (physician) and Part D (prescription drug) portions of the program. But common sense should dictate first that wealthy individuals not only should be able to opt-out of Medicare if they so choose—because, strange as it sounds, the federal government currently forbids individuals from renouncing their Medicare benefits—wealthy seniors should not receive a taxpayer subsidy at all. Whether in Medicare or Sanders’ socialist utopia, the idea that Warren Buffett or Bill Gates warrant taxpayer subsidies defies credulity.

Despite this common-sense logic, liberals continue to support providing taxpayer-funded benefits for billionaires. In 2011, then-Rep. Henry Waxman (D-CA) said “if [then-Speaker John] Boehner wants to have the wealthy contribute more to deficit reduction, he should look to the tax code.” Perhaps Waxman views keeping wealthy seniors in Medicare as a form of punishment for the rich. After all, nearly nine in ten seniors have some form of supplemental insurance, and a form of “insurance” one must insure against may not be considered an unalloyed pleasure.

Regardless, Medicare faces its own financial reckoning, and sooner rather than later. In 2009—the last trustees’ report before Obamacare introduced fiscal gimmicks and double-counting into Medicare—the program’s actuaries concluded Medicare’s Hospital Insurance Trust Fund would become functionally insolvent this year. Given that bleak outlook, neither Medicare nor the American people can afford Sanders’ ill-conceived scheme to provide taxpayer-funded health benefits to wealthy 1-percenters.

This post was originally published at The Federalist.

What You Need to Know about Today’s Medicare Trustees Report

Insolvency Date:  The insolvency date for the Medicare Hospital Insurance Trust Fund is 2029, one year later than last year’s report. However, remember that, if not for the double-counting in Obamacare (about which see more below), the Trust Fund would ALREADY be insolvent, as in 2009 — the last trustees report prior to Obamacare’s enactment — the trustees projected insolvency for 2017 (i.e., this year).

IPAB NOT Triggered:  Despite prior predictions, this year’s trustees report did NOT trigger a reporting requirement related to the Independent Payment Advisory Board (IPAB). In other words, Medicare spending over the relevant five year period (2015 through 2019) is not projected to exceed the per capita caps established for Medicare in Obamacare itself. Which makes one wonder — if per capita caps for Medicare haven’t yet bit, why are liberals objecting so loudly to per capita caps for Medicaid…?

A Brief Break from Massive Deficits:  For the first time in nearly a decade, the Medicare Part A Trust Fund did NOT run a deficit. However, the small $5.4 billion surplus did not even begin to overcome the $132.2 billion in deficits run by the Medicare program from 2008 through 2015.

Funding Warning:  For the first time since 2013, the trustees issued a funding warning showing that the Medicare program is taking a disproportionate share of its funding from general revenues, thus crowding out programs like defense and education. If a second warning is issued next year, the President will be required to submit legislation to Congress remedying the problem.

Unrealistic Assumptions:  As it has every year since the passage of Obamacare, the trustees issued an alternative scenario, because “absent an unprecedented change in health care delivery systems,” the payment reductions included in Obamacare mean that “access to, and delivery of, Medicare benefits would deteriorate over time for beneficiaries.”

Double Counting:  The actuary also previously confirmed that the Medicare reductions in Obamacare “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date – rendering dubious any potential claims that Obamacare will extend Medicare’s solvency.  As Nancy Pelosi previously admitted, Democrats “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” – and you can’t improve Medicare’s solvency by taking money out of the program.