Medicare trustees: Repealing Obamacare cuts would hasten insolvency

August 16, 2012

Republican presidential candidate Mitt Romney has pledged to repeal the Affordable Care Act's $716 billion in Medicare cuts, returning those funds to the trust fund.

"I'm going to restore that $716 billion to the Medicare trust fund so that current seniors can know that trust fund is not being raided and get Medicare on track to be solvent on a long term basis," he told "CBS This Morning" on Wednesday.

It makes for a great talking point. But if you walk through how the spending cuts actually work, as Ricardo Alonso-Zalidvar did this morning, it's not exactly clear this would move the program toward solvency at all. It could actually make Medicare insolvent a whole lot faster.

A bit of background here:  Obama's Affordable Care Act Medicare cuts reduce how much the program pays hospitals, private insurers and other providers. The $716 billion in savings helped free up funds to pay for other health programs, like the expansion of insurance to 32 million Americans.

That was the primary purpose, at least. There was also a really important side effect: The health care law extended the solvency of Medicare's Trust Fund. If the program pays hospitals less, each dollar stretches a little bit further. Earlier this year, the independent Medicare Board of Trustees estimated that with these cuts the trust fund would remain solvent through 2024.

Without those cuts, however, the budget gets a little tighter. Medicare keeps paying providers at the same rates it does now, but each dollar buys less. And that means, according to these trustees, that the trust fund would no longer be able to cover Medicare's costs as soon as 2016.

"Simply undoing the cuts would restore higher payments to those service providers," Alonso-Zalidvar writes. "And that would cause Medicare to spend money faster."

It's worth pointing out that this wouldn't be exactly the same thing as Medicare going "broke" - Congress could always allocate additional funds to cover the program. They have pretty reliably done so when previous trustee reports suggested that insolvency might be near.

What it does tell us is this: Medicare would have more trouble covering its bills without the Affordable Care Act's cuts than with them.

 

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