Key Points from Today’s Medicare Trustees Report

The official Medicare trustees report has now been posted online here.  Here’s a quick take about what you need to know in the report:

  1. Insolvency One Year Closer:  Contrary to predictions made in this space this morning, the insolvency date for the Medicare Hospital Insurance Trust Fund remains at 2024 – despite the 2% sequester cuts scheduled to take effect beginning in January.  In other words, if not for the sequester cuts insisted on by Congress, Medicare’s financial stability would have deteriorated even further.  As it is, we’re still one year closer to Medicare running out of IOUs to cash in to pay its bills (see #3 below).
  2. Obama Economy Making It Worse:  As the Associated Press noted, “Social Security’s finances worsened” – and Medicare’s finances did not improve, sequester notwithstanding – “in part because high energy prices suppressed wages, a trend the trustees see as continuing.  The trustees said they expect workers to work fewer hours than previously projected, even after the economy recovers.”  President Obama’s poor economic record is not only harming workers today, it will harm future generations – seniors in current entitlement programs that are less secure, and children and grandchildren forced to pay the bills for skyrocketing spending – for decades to come.
  3. Deficits as Far as the Eye Can See:  The report once again confirms that the Medicare program is already contributing to the federal deficit, will continue to do so throughout the coming decade, and forever thereafter.  Since 2008, the program has run cash flow deficits; this year’s deficit is expected to total $28.9 billion.  The only thing keeping the program afloat financially is the sale of Treasury bonds in the Medicare Trust Fund – and the redemption of those paper IOUs increases the federal deficit.
  4. Funding Warning:  For the seventh straight year, 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.  While in theory this development should prompt the President to follow his statutory requirement to submit legislation remedying this funding shortfall, the White House has previously refused to do so – relying instead on a signing statement by President Bush to ignore the need for Medicare reform (and also breaking the President’s campaign promises in the process).
  5. Unrealistic Assumptions:  For the third straight year since the passage of Obamacare, the report features a statement of actuarial opinion by the non-partisan Medicare actuary (pages 277-279 of the report), who says “the financial projections shown in this report…do not represent a reasonable expectation for actual program operations.”  The actuary will again issue an alternative scenario for Medicare’s unfunded obligations that he views as more realistic, because the major source of Medicare payment reductions in Obamacare may not be sustained over a long period of time.
  6. 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 Speaker Pelosi admitted last year, 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.
  7. Massive Tax Increases:  Today’s report again confirms that Medicare’s finances are also being bolstered by the extension of the health care law’s “high-income” tax – which is NOT indexed for inflation – to more and more individuals over time.  Page 30 of the report notes that “by the end of the long-range projection period, an estimated 80 percent of workers would pay the higher tax rate.”  As JEC recently reported, these tax increases are part of the $4 trillion in “revenue enhancements” over the next 25 years taking place thanks to Obamacare.  When Democrats talk about raising taxes to reduce the deficit, keep in mind that they have already raised taxes in a way that will harm middle-class families over time – and that those tax increases were used not to reduce the deficit but to pay for new and unsustainable entitlements.
  8. Seniors Losing Coverage, Part I:  Table IV.C1 of the report notes that millions of seniors will lose their current Medicare Advantage plans – enrollment is projected to fall from 13.5 million this year to 9.7 million by 2017.  However, thanks to the waiver/demonstration program announced by the Administration, and criticized by the Government Accountability Office in a report this morning, enrollment in Medicare Advantage will not begin falling until after the President has completed his re-election campaign.
  9. Seniors Losing Coverage, Part II:  Table IV.B10 of the report re-stated prior projections that enrollment in employer-sponsored retiree drug plans will fall from 6.8 million in 2010 to a mere 800,000 by 2016 – a drop of nearly 90%.  This rapid decrease in enrollment occurs thanks to provisions in Obamacare that raise taxes on employers who continue to offer retiree drug coverage.

 

Unfunded Obligation Projections for 75-Year Budget Window (2012-2086)

  2009 Trustees’ Report pre-Obamacare

(in trillions)

2011 Trustees’ Report (in trillions) 2011 Alternative Scenario (in trillions) 2012 Trustees’ Report (in trillions) 2012 Alternative Scenario (in trillions)
Part A (Hospital Insurance) $13.4 (1.7% of GDP) $3.0 (0.3% of GDP) $8.3 (0.9% of GDP) $4.8 (0.3% of GDP) Not Yet Released
Part B (Obligations less beneficiary premiums) $17.2 (2.2% of GDP) $13.9 (1.6% of GDP) $21.0 (2.4% of GDP) $14.8 (1.6% of GDP) Not Yet Released
Part D (Obligations less beneficiary premiums and state “clawback” payments) $7.2 (0.9% of GDP) $7.5 (0.8% of GDP) $7.5 (0.8% of GDP) $6.8 (0.7% of GDP) Not Yet Released
TOTAL $37.8 (4.8% of GDP) $24.4 (2.8% of GDP) $36.8 (4.2% of GDP) $26.4 (2.9% of GDP) Not Yet Released

 

Obama Abandons Medicare

President Obama and Democrats claim to be committed to “protecting” seniors.  But their policies fail to protect the essential Medicare program.  It is yet another broken promise by the president.  Once again this week, President Obama ignored a legal requirement to produce a plan to strengthen Medicare – the fourth straight year he has failed to put a plan forward.  And reports indicate Democrats in the Senate have no plans to strengthen Medicare because it would be “giving away the biggest [political] advantage” Democrats have had “in some time.”
The failure of the President’s health care law to strengthen Medicare is a prime example of Democratic hypocrisy.  A close look at provisions in the law reveal how it’s fiscal gimmicks and centralized control undermine the Medicare program, harming seniors in the process.
Millions Lose Their Current Coverage

The Congressional Budget Office (CBO) estimates that the president’s health care law will cut a total of $202.3 billion from Medicare Advantage plans.  These plans deliver a range of health care options to more than 12 million seniors, one-quarter of those enrolled in the Medicare program.  One recent study demonstrated that the law will cause Medicare Advantage plan enrollment to be cut in half by 2017.  In addition to enrollment being cut, seniors’ choice of health care plans will be cut by two-thirds

The Health Care Law Hurts Medicare’s Long-Term Solvency

Obama Administration actuaries have confirmed that the president’s health care law will increase overall health spending by $311 billion.  The increased spending further exacerbates the long-term trends that have placed the Medicare program in financial trouble.

The president’s health care law uses Medicare savings not to strengthen Medicare, but to fund new entitlements.  The CBO stated the law “would not enhance the ability of the government to pay for future Medicare benefits.”  The non-partisan Medicare actuary confirmed that Medicare reductions in the law “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund.”  Even Speaker Pelosi admitted this problem in November, when she said in an interview that “we took half a trillion dollars out of Medicare in…the health care bill,” to pay for other program spending.
Unsustainable Payment Cuts Would Drive Hospitals Out of Business

Medicare payment reductions in the Obama health care law will not improve the solvency of the program.  CBO concluded that the reductions are phantom savings.  They say the largest Medicare reductions—permanent reductions in payments to hospitals and other Part A medical providers—will be “difficult to sustain for a long period.”  The non-partisan Medicare actuary also found that provisions in the health care law “are unlikely to be sustainable on a permanent annual basis.”

 
One analysis conducted by the Medicare actuary found that over the long term, Medicare would pay hospitals only about one-third the rate paid by private health insurance.  These reductions would cause up to 40 percent of hospitals to become unprofitable—meaning medical providers would likely have to stop treating Medicare patients to remain in business, and thus jeopardizing beneficiaries’ access to care. 
Cuts to Doctors Would Lead to Higher Premiums

The president’s health care law did not fix the Medicare formula for physician reimbursement levels.  As a result, physicians will receive a 32 percent cut in payment levels beginning in January 2013 and further reductions thereafter while health costs continue to rise.  The president’s FY 2013 budget does not fix the funding shortfall either – it ignores the $429 billion cost for the fix.  If the president’s proposals become law, seniors would pay higher Part B premiums—more than $100 billion.

Most Seniors Will Pay More
In order to give a select group of beneficiaries richer coverage, the president’s health care law raises seniors’ Part D premiums  CBO estimated that “the law would lead to an average increase in premiums for Part D beneficiaries of about four percent in 2011, rising to about nine percent in 2019.”  That means 17 million seniors enrolled in Part D plans are paying higher premiums so that about 400,000 beneficiaries passing through the so-called “doughnut hole” can receive the full benefit of the law’s drug discount.  Many of these beneficiaries are low-income seniors whose additional costs were already covered before the President’s health care law.
The Law Puts Washington Bureaucrats in Control 
The president’s health care law establishes a new board of 15 unelected, unaccountable bureaucrats empowered to make decisions with the force of law on reductions within Medicare.  Each of these officials, whose salaries will be paid by the federal government, could be in power for well over a decade.  The law mandates that a majority of board members must consist of economists and other similar “experts,” NOT practicing doctors, nurses, or other medical providers.  Its members will make rulings to reduce Medicare spending, and these rulings will be binding unless overturned by a supermajority of both houses of Congress.  Medicare beneficiaries who are harmed by this unaccountable board will have no recourse to appeal its decisions, as the law prohibits both judicial and administrative review of the board’s decisions.  Patients should be concerned that the law inserts bureaucrats between patients and doctors.
Medicare must be strengthened.  CBO projects that the Medicare trust fund will run deficits in the tens of billions of dollars forever.   The president’s former Chief of Staff, Bill Daley, said in July that the program “will run out of money in five years if we don’t do something.”  The president himself acknowledged that “if you look at the numbers, then Medicare in particular will run out of money and we will not be able to sustain that program no matter how much taxes go up.  I mean, it’s not an option for us to just sit by and do nothing.”
Unfortunately, the president’s health care law fails a Medicare program in need of strengthening.  The law imposes budget gimmicks that divert Medicare savings to pay for new programs, and assumes payment reductions that will have to be overridden for seniors to have access to care.  Moreover, the law centralizes control within a government-run system, eliminating choices in Medicare Advantage and ceding massive power to a board of unelected and unaccountable bureaucrats.  While Democrats claim that Republicans want to destroy Medicare, it is Democrats who radically altered the program for the worse as part of President Obama’s massive 2700-page health law.

Obama’s Medicare Abdication: 808 Days and Counting…

That’s how long it’s been since President Obama was first required by law to submit legislation remedying Medicare’s funding shortfalls.  As we previously reported, existing law requires that when the Medicare trustees certify a Medicare funding warning (as they have in every year since 2007), the President has a statutory requirement to propose legislation to Congress within 15 days to remedy the shortfall.  President Obama’s first complete budget* was submitted on May 7, 2009, meaning the requirement to submit Medicare reform legislation kicked in on May 22, 2009 – 808 days ago.

In that entire time frame, President Obama has submitted ZERO bills to Congress to fix Medicare’s fiscal shortfalls, statutory requirements notwithstanding.  Worse yet, the President signed into law a measure (i.e., Obamacare) that diverted more than $500 billion in Medicare savings – not to ensure the solvency of the Medicare program, but to create more new and unsustainable entitlements.  The Congressional Budget Office noted that the Medicare provisions in Obamacare “would not enhance the ability of the government to pay for future Medicare benefits.”

The President claimed in his speech yesterday that he intends to submit his own recommendations to the Congressional “Super Committee” regarding deficit reduction – and perhaps, just perhaps, regarding entitlement reform as well.  However, seeing as how he has willfully disregarded his statutory requirement to submit solutions to Medicare’s problems for over two years – and used the Medicare program as a “piggy bank” to fund Obamacare’s massive new entitlements – many, warily eyeing the President’s apparent Damascene conversion to the cause of entitlement reform, may ask:  What took you so long?  And how does waiting more than 800 days to fulfill statutory requirements designed to ensure Medicare’s solvency constitute Presidential leadership?

 

* As most newly inaugurated executives do, President Obama submitted his 2009 budget request in two parts – a summary document released in February, and a complete version of documents, which was released on May 7, 2009.  Using the later date results in the most generous interpretation possible of the President’s abdication of leadership regarding this issue.  However, the President also said yesterday it was “true the day I took office” that the United States needed to embark on deficit reduction.  For the record, it is now 930 days since President Obama took office.

Fact Check: Doing Nothing on Medicare

At the IPAB hearing before the House Budget Committee, Secretary Sebelius just said that no one is talking about doing nothing when it comes to Medicare reform.  But that’s EXACTLY what Democrats in Congress want to do – do nothing on Medicare reform to gain political points.  The liberal Plum Line reported yesterday that Senate Democrats don’t want to pass Medicare reform because it would be “giving away the biggest [political] advantage” Democrats have had “in some time.”  Likewise, the head of House Democrats’ campaign committee is reported to have said “the Medicare message is a winner [for Democrats], but that he’ll have a hard time recruiting candidates if he loses it.”  In other words, Democrats in both bodies of Congress want to avoid making tough choices on Medicare in order to obtain what they perceive as a political advantage.

And if the President doesn’t want to do nothing, then where is HIS Medicare plan?  He’s been required to submit one to Congress for the last three years, yet failed to do so.  If he can’t bother to submit a simple bill to Congress, how serious is the President regarding Medicare reform?

President Obama’s own Chief of Staff admitted this weekend that “Medicare will run out of money in five years if we don’t do something.”  And President Clinton has argued that Democrats can’t say “we shouldn’t do anything” on Medicare reform because otherwise “health care [will] devour the economy.”  So if the Secretary wants to assert that no one is talking about doing nothing, where’s the Democrat Medicare reform plan?

Sessions-Ryan Letter to Obama: Where’s YOUR Medicare Bill?

House Budget Committee Chairman Ryan and Senate Budget Committee Ranking Member Sessions sent a letter to President Obama today pointing out that the President is violating the law by failing to submit Medicare reform legislation to Congress.   Last month, the Medicare trustees issued their fifth straight 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.  While in theory this development should prompt the President to follow his statutory requirement to submit legislation remedying this funding shortfall, the White House has steadfastly refused to do so – relying instead on a signing statement by President Bush to ignore the need for Medicare reform.

As a reminder,  the President’s deficit reduction “plan” calls for a deficit “fail-safe” requiring additional action if the budget situation does not improve.  But Medicare ALREADY has such a “fail-safe,” and the President has scrupulously ignored it.  If the President is so interested in budgetary “fail-safes” as a way to reduce the federal deficit, why doesn’t he abide by the Medicare “fail-safe” that’s already in law – a “fail-safe” he has completely ignored?

After promising during his presidential campaign that he would NOT use presidential signing statements to “get [his] way,” President Obama is now relying on a signing statement to avoid putting forward concrete proposals for Medicare reform – effectively attempting to get his way by avoiding the big issues of entitlement reform 18 months before his re-election bid.  But, with federal deficits running at record highs, some may wonder whether ducking on the biggest issue of our generation – massive and unsustainable federal debts sparked largely by uncontrolled entitlements – represents the kind of change the American people can believe in.

Obama’s Medicare Abdication — and Constitutional Hypocrisy

Karl Rove has a column in the Wall Street Journal this morning talking about President Obama’s failure to submit Medicare reform legislation under the funding “trigger” included in 2003’s Medicare Modernization Act.  Last month, the trustees issued their fifth straight Medicare 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.  While in theory this development should prompt the President to follow his statutory requirement to submit legislation remedying this funding shortfall, the White House has steadfastly refused to do so – relying instead on a signing statement to ignore the need for Medicare reform (and also breaking the President’s campaign promises in the process).

Mr. Rove’s column rightly points out that the President views statutes as a “legal cafeteria” from which he can pick and choose the requirements with which he deign comply.  But there’s also another point at issue, and that’s this:  The President’s deficit reduction “plan” calls for a deficit “fail-safe” requiring additional action if the budget situation does not improve.  But Medicare ALREADY has such a “fail-safe,” and the President has scrupulously ignored it.  If the President is so interested in budgetary “fail-safes” as a way to reduce the federal deficit, why doesn’t he abide by the Medicare “fail-safe” that’s already in law – a “fail-safe” he has completely ignored?

Medicare is currently running cash flow deficits in the tens of billions of dollars, and according to the Congressional Budget Office, its Hospital Insurance Trust Fund will be insolvent in nine short years.  The Medicare trustees report notes that the program needs major fiscal reform NOW – not after the President’s re-election campaign, when the White House’s deficit reduction plan would finally take effect.  Instead the White House continues to duck the tough questions regarding Medicare reform.

After promising during his presidential campaign that he would NOT use presidential signing statements to “get [his] way,” President Obama is now relying on a signing statement to avoid putting forward concrete proposals for Medicare reform – effectively attempting to get his way by avoiding the big issues of entitlement reform 18 months before his re-election bid.  But, with federal deficits running at record highs, some may wonder whether ducking on the biggest issue of our generation – massive and unsustainable federal debts sparked largely by uncontrolled entitlements – represents the kind of change the American people can believe in.

Topline Summary of Medicare Trustees Report

The official Medicare trustees report is now online – here’s a quick take on the topline points:

  • Deficits as Far as the Eye Can See:  Today’s report confirms that the Medicare program is already contributing to the federal deficit – and will continue to do so throughout the coming decade.  Since 2008, the program has run cash flow deficits; this year’s deficit exceeds $32 billion.  The only thing keeping the program afloat financially is the sale of Treasury bonds in the Medicare Trust Fund – and the redemption of those paper IOUs is increasing the federal deficit.
  • Insolvency in 2024:  According to the report, even the IOUs will be exhausted by 2024, at which point the Medicare Hospital Insurance Trust Fund will be officially insolvent.  By comparison, the Congressional Budget Office’s March 2011 baseline projects insolvency in 2020.  While last year’s report predicted insolvency in 2029, this year’s trustees report should see an acceleration of insolvency, thanks in large part due to the failed economic policies of the Obama Administration, which have led to prolonged high unemployment and a resulting loss of payroll tax revenues.
  • Funding Warning:  For the sixth straight year, 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.  While in theory this development should prompt the President to follow his statutory requirement to submit legislation remedying this funding shortfall, the White House has previously refused to do so – relying instead on a signing statement by President Bush to ignore the need for Medicare reform (and also breaking the President’s campaign promises in the process).
  • Unfunded Obligations:  As you can see from the charts below, last year’s trustees report “magically” reduced the program’s stated unfunded obligations over an “infinite horizon” timetable from $88.9 trillion to $36.3 trillion when compared to the 2009 report.  This year’s report increased those obligations to $38.4 trillion – a number demonstrating how badly the program needs immediate reform.  More importantly, even this figure represents an unrealistically low estimate of the program’s long-term financial difficulties, for the reasons laid out below.
  • Unrealistic Assumptions:  Once again this year’s report features a statement of actuarial opinion by the Medicare actuary, in which he stated that “the financial projections shown in this report…do not represent a reasonable expectation for actual program operations.”  The actuary has again issued an alternative scenario for Medicare’s unfunded obligations that he views as more realistic, because the major source of Medicare payment reductions included in the health care law may not be sustained over a long period of time. (The link to the alternative scenario document is not yet active.)
  • Double Counting:  As a reminder, the Medicare actuary previously confirmed that the Medicare reductions in the law “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date – making any potential claims that health “reform” will extend the life of the Medicare trust fund highly dubious at best.  As the Associated Press preview of last year’s report noted, “Despite assertions to the contrary by the Obama Administration, the new health care law doesn’t improve Medicare’s solvency by much.”

The trustees report confirms once again that Medicare needs fundamental reform, and soon.  Given that fact, why haven’t Senate Democrats yet revealed how they plan to preserve the program by telling the American people what entitlement reforms they actually support?

 

Unfunded Obligation Projections for 75-Year Budget Window (2011-2085)

  2009 Trustees’ Report

(in trillions)

2010 Trustees’ Report

(in trillions)

2010 Alternative Scenario (in trillions) 2011 Trustees’ Report (in trillions)
Part A (Hospital Insurance) $13.4 (1.7% of GDP) $2.4 (0.3% of GDP) $7.0 (0.8% of GDP) $3.0 (0.3% of GDP)
Part B (Obligations less beneficiary premiums) $17.2 (2.2% of GDP) $12.9 (1.5% of GDP) $20.6 (2.4% of GDP) $13.9 (1.6% of GDP)
Part D (Obligations less beneficiary premiums and state “clawback” payments) $7.2 (0.9% of GDP) $7.2 (0.9% of GDP) $7.2 (0.9% of GDP) $7.5 (0.8% of GDP)
TOTAL $37.8 (4.8% of GDP) $22.5 (2.7% of GDP) $34.8 (4.1% of GDP) $24.4 (2.8% of GDP)

 

Unfunded Obligation Projections for Infinite Horizon

  2009 Trustees’ Report

(in trillions)

2010 Trustees’ Report

(in trillions)

2011 Trustees Report

(in trillions)

Part A (Hospital Insurance) $36.4 (2.8% of GDP) -$0.6 (-0.0% of GDP) -$0.1 (0.0% of GDP)
Part B (Obligations less beneficiary premiums) $37.0 (2.8% of GDP) $21.1 (1.5% of GDP) $22.4 (1.5% of GDP)
Part D (Obligations less beneficiary premiums and state “clawback” payments) $15.5 (1.2% of GDP) $15.8 (1.1% of GDP) $16.1 (1.1% of GDP)
TOTAL $88.9 (6.8% of GDP) $36.3 (2.6% of GDP) $38.4 (2.6% of GDP)

 

Why the President’s Failsafe Proposal Fails, Part II

As a follow-up to my missive from last night regarding the President’s “fail-safe” deficit mechanism, there’s one question the White House should be answering: If the President is so interested in budgetary “fail-safes” as a way to reduce the federal deficit, why doesn’t he abide by the Medicare “fail-safe” that’s already in law – a “fail-safe” he has completely ignored?

In case you weren’t aware, Medicare is ALREADY subject to a “fail-safe” mechanism designed to ensure the program will be sustainable in the long term.  The Medicare Modernization Act included provisions requiring the Medicare trustees to determine when the program is relying too heavily on general revenues (as opposed to the Medicare payroll tax) for its funding needs, thus crowding out other important government priorities such as defense, education, etc.  A section on pages 52-55 of last August’s trustees report made such a determination of “excess general revenue Medicare funding” for the fifth straight year.  Therefore, under the procedures outlined within the MMA, the President must within 15 days of submitting his budget propose to Congress legislation remedying the funding warning – to make the program more financially sustainable for current taxpayers and future generations alike.  This provision was codified in statute, meaning the President is required to submit a legislative proposal (which the leaders of both parties will formally introduce at his request).  In his three budget submissions thus far, the President has ignored this statutory requirement under the Medicare “fail-safe” to propose legislation remedying the program’s funding shortfalls.

The White House hasn’t talked about the Medicare funding warning mechanism much – and not just because health “reform” engaged in fiscal double-counting by diverting savings from Medicare to establish new entitlements.  On the one occasion when an Administration document did discuss the Medicare “fail-safe” – the Analytical Perspectives to the President’s April 2009 budget – the Administration claimed that “in accordance with the recommendations clause of the Constitution, the President considers this requirement to be advisory and not binding.”  This wording is particularly ironic, as it echoes the signing statement issued by President Bush at the time the Medicare Modernization Act was enacted in 2003.*

Medicare is already running cash flow deficits in the tens of billions of dollars, and according to the Congressional Budget Office, its Hospital Insurance Trust Fund will be insolvent in nine short years.  The Medicare trustees report notes that the program needs major fiscal reform NOW – not after the President’s re-election campaign, when the White House’s deficit reduction plan would finally take effect.  Instead the White House continues to rely on a presidential signing statement to duck the tough questions regarding Medicare reform, breaking his campaign promises in the process.  Since the President has for years failed to lead on Medicare reform despite a legal “fail-safe” requiring him to do so, why should anyone believe his newfound conversion to targets and “fail-safes” now?

 

* It should be noted that President Bush, unlike President Obama, followed the statutory requirements and submitted Medicare reform legislation as required in February 2008 – meaning his concerns over entitlement spending, and desire to propose solutions regarding same, outweighed any concerns about constitutional prerogatives.  (The proposals were introduced by request in both chambers as bill H.R. 5480/S. 2662 of the 110th Congress.)  President Obama apparently feels no such compunction to put comprehensive entitlement reform ahead of any separation-of-powers concerns, or for that matter the political benefit he may perceive from avoiding the issue until after the next election.

Obama Double Standards on Signing Statements and Medicare Reform

As previously discussed, the Administration failed today to send to Congress legislation to remedy general revenue funding shortfalls in Medicare – a requirement codified in statute.  Almost as interesting however is WHY President Obama chose to ignore this requirement.*  The White House hasn’t talked about the Medicare funding warning mechanism (aka the Medicare “trigger”) much – probably because doing so would draw attention to the fact that health “reform” diverted savings from Medicare to establish new entitlements, engaging in fiscal double-counting and budgetary prestidigitation that did little to resolve Medicare’s structural shortfalls.

But on the one occasion when an Administration document did discuss the Medicare “trigger” – the Analytical Perspectives to the President’s April 2009 budget submission – the Administration claimed that “in accordance with the recommendations clause of the Constitution, the President considers this requirement to be advisory and not binding.”  This wording is particularly ironic, as it echoes the signing statement on the “trigger” issued by President Bush at the time the Medicare Modernization Act (which included the “trigger” mechanism) was enacted in 2003.

It should be noted however that President Bush, unlike President Obama, followed the statutory requirements and submitted Medicare reform legislation under the “trigger” as required in February 2008 – meaning his concerns over entitlement spending, and desire to propose solutions regarding same, outweighed any concerns about constitutional prerogatives.  (The “trigger” proposals were introduced by request in both chambers as bill H.R. 5480/S. 2662 of the 110th Congress.)  President Obama apparently feels no such compunction to put comprehensive entitlement reform ahead of any separation-of-powers concerns, or for that matter the political benefit he may perceive from avoiding the issue until after the next election.

So after promising during his presidential campaign that he would NOT use presidential signing statements to “get [his] way,” President Obama is now relying on a signing statement by President Bush to avoid putting forward concrete proposals for Medicare reform – effectively attempting to get his way by avoiding the big issues of entitlement reform 18 months before his re-election bid.  But, with federal deficits running at record highs, some may wonder whether ducking on the biggest issue of our generation – massive and unsustainable federal debts sparked largely by uncontrolled entitlements – represents the kind of change the American people can believe in.

 

* To be sure, the President’s budget does propose SOME savings from Medicare.  But the total savings in Fiscal Year 2012 – $1.6 billion from Medicare, Medicaid, and other government health programs combined – is comparatively miniscule compared to the “at least $40 billion” of spending reductions in FY2012 from Medicare alone that the trustees said would be needed to meet the “trigger” requirements.  Moreover, the President proposes spending its budgetary “savings” on a two year Medicare “doc fix” costing $54 billion, meaning total Medicare spending would actually increase during the fiscal years examined by the Medicare “trigger” under the President’s budget – meaning the proposals are clearly insufficient to meet the statutory requirements.  See pages 194-96 (Table S-8) of the budget, and pages 52-55 of the trustees report, for additional details.

Will President Obama Fulfill His Requirements on Entitlement Reform?

Even as Congress works this week to complete this year’s appropriations bills, thoughts turn to the long-term budget outlook, which under any scenario is far from rosy.  Experts generally agree that the growth of the long-term budget deficits is largely a function of entitlements like Social Security, Medicaid, and Medicare; President Obama admitted as much in an interview with the Washington Post shortly before taking office: “The real problem with our long-term deficit actually has to do with our entitlement obligations….The big problem is Medicare, which is unsustainable.”  Unfortunately, however, the President signed a health care law that extracted savings from Medicare to create a massive new $2.6 trillion entitlement, relying on double-counting and similar budgetary gimmicks rather than enacting reforms that will make the Medicare program truly sustainable.

This week, however, the President has been granted a second chance to start a conversation about true Medicare reforms that will make the program more sustainable – in fact, he is required by law to do so.  The Medicare Modernization Act included provisions requiring the Medicare trustees to determine when the Medicare program is relying too heavily on general revenues (as opposed to the Medicare payroll tax) for its funding needs, thus crowding out other important government priorities such as defense, education, etc.  A section on pages 52-55 of last August’s trustees report made such a determination of “excess general revenue Medicare funding” for the fifth straight year.  Therefore, under the procedures outlined within the MMA, the President must within 15 days of submitting his budget also propose to Congress legislation remedying the funding warning – to make the program more financially sustainable for current taxpayers and future generations alike.  This provision was codified in statute, meaning the President is required to submit a legislative proposal (which the leaders of both parties will formally introduce at his request).

President Obama has talked a lot about entitlement reform, and he has on numerous occasions criticized Republicans for not paying for the cost associated with the MMA (even though Democrats didn’t propose offsets to the bill’s new spending, then or now).  He has an opportunity to use one of the tools provided to the President and Congress in the MMA to bring the Medicare program back into balance – one which could reform an entitlement the President himself called “unsustainable.”  Will the President embrace this opportunity, or will his response to whether the country should reform its costly entitlement programs once again be the deafening silence of “NO?”