What do a public trustee of the Social Security and Medicare programs and a former associate director at the White House Office of Management and Budget have to say about President Obama’s health law? They claim he’s double counting savings by spending the same money twice.
A recent story in the Wall Street Journal by Charles Blahous and James Capretta explains how the ObamaCare plan is double counting Medicare savings.
Here’s how it works. When Congress considers legislation that alters taxes or spending related to Medicare’s Hospital Insurance Trust Fund, the changes are recorded not just on the Hospital Insurance Trust Fund’s books, but also on Congress’s “pay-as-you-go” scorecard.
The “paygo” requirement is supposed to force lawmakers to find “offsets” for new tax cuts or entitlement spending, and thus protect against adding to future federal budget deficits…
But the same provisions add to the Hospital Insurance Trust Fund’s reserves, which expands Medicare’s spending authority. Medicare can only pay full benefits so long as its trust fund has sufficient reserves to meet these obligations. If the trust fund has insufficient resources, then spending must be cut automatically to ensure the fund does not go into deficit…
In short, the scoring convention is not widely understood and thus obscures the double-counting.
Confused? I was. The authors help with this simple comparison to Social Security:
Perhaps the easiest way to understand this is to look at Social Security. If we generate $1 in savings within that program, then that’s $1 that Social Security can spend later. If we also claimed this same $1 to finance a new spending program, we would clearly be adding to the total federal deficit. … Congress’s paygo rules prohibit using Social Security savings as an offset to pay for unrelated federal spending.
No such prohibition exists in the budget process against committing Medicare savings simultaneously to Medicare and to pay for a new federal program. It’s this budget loophole, unique to Medicare, that gives the health law’s spending constraints and payroll tax hikes the appearance of reducing federal deficits. … If you have only $1 of income and are obliged to pay a dollar each to two different recipients, then you will have to borrow another $1. This is effectively what the health law does. It authorizes far more in spending than it creates in savings.
Defenders of the law are quick to point out that the double counting is simply maintaining the same accounting convention as the previous administration. That may be so, but it does not make it right. The American people deserve straight answers and real solutions.