NCPA - National Center for Policy Analysis


July 27, 2010

President Obama's health care overhaul is designed to cover the uninsured by changing how the government spreads its social safety net, says the Wall Street Journal. 

The new law taps a program for the elderly to help provide insurance to 32 million Americans of younger generations.  Nearly half the funding is supposed to come from paying lower fees to hospitals, insurers and other health care providers that participate in Medicare, the federal insurance program for Americans age 65 and older, as well as younger disabled people, says the Journal: 

  • The 44 million Americans on Medicare won't see changes to their guaranteed benefits under the law.
  • But of those, 11.3 million on Medicare Advantage plans (a public-private hybrid) are likely to begin seeing extra benefits go away as soon as next year.
  • Medicare Advantage cuts are slated to pay for 15 percent of the health care law's tab. 

The White House says the health law doesn't take from seniors to help younger generations, but instead eliminates overpayments to private companies, particularly insurers that run Medicare plans.  By lowering payments to health providers, the new law extends the life of Medicare's trust fund by 12 years, according to an actuarial report from Medicare's umbrella agency. 

Stuart Butler, a vice president at the Heritage Foundation, says the White House is misrepresenting the benefits that accrue from Medicare payment cuts.  "It uses it to create a new entitlement for a separate group of people rather than strengthening" the program, he says.  Moreover, such cuts alone don't pay for the law. 

According to Heritage: 

  • The law will spend $938 billion over a decade, mostly to expand coverage to lower-income Americans.
  • To finance that, there will be $455 billion coming from cuts in government payments to health care providers that serve patients on Medicare and two other federal programs.
  • The hardest hit -- to the tune of $136 billion -- will be private insurance companies that run Medicare Advantage plans. 

The Congressional Budget Office says on average, Medicare Advantage enrollees will get $68 less a month in benefits by 2019 because of the law.  The payment cuts to Medicare Advantage begin in 2012. 

Source: Janet Adamy, "Health Law Augurs Transfer of Funds From Old to Young," Wall Street Journal, July 25, 2010. 

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