NCPA - National Center for Policy Analysis

Kicking the Medicare Can -- Again

December 15, 2010

While much of Washington was focused on the tax compromise between President Obama and congressional Republicans, the Senate was putting together another deal that shows how little both parties really understand what happened in the last election, says Michael Tanner, a senior fellow at the Cato Institute.

  • Senate Democrats and Republicans agreed on -- and passed by a vote of 99-0 -- a one-year extension of the so-called "doctor fix" for Medicare.
  • The result is almost certainly going to mean higher deficits and more debt piled on the backs of our children.

Since 2003, the sustainable growth rate (SGR) -- a formula designed to control increases in Medicare spending -- has dictated reimbursement cuts.  And every year, Congress intervened to postpone those cuts.

Now, faced with having the cuts kick in on Jan. 1, Congress has once again voted to postpone them for a year, at a cost of $15 billion.

But wait.  Congress found a way to pay for it: It voted to reduce subsidies under the president's health reforms -- in 2014.

That's right.  Congress will spend the money next year, but you needn't worry because it will reduce subsidies four years from now, says Tanner.

Well, it's not really going to reduce the subsidies.  What members actually voted for was a requirement that people who get the subsidy incorrectly because their incomes changed during the year (making them ineligible) will have to repay a larger portion of the subsidies that they shouldn't have received in the first place.

So, four years from now, the government will pay people money that it shouldn't.  Those people will then repay part of this money.  And Congress will use that repayment to repay the money it borrowed to spend this year to avoid making cuts in a program that is trillions of dollars in debt, says Tanner.

Feeling better now?

Source: Michael Tanner, "Kicking the Medicare Can -- Again," New York Post, December 13, 2010.

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