Budget Office Rebuts Democratic Claims on Medicare

Bloomberg (Link) - James Rowley and Nicole Gaouette (December 23, 2009)

The Congressional Budget Office challenged claims by health-care overhaul proponents that Medicare savings in Senate legislation would help finance expanded coverage and postpone the bankruptcy of the medical program for the elderly.

The nonpartisan agency said the $246 billion it projected the legislation would save Medicare can�t both finance new programs and help pay future expenses for elderly covered under the federal program.

Nor could those savings be used to extend the solvency of Medicare, set to run out of money in 2017, the budget office said in a letter to Senate Republicans.

�What we�ve seen is a colossal manipulation� by Democrats �of the accounting scores of CBO� and the independent actuary of the Centers for Medicare and Medicaid, said Alabama Senator Jeff Sessions, the Republican who requested the analysis from CBO. He called the letter �a potential game-changer.�

The estimated Medicare savings in the legislation overstate �the improvement in the government�s fiscal position,� the CBO said in the letter.

�The true increase in the ability to pay for future Medicare benefits or other programs would be a good deal smaller,� the budget office said.

Reid Aide�s Response

A spokesman for Senate Majority Leader Harry Reid said the CBO letter doesn�t reflect on the overall health-care bill, which the Senate is set to approve tomorrow.

�Today�s letter deals explicitly with Medicare, not the overall short and long-term budgetary impact of the legislation,� Reid spokesman Jim Manley said in an e-mail.

Manley said the CBO still projects that the bill will reduce the deficit the first 10 years by $132 billion and by $650 billion to $1.3 trillion in the second decade.

At a press conference, Sessions said the CBO report shows that the legislation the Senate is poised to pass wouldn�t create �a $132 billion surplus, but would add $170 billion to the deficit.�

Sessions described the Democrats� accounting as �a $300 billion misrepresentation. That $300 billion converts a $132 billion alleged surplus, a reduction of the debt by the legislation, to a $170 billion increase in the debt,� Sessions said.

Trust Fund

The budget office said that whenever the Medicare trust fund runs a surplus, the savings are turned over to the U.S. Treasury, which issues bonds to borrow for the future needs of participants in the health-care program for the elderly. The trust fund is currently running annual deficits.

North Dakota Democrat Kent Conrad, chairman of the Senate Budget Committee, has said that the Senate legislation would postpone the Medicare trust fund�s projected 2017 insolvency by several years.

To credit such projected savings as helping to extend Medicare�s solvency �ignores the burden that would be faced by the rest of the government later in redeeming the bonds held by the trust fund� to pay for future Medicare expenses, the budget office said.

Arguments that the Medicare savings would both extend Medicare�s solvency and help finance �new spending outside of Medicare would essentially double count a large share of those savings,� the CBO said.