Medicare trustee says health reform law will add to debt

The former Bush adviser argues for repealing health care subsidies before millions of Americans begin to use insurance exchanges in 2014.

By Charles Fiegl amednews staff — Posted April 20, 2012

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

A Medicare trustee who was an economic adviser in the George W. Bush administration has warned that the health system reform law could add between $340 billion and $530 billion in federal deficits during the next decade.

The fiscal impact of the reform law that will expand insurance coverage to tens of millions of Americans has not been understood completely, said Charles Blahous, PhD, in a research paper published by the Mercatus Center at George Mason University, a think tank that promotes free-market policy ideas. Overall, federal spending will increase by more than $1.1 trillion from 2012-21 because of the law enacted in 2010.

“Relative to prior law, the [reform law] would increase an already unsustainable federal commitment to health care spending, exacerbate projected federal deficits and thus considerably worsen the federal fiscal outlook,” said Blahous, a senior fellow at the Mercatus Center.

Previous analyses of the law had predicted that health reforms would extend the solvency of the Medicare program. For instance, after the law’s enactment, the hospital trust fund was projected to cover Part A benefits until 2029, which was 12 years longer than an estimate in 2009. In 2011, the solvency of the trust fund was revised back to 2024.

But the law relies on those savings to pay for its other provisions, such as providing subsidies to low-income individuals to pay for health coverage on insurance exchanges, Blahous said. Exchange subsidies will cost $777 billion during the next 10 years, according to the Congressional Budget Office.

The law also applies a 3.8% tax on investments for individuals with incomes more than $200,000 and couples with incomes over $250,000. But the tax is not indexed to inflation and would include more Americans over time. Congress probably would not allow the number of taxpayers affected by the new tax to grow, and the government would collect less revenue as a result, Blahous said.

To improve the nation’s fiscal outlook, he recommended that Congress eliminate two-thirds of the exchange subsidies before the benefit begins in 2014.

The “double-counting” argument used to discredit reform law savings is not new, said Paul Van de Water, PhD, a senior fellow at the Center on Budget and Policy Priorities, a liberal think tank in Washington. The fiscal projections for the federal budget and the Medicare trust funds are different. Some health reforms in the law improve the budget but not the trust fund, while other provisions improve both. In the end, government actuaries have concluded that federal deficits would be reduced, and the solvency of the Medicare program would be extended, he said.

“That’s no different than when a baseball player hits a home run — it adds to his team’s score and also improves his batting average,” Van de Water said. “Neither situation involves double-counting.”

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn