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Thursday, August 12, 2010


Running ads featuring the beloved Andy Griffith, Obamacare advocates used Medicare’s recent 45th birthday to attempt to continue to sell the unbelievable claim that the massive cuts planned for Medicare will not hurt the program. In the ad, the veteran television star attempts to assure seniors they won’t lose benefits. But with the hundreds of billions of dollars in cuts facing the program, this assertion is almost laughable.

As it happened the Medicare Trustees report came out at the same time that the Obama administration is engaged in this major campaign to sell its health care “reform.” While the reports offers the assurance that Obamacare will add an additional 12 years of life onto the Medicare program, there is some very ominous information contained in “2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds.”

By law, the Board of Trustees of Medicare is required to issue annual reports on the financial status of the Medicare Trust Funds. Those reports are required to contain a statement of actuarial opinion by the Chief Actuary. The Chief Actuary of CMS is responsible for providing accounting information and cost-projections to the Medicare Board of Trustees in order to assist them in assessing the financial health of the program.

While the report says that Medicare will save money and add years, there are major flaws – ones so major that in the first time in 45 years, we have what amounts to a dissenting opinion in the report. For the FIRST time in report history, Richard Foster, Medicare’s Chief Actuary, felt it necessary to release a detailed statement appended to the Trustees’ Report calling the assumptions “implausible” and “unreasonable.” [1]

The report makes assumptions that simply do not hold up under scrutiny. Pushing aside the notion that hundreds of billions on cuts have no effect on services under the Medicare program, the trustees make more predictions for the future.

For example, the trustees' report assumes Medicare physician fees will be cut by 30 percent over the next three years. We have seen this fiction play out year after year, something Foster calls "impossible."

Since the mid-1990’s, Medicare physicians were supposed to face serious yearly cuts to keep Medicare solvent. However, faced with political reality and the importance of paying doctors enough to participate in the Medicare program, Congress cobbled together expensive bills to find the money.

Basically, the big cuts never happen, which means that Medicare is quickly approaching insolvency. But now we are supposed to believe that under Obamacare, Congress will allow the devastating cuts to occur, driving countless physicians out of Medicare.

For another example, the trustees' report assumes that productivity in medical services will match productivity in the rest of the economy. However, in the very same breath we see the admission that “Most categories of health care providers have not been able to improve their productivity to the same extent as the economy at large.” [1]

For well over a decade, the National Right to Life Committee has argued this very point – but from a different perspective. NRLC points out that continually rising productivity in other sectors of the economy, such as agriculture, frees up resources that can be and are used to extend our lives and improve our health. So as the cost of goods falls, resources are freed up for healthcare, whose price is dropping in inflation-adjusted amount, but just not as rapidly as the price of goods. This does not mean there aren’t real cost problems associated with health care.

The first problem is that while the benefits of rising productivity are seen in rising real incomes for Americans, those income increases are not distributed equally. Those whose incomes have not increased--when adjusted for inflation--may truly face difficulties because of the rising nominal (meaning the current value of money) cost of health insurance. When health costs rise, and incomes do not rise as fast, this led to many of the uninsured.

Second, while the American economy as a whole can continually afford more and better health care (because of rising productivity in other sectors that frees up more and more resources for health care), the same is not true of government’s share of health care costs. For further description of this, see This ‘webinar’ will not only describe how the economy as a whole can afford health care, but how the cost of what people can afford could be used to address the government healthcare entitlements.

With this notion that somehow Medicare can increase in productivity (when there is no proof that health care can do this to the extent Obamacare assumes) along side the totally unrealistic conclusion that hundreds of billions in cuts somehow make Medicare stronger, the program is in real trouble.

[1] See Centers for Medicare and Medicaid Services, “2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds,” August 5, 2010, at (August 10, 2010).