Health Care Reform Isn't Entitlement Reform

Despite administration promises, ObamaCare hasn't helped Medicare.


In February 2009, as the Obama administration was beginning to make its pitch for a major health care overhaul, then-White House budget director Peter Orszag made his closing pitch for the law at a summit in Washington: "To my fellow budget hawks in this room and in the rest of the country, let me be very clear: health care reform is entitlement reform," he said. "The path of fiscal responsibility must run directly through health care." A little more than a year later, the law that would become known as ObamaCare passed.

So how is Medicare, the nation's biggest health care entitlement, doing now? Not so well. Two years after the passage of the Patient Protection Protection and Affordable Care Act, the program's Trustees are reporting that the seniors' health program is on a glide path to insolvency—perhaps by as soon as 2016. The technocratic reforms that were supposed to remake the program aren't working nearly as well as hoped. And there are already signs that the Medicare spending reductions called for by the health care law will be delayed or undercut just as many critics warned.

Medicare's finances have been precarious for years. The program has skirted the boundaries of insolvency on multiple occasions, but never quite tipped over the cliff. Yet it has only survived on temporary patches and half measures. In the long term—and perhaps sooner—the program will eventually prove unsustainable.

This week saw the release of the latest report from the program's trustees, and the picture it paints is bleak. The program's trust fund is rapidly being depleted. By 2024, current projections indicate, the trust will be empty, and the program, relying solely on existing revenues, will be unable to pay all of its bills. In its first year of insolvency, the program will be able to finance just 87 percent of its obligations, a percentage that will decline further over time.

But even that calculation overstates the program's fiscal outlook. That's because it relies on the assumption that ObamaCare's Medicare payment reductions and other structural reforms will produce savings that shore up Medicare's trust fund. The problem, as Medicare Trustee Charles Blahous recently pointed out, is that these savings—roughly $500 billion over the next decade—are also expected to be used to finance the law's vast expansion of health insurance coverage. If that money is spent on insurance coverage, then Medicare's trust fund would hit insolvency in 2016.

As Richard Foster, Medicare's Chief Actuary, has explained, the conventions of trust fund accounting allow the federal government to collect one dollar in revenues but spend that same dollar twice. But even the government's top fiscal magicians haven't figured out how to make that work without consequences: Eventually that second dollar has to be accounted for, either with higher taxes, previously unplanned spending cuts in other areas, or additional borrowing.

All this assumes that the law's Medicare savings will actually pay off. Yet that is no sure thing either. Those projected savings are based in large part on targeted payment cuts to health industry players and providers. Those cuts, however, are already facing heavy opposition, and the White House has already backed down at least once.

On the same day that the Medicare Trustees report was released, the Government Accountability Office published a critical report on the administration's decision to override planned payment cuts to private insurers in the Medicare Advantage program—cuts that played a big part in generating ObamaCare's alleged Medicare savings. A week earlier, progressive champion and Massachusetts Senate hopeful Elizabeth backed scrapping ObamaCare's tax on medical device makers. In this sort of political environment, it is hard to see how all of ObamaCare's savings will stick.

Nor are the experimental delivery system reforms intended to weed out waste and excessive cost growth within Medicare working as hoped. ObamaCare sought to reform the system with a multitude of pilot programs designed to overhaul the nation's health care and payment structure. But according to the Congressional Budget Office, the results of many of Medicare's demonstration project are "disappointing" and "discouraging."

The same can be said for the rest of ObamaCare's effect on Medicare. The Obama administration gave us health care reform. But America's entitlement system is now more in need of real reform than ever before.

Peter Suderman ( is a senior editor at Reason magazine.

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  1. The Trustee did move the “go red” date from 2016 to 2024 and cited Obamacare as the reason for improvement.

    I am no fan of Medicare (I hate it) but the ACA cuts Medicare fat a bit.

    And IPAB would cut more. Its the only chance to slay this monster.

    1. And IPAB would cut more. Its the only chance to slay this monster.

      I’m going to try this again.

      Gabrielle Giffords.

      You are the ER physician.

      Does she live or die?

      1. Well since you are beholden to the state (obviously your being a doctor means you should work for free) and she is a member of the super awesome elite political class (at least at the time) you just have to make sure she lives.

        Screw the little girl that came in right after her.

        1. I want Shriek to specifically answer this. He’s hellbent on exterminating people who are dying or near death.

          He’s claimed he is honest. Yet the Roofie giving, daytrading failing little prick has never made such a decision on the spot, much less had to live with it.

          I want to know what Dr. Shriek would do, knowing how much money and time her medical care has cost, in addition to her 1 in 15,0000 to 17,000 chance of just surviving a point blank gunshot wound to the head.

          Man up Shriek.

          Live or die?

      2. You misunderstand IPAB. There are no ground level ER decisions with it.

        Think taking those stupid Medicare scooters out of funding – or penis pumps, or MRIs for terminally ill patients, etc.

        I know – its a bureau, the whole damn program is.

        1. You misunderstand IPAB. There are no ground level ER decisions with it.

          No, Shriek. Patients on CMS are entitled to go to the ER as well, even when in hospice if they so choose, if able to make that decision.

          IPAB is not limited to just direct care, imbecile.

          And answer the question.

          1. I would limit PUBLIC services to the terminally ill – you got me.

            Ron Paul famously said in a debate public services should not be extended to slightly ill young people. I don’t go that far.

            Paul would deprive public services to a 20 yr old who required a simple appendectomy. I would not, I admit.

            But I would not pay for Dickless Cheney’s heart transplant with tax dollars either. Fuck that murdering scumbag.

            1. But I would not pay for Dickless Cheney’s heart transplant with tax dollars either.

              I didn’t ask about Cheney (assuming that he paid OOP. I find the likelihood of his claim being approved remote, but I digress). But GG is on taxpayer money as well.

              So, based on that logic, you would indeed deprived GG of lifesaving medical care?

              Yes or no. And then I will leave you alone.

              1. GG was not terminally ill even if your odds against her survival are correct.

                A young healthy person with a brain injury is worth a modest investment.

                I know this is all statist but the whole damn system distorts investment dollars because it is fucked up. A 90 yr-old should not get unlimited tax dollars while a 20 yr-old gets the finger from Ron Paul.

                1. GG was not terminally ill even if your odds against her survival are correct.

                  Cheney had approx a 1 in 250 chance of surviving his transplant surgery and is by all accounts doing remarkably well. I did the math myself (Bayes’ Theorem, FTW) and I guarantee you it cost less than Gifford’s surgery and subequent years of therapy. She might even need a scooter.

                  Giffords is 41 years old, not 20. Again, 1 in 15,000 (I’ll be generous).

                  Now, once again, on an IPAB cost budget analysis, you are the ER physician. This is a specific patient, a real person, not some hypothetical “young person.”

                  Live or die?

                  1. Also:

                    shrike|4.13.12 @ 4:01PM|#

                    I support death panels for the dying and near dead.

                    I am honest.

                    Gabby Giffords more than qualified for dying and/or near dead.

                    Your words.

                    Live or die?

                    1. So you support statist health care. I share some of that impulse.

                      I would pull the plug on GG after several hours of attempted triage.

                      I guess I am more Libertarian than you are (although I fail the purity test like 99% do).

                    2. Thank you for answering the question. Just that little exercise is what we doctors deal with everyday.

                      Not so easy, is it?

                    3. No, it wasn’t. You win points.

                      I also support the docs who pulled the plug during Katrina due to power outage.

                      Yeah – you guys get extra leeway with me.

                    4. Yeah – you guys get extra leeway with me.

                      I believe I have now earned your respect. Thank you for the conversation.

                      My views on free market medicine are pretty well known. What I also believe is that the larded up CMS (Including Medicaid. ESPECIALLY MEDICAID) system must be transitioned to a free market medical delivery model. What needs to happen is a transition between the two must be salable and practical, and with the populous believing (erroneously) that medical care is a “right”, will serve to hamper the necessary changes that need to be made. Otherwise, the system will implode.

                    5. OK, you coerced an agreement out of me. Fine, you won it fair.

                      I am offended by a system that spends 1/3 of all medical costs on those who have less than a year to live.

                      That is the status quo. You know it too.

                    6. This isn’t about winning, Shrike. I want to fix the system so I don’t have to run from it and go be a medical mercenary in UKR. The status quo stinks, that is not in question.

                      I am offended by a system that spends 1/3 of all medical costs on those who have less than a year to live.

                      Understandable and I am sympathetic to that view. The point of my exercise, which I respect your participation BTW, is that is very difficult to make those decisions and those decision should be left up to family, physicians, and the patient, if possible. Not Kathleen Sebelius and an IPAB.

                    7. Ok, yes, you have the cred.

                      I was looking for a cost cutting mechanism.

                      Although you win on the doc side you have offered nothing on the taxpayer side.

                    8. Although you win on the doc side you have offered nothing on the taxpayer side.

                      This conversation cannot, and I believe this with every fibre of my being, happen until the populous decides, once and for all, if medical care is a “right”. And I would prefer a Constitutional amendment stating this if that is the will of the people.

                      Cost cutting happens when people are responsible for their own care and payment of medical care, and this happens on the State level with the abolishment of insurance mandates for procedural care. Ryan’s plan is somewhat in the right direction, but I don’t like the cost shifting aspect, which is almost as bad as ObamneyCare.

                    9. I am glad you said “right” to medical care instead of right to medical care. Government can say anything it wants about your “rights” – see the Universal Declaration of Human Rights – but you simply do not have a right to anything someone else has to supply. If someone else has an obligation to supply what is your right, that person is not a free man.

                      Unfortunately, our government has told the Baby Boomers they have a right to Social Security and Medicare and now we are finding out somebody has the obligation to provide that right. The young and the healthy I don’t think have thought through the implications of Obamacare. We are only seeing the tip of the iceberg so far on where costs are headed and once the kids have been bled dry for grandpa’s hip replacement so he can still enjoy his daily stroll on the beach, where is the money coming from to pay for junior’s brain transplant so he can continue to enjoy his condo on Phobos?

                      There simply isn’t enough money in the world to guarantee everybody an above-average existence when their desires are treated as needs. Government can give you the “right” to medical care, but it cannot give you the right to medical care.

                      And Grievous, what sort of secret plan do you have to run off to the Ukraine and become a medical mercenary? You must know that as the system implodes, you are not going to be free to leave the US any more than you are going to be free to leave the healthcare profession.

                    10. shrike|4.25.12 @ 7:14PM|#
                      “OK, you coerced an agreement out of me.”
                      Hey, dipshit, learn what “coercion” means before you make as ass of yourself again.

                    11. How would you feel if the 1/3 had private insurance instead of Medicare/Medicaid? Would they not have paid for that luxury, if only to live for a year?

                    12. You fail the libertarian test because you continually stick up for Obama dude.

                    13. I know I fail the LP purity test. 90% is not good enough.

                      Fine with me. Hayek too. Soros and Ayn Rand too.

                    14. You seriously think Soros would even consider calling himself a libertarian? That is fucking funny.

                      And you missed the point. If you were on here 5 years ago defending Bush the way you do Obama you wouldn’t have passed the sniff test then either.

              2. I’m guessing you won’t hear back from Shreek until another thread is fully underway!

                Maximus for the win!

                1. Oh and like that I stand corrected.

                  D’oh! Way to hang in Shreek.

                  1. I will not back off to a direct challenge.

                    In this case GM is a physician where I am not – so has a great advantage. I still won’t back down.

    2. I am no fan of Medicare (I hate it) but the ACA cuts Medicare fat a bit.

      And IPAB would cut more

      Ha! Good one.

  2. Foster’s statement at the end of the report is pretty damning. But he’s been saying the same thing for years.

    “For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).”

  3. As a new American who grew up in a country that has government imposed health care, please read this

  4. Please read my blog post on what happens to countries with government intervention in health care…

  5. After the recent incident people think the only place an American in USA can be guaranteed appropriate medical care (at the top of the list/front of the line) is in prison but good alernative for now is “Penny Health” check it out

  6. OK wow, lets get on down with it man.

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