Obama's Iffy Numbers On McCain Health Plan

Wednesday, October 22, 2008

"How would your golden years turn out under John McCain? His health-care plan would cut Medicare by $800 billion. That means a 22 percent cut in benefits. Higher premiums and co-pays. More expensive prescription drugs. Nursing home care could suffer. . . . After a lifetime of work, seniors' health care shouldn't be a gamble. John McCain's plan? It's not the change we need."

-- Obama campaign's "Your Golden Years" ad

Barack Obama has been telling seniors that their hard-won Medicare benefits are at risk if his rival wins the election. The message has been hammered home in a series of speeches and television ads, including the one shown above, set against a backdrop of spinning lottery balls. Is it true, as the Democratic senator asserts, that his Republican opponent is planning to "gamble" with Medicare benefits?


The Obama claim rests primarily on a Wall Street Journal interview with McCain's top economic adviser, Douglas Holtz-Eakin, that was published Oct. 6. Holtz-Eakin told the Journal that McCain would pay for his health plan "in part" by looking for "savings" in Medicare and Medicaid. He was vague about where the savings would come from, other than talking about the need to cut fraud and waste in the programs.

"It's about giving [Medicare and Medicaid recipients] the benefit package that has been promised to them by law at lower cost," Holtz-Eakin told the newspaper.

In other words, contrary to the claim in the Obama ad, the McCain campaign was specifically promising not to "cut benefits" but to provide the promised benefits at a lower cost. The Obama ad misleadingly cites the Wall Street Journal interview as the source for the alarming "22 percent cut in benefits."

How did the Obama campaign come up with the claim of an $800 billion cut in Medicare (described in another Obama ad as an $882 billion cut)? Answer: some back-of-the-envelope calculations by a liberal think tank, the Center for American Progress.

The think tank bases its findings on the assumption that McCain will need to save around $1.3 trillion over 10 years to pay for his health-care plan. (This is based on an analysis by the independent Tax Policy Center that has not been challenged by the McCain campaign.) The senator from Arizona has promised to give Americans a $2,500 refundable tax credit to be spent on health care in exchange for taxing the health benefits they receive from their employers.

It may be that McCain is wildly optimistic in believing that he can find sufficient savings in Medicare and Medicaid to pay for his promised refundable health-care tax credit. But such a criticism also applies to Obama, who is relying on similar cost cuts to fund his health-care plan. The senator from Illinois says that a shift to electronic health records will generate savings of around $120 billion a year, a claim termed "wishful thinking" by many independent experts.


John McCain has not provided a convincing explanation for how he will fund his health-care plan. But it is a huge stretch for the Obama campaign to argue that the McCain plan will inevitably result in an $800 billion (or $880 billion) cut in Medicare programs over 10 years, or a "22 percent cut" in benefits paid to American seniors. McCain's top economic adviser has specifically promised not to cut benefits.

THREE PINOCCHIOS: Significant factual errors.

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