Both the Centers for Medicare and Medicaid Services and the Congressional Budget Office have said that the Obama administration cannot claim that the Medicare cuts they are enacting will simultaneously finance the new health care law, which is supposed to cover 30 million uninsured, and extend the solvency of the existing Medicare program.
But that hasn’t stopped the administration from continuing to make both claims anyway. And when I asked about this on a Monday conference call held to tout Medicare savings, Health and Human Services Secretary Kathleen Sebelius dismissed the conclusion of the CMS actuary, and falsely claimed that the CBO had taken a different view.
In her opening remarks, Sebelius promoted a new report that said the changes made to Medicare would save $8 billion over the next two years, and $575 billion over 10. The report also says that, “Implementing these changes extends the life of the Medicare Trust Fund by 12 years from 2017 to 2029, more than doubling the time before the exhaustion of the Trust Fund.” (See PDF of report at the bottom of this post.)
During the question and answer session, I asked how the administration could claim the same money could be used to pay for two different things. At first, Jonathan Blum, the director of the Center for Medicare Management for CMS, sought to answer the question.
“I think it’s been a consistent budget convention to use Medicare, which as you know is a pay as you go program, that is all paid with a unified budget,” Blum explained. “And when you have few outlays in place of the Medicare trust fund that it both extends the life of the trust fund, because you’re paying less in benefits, but it also produces surplus to the overall federal budget. This is a convention that was used back in 1997, when the Republican Congress passed the balanced budget act…”
At that point, I interjected and quoted a passage, taken directly from an April report by CMS, where Blum works. It read:
“In practice the improved (Medicare hospital insurance) financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.”
In response to my reading this, Blum said, “Yeah, I think it’s been a historical, and longstanding budget convention that when you have less dollars paid to the Medicare program to pay for benefits, there are dollars that accrue to the overall federal treasury, that can be spent for other purposes. And this is an OMB, CBO budget convention…”
I then followed up by asking: “It’s a budget convention, but in reality, the $575 billion can’t be used to extend the trust fund for 12 years and simultaneously used to finance coverage for 30 million people. Is that correct?”
At this point, Sebelius jumped in to say I was wrong.
“Actually, that is not correct,” she said. “There are two different operating methods of looking at this, and the CMS actuary in the report that you cite differs in his strategic opinion from every accounting methodology that’s used for every other program in the federal budget, that has traditionally used for Medicare. And he has a different interpretation that is not agreed upon by either the Congressional Budget Office or the OMB or traditionally in Congress.”
Set aside the irony that in a conference call held to highlight CMS estimates on Medicare, Sebelius was questioning CMS methodology. Her statement that the CBO had taken a different view on this is demonstrably false. On several occasions, the CBO has determined that you can’t double-count Medicare savings.
In a March letter to Paul Ryan, the CBO wrote that a majority of the Medicare savings from the health care law “would be used to pay for other spending and therefore would not enhance the ability of the government to pay for future Medicare benefits.”
Last December, in a letter to Sen. Jeff Sessions, the CBO explained this in further detail. That letter concluded that: “To describe the full amount of (Medicare hospital insurance) trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.”
The moderator on the conference call cut me off so they could move to the next question before I was able to follow-up by asking Sebelius about these CBO conclusions.