The Unintended Consequences of Obamacare on the Future of Medicare

On the campaign trail, both Democrats and Republicans are pointing angry fingers claiming that the opposition party’s plan will end Medicare as we know it.  There can be no doubt that both parties are correct.

While I’m nowhere near convinced that the GOP has a completely workable plan, I’m even more fearful of what I predict will happen under President Obama’s Affordable Care Act (ACA).  A new working paper from American Action Forum scholars Michael Ramlet and Robert Book clearly shows how the $700 billion in cuts mandated by the ACA are both real and damaging.



The Ramlet-Book study is based on the July, 2012 Congressional Budget Office report.  It shows cuts to each state based on shares of Medicare spending and Medicare Advantage enrollment.

The cuts hit payment rates to Medicare fee-for-service providers the hardest, to the tune of $415 billion. Payments to  Medicare Advantage plans and hospitals pick up another massive chunk ($156 billion and $31 billion, respectively). Dozens of small ACA cuts trim Medicare spending by an additional $114 billion. All told, the ACA whacks nearly three-quarters of $1 trillion from Medicare spending between 2013 and 2022.

That’s a ton of taxpayer money, but what does it really mean to Medicare beneficiaries?

Democrats make the claim that the ACA does not rob Medicare, because it does not cut benefits. While technically true, Democrats fail to explain that fewer and fewer health care providers will offer services at the new ACA mandated rates.  This is an unintended consequence of devastating proportion to many seniors.

When cuts to health care providers near or dip below what it actually costs to deliver the services, they  stop offering services to Medicare patients. Put bluntly, seniors will be offered fewer benefits because fewer providers will offer them services.  When seniors go to a provider that does not accept the government approved rate, the senior pays the difference.  In essence, the ACA cuts shift billions in “excess charges” to seniors.

Regardless of which political party you align yourself with, it’s difficult to deny how the ACA’s cuts to Medicare can be anything but a bad thing for seniors.  So, you have to ask, why would the president make the cuts he did?  It boils down to political party accounting.

By claiming they did not cut Medicare, the Democrats get an IOU, of sorts, from the U.S. Treasury.  The reality is that the money is being spent on subsidies to fund private health insurance on state exchanges. Sounds like a good idea until you realize we’re simply moving the burden from one demographic to another.

According to the Center for Medicare and Medicaid Services, the total bill for the state health exchanges is likely to exceed $800 billion by 2021. That means the cuts to Medicare fall short of actually funding ACA and will not extend Medicare’s solvency.

Like your presidential candidate for whatever reasons suit you, but go into this election understanding the reality. The Affordable Care Act might very well be what this country needs to provide health care to those who have none, but it will do so on the backs of America’s seniors.