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Medicare: Where Is the $716 Billion Robbery

With the heating up of campaign rhetoric, I’ve been hearing a lot about this $716 billion dollars that Romney is publicly saying President Obama “robbed” from Medicare. That is the exact word Romney uses. Well, if someone is stealing, I want to know how they are getting away with it so I did my research and discovered what the $716 billion is.

First, let me remind you that the Medicare trust fund does not have that much money and it’s not a piggy bank that can be raided. At the end of 2011 the Part A trust fund had only $244.2 billion.  The Part A, hospital insurance program, is financed through a payroll tax that goes into a trust fund similar to the Social Security trust funds. And that hospital insurance trust fund is being spent much more rapidly than the Social Security funds. No president can actually take money out of the Medicare trust fund as this money is in Treasury bonds which can only be cashed by Medicare at any time it is needed. As it is, with the continued increase in medical cost, Medicare can’t cover all the benefits without either more revenue (taxes) or reduced spending.

Ok, so where did the $716 billion come from? Actually this figure is for reductions in spending, so it really doesn’t take any money that is in the trust fund out of the trust fund. (Hum, isn’t that what Republicans are always saying—that we need to reduce spending?)

 Sorry Romney, there is no “robbery”. These reductions do not take any money out of Medicare, they are necessary adjustments to vendors who receive Medicare payments, and do not affect payments to beneficiaries.  They are aimed at insurance companies, hospitals, nursing homes and most of all, the Medicare Advantage companies. Medicare Advantage was started under President George W. Bush, with the idea that competition among the private insurers would reduce costs. But in recent years the plans have actually cost more than traditional Medicare. So the health care law scales back the payments to these private insurers. Medicare Advantage plans currently receive higher payments from the government on average than traditional Medicare – 9% higher than it was in 2010. The government pays Advantage companies 14-20% to manage patients health care. The Affordable Care Act cuts this fee to private companies. Romney and Ryan have a countdown clock showing how many days until Medicare (part A) is broke. The truth is that there would be even fewer days until the fund’s exhaustion if Obama’s health care law hadn’t included those $700 billion in spending reductions.

Romney’s campaign ad incorrectly claims that the “money you paid” for Medicare is being used to pay for Obama’s health care law. It is incorrect because the law doesn’t take money out of the existing hospital insurance trust fund. It cuts the future growth of spending. And in the future, seniors will still receive the benefits to which they are entitled.

Sources: Politifact.com, Factcheck.org

This is a guest post from Barbara Moore.

© 2012 Barbara Moore

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  1. Pabitra Mukhopadhyay Says:

    Unfortunately my friends in the US do not really see issues or policies that have implications outside of of US (and have a feedback loop effect on US) very carefully.
    I know Obama is not liked by many but as an outsider keenly following world politics and events, he may not be dealt with fairness if one draws a conclusion about him in 4 years. I think people in the US have seen much worse candidate in the White House.
    In my humble opinion, Obama is redefining the ‘The Big American Dream’. He is a non white, of mixed cultural background, a middle-class intellectual – everything that contrasts a hat yielding red neck.
    As for Obamacare, this is in perfect tune to changing face of consumption and equity-based economy of the future.
    Thanks for debunking some populist campaign.

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