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Medicare’s rosy health*

August 10, 2010

Every year, Medicare trustees deliver an impenetrable report that answers a single headline-worthy question: How soon will Medicare run out of money?

Last year, the trustees estimated that one part of Medicare would be insolvent alarmingly soon — 2017. But then came the new health care law, sold to Americans as a way to reduce costs and shore up Medicare.

The trustees released a new report last week that said — ta-da! — Medicare had 12 more years to live.

That is, the Medicare hospital trust fund would run out of money in 2029 instead of 2017. Treasury Secretary Tim Geithner declared that “the outlook for Medicare has improved substantially because of program changes” made by the new law.

But hold on. Democrats weren’t straight with Americans about the costs of health care reform before the law passed. They used a lot of accounting tricks to make it look less expensive than it really will be. And they’re still fuzzing over facts.

One gimmick: double count the savings. The Democrats crow that the new law wrings $575 billion from Medicare projected costs, via savings and tax increases, to extend the program’s solvency. But that money isn’t going directly to Medicare’s coffers. Congress is plowing it into the expansion of benefits under the new health care law.

See that asterisk in the headline above? We put that there because the trustees’ report comes with a surprise twist from Medicare’s chief actuary, Richard Foster. In a capsule, he says: Never mind.

Never mind about the rosy projections on the previous 280-plus pages. It’s fiscal fantasyland. The trustees are required by law to appraise Medicare based on certain assumptions. But they bear little resemblance to the real world in doctor’s offices and hospitals.

Those assumptions, Foster writes, “do not represent a reasonable expectation for actual program operations in either the short range … or the long range.”

For example: The report assumes that Congress will deeply slash doctors’ Medicare pay. Congress has threatened to do so, but has always backed off. That’s the infamous “doc fix.” The doctors are due for a 23 percent pay cut in December. Congress will back down, as it always does.

Scratch about $250 billion to $300 billion in “savings” over a decade.

Another example of the absurdity of these projections: Under an inflation formula imposed by the new law, Medicare payments would tumble below the abysmally low Medicaid payments by the end of the decade. They’d fall from nearly 80 percent of private insurance prices now to about 50 percent by 2050. That would squeeze many doctors, hospitals, surgical centers and other providers into oblivion.

Long before that happens, hospitals and other facilities will stop treating Medicare patients and raise costs for private patients.

We’re likely to hit another health care flashpoint before that. Missouri residents recently voted overwhelmingly against the mandate that all Americans carry health insurance or pay a penalty. Officials in 21 states are suing the federal government on grounds that the coverage mandate is unconstitutional. A federal judge recently refused to dismiss that challenge.

This page supported the mandate, though it balked at the enormous expense and false assumptions in the law.

There’s a long way to go before health care reform fully kicks in by 2014. Congress still must funnel billions to create state exchanges and fund subsidies for many Americans to buy insurance. There will be billions more for Medicaid expansion in the states.

The law won’t be repealed, but it’s looking awfully likely that it will face some big changes, and soon.

Meantime, the government could just talk straight about the future of Medicare and the rest of the health care system in this nation. Wouldn’t that be a change?