finds himself more than usually ignorant about a topic which interests him (hard as that is to believe).
Medicare has a budget shortfall of present value of a whole whole lotta dough. This tends to make people worry, and makes many believe that benefits will be cut by the health care reform bills. There are no such cuts in the bills on the floor of the House or Senate. However, many people who know this seem convinced by Republican hints that reform will lead to medicare cuts. The logic is that if the Federal Government accepts responsibility to guarantee health insurance to people under 65 it will have to cut medicare to remain solvent.
Now back to that shortfall. It can be recalculated assuming say the House Ways and Means committee bill passes. It seems to me that it will be much smaller. There are cuts of medicare expenditures — less extra spending for medicare advantage and lower transfers to hospitals for care of the uninsured. As far as I can tell, there are no cuts to medicare administration revenues. The spending increases for subsidies and medicaid expansion will be financed with another tax (in the bill in question a tax on high incomes).
Doesn’t that mean that the bill will cut the medicare shortfall ? I mean by something like half a trillion (update: to be clear, as in all discussions of dollars and health care reform, this refers spending over the ten years not annual spending, note comment by guest) and growing discounted with whatever the hell interest rate they use which works out to maybe a half lotta dough or a quarter lotta dough but in any case a less horrible looking shortfall and less pressure for cuts in medicare benefits.
Am I confused ? Anyone ? Bueller ? OK Bueller is playing hooky, how about Bruce ? Help me out here. I need it.
update: Grammer corrected and referent for half a trillion clarified. The actual score for the Ways and Means/education and labor bill in the House is Medicare and Medicaid savings of $465 billion over then next 10 years. Medicare savings alone (over 10 years) are therefore well under $ 500 billion. Ooops I missed the “and medicaid” part.
Note also that the estimated medicare shortfall is huge because the present value of spending is (current annual spending)/(i-g) where i is the interest rate and g is the rate of growth of nominal spending. Since plausible estimates of g are close to i that means the denominator is real small. I have no idea what g is used in the calculation of $ 465 billion over ten years or what i and g are used in the calculation of the shortfall. Hence the bleg.
update 2: I think that I will not be able to find out what fraction of money paid to hospitals to compensate for care of the uninsured comes from medicare and what fraction from medicaid. It is not a huge amount of money compared to the cost of medicare advantage. The best I can do is from the horses mouth (warning pdf)
CMS makes payments – significant payments – to hospitals which treat a large number of poor and uninsured patients. For example, the Medicare and Medicaid disproportionate share provisions paid $22 billion to hospitals last year.
Medicare funding is very complicated. Medicare does *not* rely on the Medicare payroll tax. There are huge transfers from the general fund to Medicare. Here is another pdf.