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Obamacare Is an Entitlement Disaster

1:09 PM, May 25, 2011 • By JEFFREY H. ANDERSON
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In June 2009, President Obama said, “Medicare and Medicaid are the single biggest drivers of the federal deficit and the federal debt by a huge margin.” Two years later, Paul Ryan and the House Republicans have advanced a serious proposal to deal with these two biggest drivers of our debt. Obama and his party could have embraced aspects of Ryan’s proposal, which builds on recommendations advanced by Democrats during the Clinton years, or they could have offered a serious proposal of their own. Instead, however, they seem to view Ryan’s plan as a political panacea — something to distract voters from their own lack of leadership on entitlements, their own lack of seriousness on deficits, and their own lack of judgment in ramming through Obamacare.

Obama SOTU

But although Democrats and their allies are now consumed with their Mediscare offensive, they still need to answer for the effects that Obamacare would have on entitlements. In addition to its detrimental impact on Americans’ freedom, Obamacare would affect our entitlement equation in two major ways: First, it would explode Medicaid spending. Second, and even more importantly, it would launch a massive new entitlement program and would loot from already barely solvent Medicare to pay for it. Progressives like to claim that Republicans want to advance their plans on the backs of seniors, but the same could be said, much more honestly, about Obamacare.   

Let’s take Medicaid first. The chief actuary for Medicare and Medicaid, who works in the Obama administration, says that, without Obamacare, there would be 61 million people on Medicaid in 2014, the same number that there are today. With Obamacare, he says there will be 84 million people on Medicaid in 2014 (see Table 2). That’s right:  Obamacare would dump 23 million people onto the rolls of Medicaid — one of the two “biggest drivers” of our debt. (You hardly hear Obama talk about it, but this is a large part of how Obamacare would decrease the number of uninsured.)   

In the process, the Congressional Budget Office (partly here, partly here) says that Obamacare would increase Medicaid spending by nearly $1 trillion over Obamacare’s real first decade (2014 to 2023). How would we pay for these nearly 13 figures of new spending? The CBO says that Obamacare would include enough new taxes and fines — levied for such transgressions as American citizens refusing to buy government approved health insurance — to raise that colossal sum. Of course, that $1 trillion or so could otherwise be used to reduce our deficits or pay down our national debt.

Meanwhile, Obamacare would launch a massive new entitlement program on top of its Medicaid expansion. How would we pay for this? Well, the CBO (partly here, partly here) says that about $1 trillion would be looted from Medicare (from 2014 to 2023) and spent on Obamacare. Moreover, Obamacare’s raid of Medicare would affect current Medicare beneficiaries. (Ryan’s proposed Medicare reforms, which would extend Medicare’s life rather than using it as a piggy bank to fund a new entitlement program, would not affect anyone currently over 55.) 

In his statement in the recently released Medicare Trustees’ Report (p. 265), the Obama administration’s Medicare chief actuary describes the future of Medicare under Obamacare (emphasis added):

Without major changes in health care delivery systems, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior [pre-Obamacare] law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance.

In other words, Obamacare would result in a level of care for Medicare beneficiaries that would become increasingly similar to the level of care currently provided to those on Medicaid. Obamacare would reduce payments to Medicare providers to levels that would cause many providers to quit seeing Medicare patients. The money saved by not paying Medicare providers anything like the going rate for medical care would be used to fund Obamacare, even while the Obama administration disingenuously maintains that each dollar raided from Medicare could be spent on both Medicare and Obamacare.

The Medicare chief actuary has previously warned that, under Obamacare, “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries). Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A [Medicare’s hospital insurance program] providers would become unprofitable within the 10-year projection period as a result....”

If this weren’t enough, President Obama has since called for further Medicare cuts to be made by the largely unchecked and clearly unconstitutional Independent Payment Advisory Board (IPAB). In fact, IPAB-imposed Medicare cuts are a centerpiece of Obama’s new budgetary “framework.” The IPAB’s dictates would have the force of law and would not be able to be overruled even with a majority vote in both houses of Congress and the president’s signature, despite the fact that that’s the lawmaking process plainly outlined in the Constitution.

In sum, President Obama has offered no serious plan to curb entitlement spending, which is one reason why the CBO says that the national debt, which has risen from $9.9 trillion when Obama was elected to $14 trillion today, would rise to $28 trillion by the end of his decade long budget. Meanwhile, his signature legislation would expand Medicaid enrollment by 35 percent in 2014, would launch a massive new entitlement program in that same year, and would raid Medicare to pay the tab — thereby lowering Medicare’s quality of care while putting the program on even worse financial footing. As much as the Democrats would prefer to change the subject, Obamacare is an entitlement disaster.  

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