NCPA - National Center for Policy Analysis


December 9, 2009

The health care reform wallowing through Congress includes a ploy reminiscent of the "liar loans" prominent during the recent real estate bubble before its collapse.   "Liar loans" describe so-called no documentation mortgage loans used to finance home purchases in the worst of the real estate bubble. Few of the homes purchases with these loans escaped foreclosure, says the Heritage Foundation.

The bill cuts imaginary Medicare spending and uses the funds for real spending elsewhere.  Senator Judd Gregg (R-N.H.) has blown the whistle on this charade.  Health care reformers are not amused says the Heritage:

  • The health care reform bill proposes to pay for new entitlement spending by cutting Medicare; the trouble, of course, is that much of Medicare spending is already unfunded and unaffordable.
  • Even assuming Congress defies steep odds and actually reduces future programmed spending, the Medicare money is not really there to be cut, so it's not there to be redirected, either -- another case of the missing income.

For example:

  • Imagine if you committed to spend $1000 more than you earned every year.
  • Imagine then you found something new to buy, at a price tag of $100.
  • Cutting back your original spending to $900 and then adding the new item for $100 is hardly an act of fiscal prudence.

Senator Gregg, as Ranking Member of the Senate Budget Committee, has offered an amendment in his role as guardian of budget common sense.  His amendment simply says that Medicare savings can only be used for Medicare, and he achieves this result by requiring that the bill be budget neutral exclusive of Medicare savings, says Heritage.

Source: J.D. Foster, "Honest Medicare Budgeting in Health Care Reform," Heritage Foundation, December 7, 2009.

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