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Morning Jay: Democrats Vulnerable on Medicare

6:00 AM, Aug 15, 2012 • By JAY COST
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Second, Obamacare draws these efficiencies from Medicare not to extend the program’s solvency, but to fund a brand new entitlement. A shallow read of governmental reports obscures this fact because of quirks in the way federal bean counters must account for the HI Trust Fund: the Democrats were allowed to count the Medicare savings twice, as offsets to Obamacare spending and extensions to the life of the HI Trust Fund. In the mixed-up world of Beltway accounting, you can do this; in the real world, you (obviously) cannot.

Again, the chief actuary of Medicare (emphasis mine):

The combination of lower Part A costs and higher tax revenues results in a lower Federal deficit based on budget accounting rules. However, trust fund accounting considers the same lower expenditures and additional revenues as extending the exhaustion date of the HI trust fund. In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.

That’s accountant-speak for: You may be able to count the same dollar twice on Uncle Sam’s books, but that doesn’t mean you can spend it twice. 

The issue gets down to the fact that, while the federal government spends the money in the HI Trust fund for non-Medicare purposes all the time, it actually is borrowing that money, to be paid back later with interest. So, think of it this way. Suppose you borrow $1,000 from me to buy a new sound system; it only costs you $700, so you return $300. How much have you borrowed? The answer is obvious: $700. But in the world of federal accounting, Uncle Sam can borrow $100 billion from the HI Trust Fund, spend $70 billion of it, then claim he actually saved the taxpayer $30 billion. Nonsense: he cannot claim to save money that he has already borrowed. (See here for a smart video that explains the problem in plain English.)

The first version of the Ryan Roadmap retained the Obamacare cuts to Medicare, but applied the savings to shore up the HI Trust Fund (not fund a new entitlement). Importantly, Romney has endorsed the restoration of all cuts that Obamacare imposed on Medicare, which means that the “Romney-Ryan” plan results in no alterations in the current program for today’s seniors; future generations will get premium support to choose a plan via a competitive bidding process.

So, where does that leave us? The GOP has proposed a premium support program for the next generation of recipients in the hopes of saving Medicare for the future. Politically dangerous, for sure. But the Democrats have blown past mere danger and charged headfirst into the utterly suicidal: They are using a top-down governmental board to cut costs in ways that will likely diminish the availability of care, not to secure the future of the program but to bankroll a brand new entitlement.

So, who is more vulnerable to "Mediscare" this cycle?

Answer: the Democrats.

Jay Cost is a staff writer for THE WEEKLY STANDARD and the author of Spoiled Rotten: How the Politics of Patronage Corrupted the Once Noble Democratic Party and Now Threatens the American Republic, available now wherever books are sold. 

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