The Myth vs Numeric Reality: HR3200 v Medicare

Angry Bear

Slightly left of center economic commentary on news, politics, and the economy.

The Myth vs Numeric Reality: HR3200 v Medicare

by Bruce Webb

The current line of attack on Health Care reform from Republicans is that it proposes to Rob Gramma to Pay Pedro. I am not going to address the care for illegals canard today but do want to probe just what HR3200 does for Medicare on net. Starting from the following two charts from the Kaiser Family Foundation.


Summary of Key Medicare Provisions in HR3200
The first chart reports the number proposed to be saved by changes in Medicare and displays the only number you are likely to see cited by opponents: $538.5 billion in cuts. But the second chart shows something interesting, these cuts are offset by an additional $320.4 billion in spending. Meaning that the net cut to Medicare overall is $218.1 billion over ten years. Which matches closely with the one shown in CBO's $219 bn score shown here:

http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf

Still $218 billion over ten years is still something. But lets look at the breakdown. Of the $538.5 billion in cuts $172 billion of it is the result of removing the 15% extra payment per enrollee granted to the private insurance companies offering Medicare Advantage. This extra payment, which made a mockery of the idea that private companies could provide a better product for the same price, was originally designed to subvert traditional Medicare and is no real loss. If we subtract that $172 billion from $218 billion we get a net spending cut to traditional Medicare of $46 billion over ten years representing only a small fraction of the cost to extend coverage to 97% of legal non-elderly Americas.

So why are Republicans pushing this point so hard? Are they really concerned about the specific tradeoffs represented by the above two charts (because wihin Medicare there are winners and losers)? I think not, instead all their crocodile tears about Gramma are disguising real tears at the prospect of the outcome shown in the third row of the CBO table: the $583 billion in extra taxes on the top 1.5% over the next ten years.

Rule no 1 in evaluating Republican proposals and counter-proposals: it's about the taxes first and foremost. They don't like paying for services for the working class. Period.