“But even with Clinton in the White House, we passed the first major entitlement reform welfare, two out of three people went to work or went to school. We reformed Medicare and saved it for more than a decade financially.” — Newt Gingrich, during the Iowa Faith and Freedom Dinner, Oct. 22, 2011
These comments suggest the Gingrich-led Congress nudged welfare recipients toward increasingly productive lives and helped rescue Medicare from certain catastrophe. They fit with the image he has tried to project during the 2012 election cycle — one of an anti-socialist, money-saving innovator who recently called himself the “candidate of paychecks” while describing Barack Obama as “the finest food stamp president.”
We researched the Medicare and welfare reforms of the 1990s to determine whether Gingrich spoke accurately about his accomplishments as Speaker of the House of Representatives.
Medicare today consists of four parts: Part A, which pays for hospital, nursing and hospice care; Part B, which helps pays for doctors, outpatient health bills and other services; Part C, which is “Medicare Advantage,” a competitive alternative to Parts A and B; and Part D, which provides prescription drug coverage. People frequently confuse these parts, but the government funds them differently.
Gingrich’s campaign did not respond to queries, but we assume the candidate’s Medicare references alluded to the Balanced Budget Act of 1997. That bill led to creation of Part C. Prescription drug benefits were not added until later.
Lawmakers designed the Balanced Budget Act to save $115 billion on Medicare over a five-year period, mostly by reducing payments to health-service providers. Subsequent legislation in 1999 and 2000 repealed some of the payment reductions, but Gingrich was out of office by then.
For what it’s worth, the reform bill also increased contribution levels for beneficiaries, created a fee-for-service option, and allowed for medical savings accounts.
The federal government has divided Medicare into two parts for funding purposes. When people suggest the program could go bankrupt, they’re really talking about one of those areas, because the other has always remains solvent.
Supplementary Medical Insurance covers prescription drug benefits, physician visits and outpatient care. The government makes annual adjustments to cover those costs, and it has never flirted with insolvency for the program.
The Medicare funding fright comes into play with Hospital Insurance, which covers just inpatient hospital visits. That part of the program draws its funds from earmarked payroll taxes, which don’t always promise to bring in enough cash to cover expenses.
We wondered what kind of shape Medicare was in when Gingrich helped push the legislation through Congress. The official Medicare Trustees Report from 1997 projected that the Hospital Insurance trust fund, which helps fund Part A of Medicare, would become insolvent within four years.
Sounds like Gingrich came to the rescue during a red alert, right? Not exactly.
Congress has grown rather accustomed to dealing with looming Medicare deficits. As the Chicago Tribune reported, every Medicare Trustee report since 1970 has projected insolvency for the Part A program, sometimes within two years, other times within a generation.
If Gingrich “saved Medicare from bankruptcy,” so did every speaker of the House for the past 41 years.
That’s not to say Medicare insolvency doesn’t pose a problem. Health-care costs are rising exponentially fast, and experts have projected that Medicare will consume about half of all federal revenue by 2050.
The biggest dilemma facing Medicare appears to be rising health-care costs, not the government’s funding formulas. When Gingrich brags about reforming the program, he’s really talking about how he helped apply a fresh band-aid to a gushing wound.
In terms of welfare reform, Gingrich is talking about the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The bill placed time limits on the amount of time recipients could collect benefits, required them to begin working within two years, created stricter conditions for food stamp eligibility, and reduced assistance for legal immigrants.
For what it’s worth, Congress restored some of the immigrant benefits in subsequent years.
U.S. Health and Human Services spokesman Kenneth Wolfe confirmed Gingrich’s claim about the number of welfare recipients who went to work or school after Clinton signed the measure. “It is true that caseloads decreased by around that percentage from the beginning of welfare reform (creation of TANF) until ticking upward in recent years,” he said.
We asked two economics experts from the Brookings Institution to explain the declines. Ron Haskins and Isabel Sawhill, co-directors for the group’s Center on Children and Families, both credited three factors: welfare reform, a booming economy, and a new “work support” system that provided benefits for workers at the lowest income levels — providing incentives for the poor to take “those crummy jobs that people always complain about,” as Haskins put it.
Overall, welfare reform helped the situation, but it had a major assist from the economy.
THE PINOCCHIO TEST
Gingrich didn’t accomplish anything exceptional in terms of dealing with the looming Medicare deficit as Speaker of the House. He just pushed through a bill that helped delay insolvency by another six years. The next Congress had to take it from there, as did the next Congress after that, and so on.
As for welfare reform, few experts disagree that the 1996 bill had positive effects, but it’s doubtful that the bill would push so many people to work and school without help from an economic explosion that created tens of millions of jobs.
Gingrich didn’t speak inaccurately about anything that happened after he pushed Medicare- and welfare-reform bills through Congress. But he did exaggerate the impact those measures had. He earns one Pinocchio.
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