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Wednesday, November 17, 2010

Restoring Obamacare's Medicare Cuts

I was thinking of writing this but Ron Bachman of PricewaterhouseCoopers beat me to it.  Mr. Bachman advocates restoring Obamacare's cuts to Medicare by taking the money from the state-based exchanges, which come online in 2014.

It's a great idea.Although the exchanges don’t start running until 2014, it is critical that those who would profit from them (health-IT vendors and consultants, dominant insurers, etc.) do not invest business-development resources in them. Unfortunately, this is already happening.
Starving the future exchanges of money as soon as possible will prevent these interests from combining to defend them and making repeal more difficult.

I was a little dismayed to read Mr. Bachman’s statement that “Medicare beneficiaries paid for Medicare during their entire working life. They paid for the coverage with Medicare taxes and continue to pay with Medicare premiums. Why should they now be singled out to bear the cost of health reform?”

Not that I think that there’s anything that politicians can do about seniors’ belief that they paid for their Medicare, but it is not true.

Medicare beneficiaries’ payroll taxes go right out the door immediately to pay for people who are already consuming Medicare benefits. Until recently, more money went in than out. The government called this positive cashflow an addition to a fantastical “trust fund” but that was nonsense: It was immediately spent on other government operations (through buying Treasury debt).

Premiums for Part B cover only one quarter of the cost of physicians’ services; and the premiums for Part D cover only about one eighth of the cost of prescriptions. The taxpayer pays the rest, as I discussed in a 2008 Health Policy Prescription.

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