MEDICARE MUDDLE: How it got this far!


Culmination—What Obama said: “How did it get this far?” as Don Corleone once said.

How did it reach the point where the Republican nominee for president was repeatedly making this bogus statement, with very little pushback from the mainstream press corps or from the liberal world:
ROMNEY (8/14/12): Do you know that if the president is re-elected, he will succeed in raiding $716 billion from Medicare, from the trust fund you have been paying into all your lives—$716 billion to pay for Obamacare? He is taking your money to finance his risky and unproven takeover of the health care system.
Romney said it again and again and again. The mainstream press corps let it go. We liberals stared into air or offered jumbled corrections.

Guess what, dumb-asses? Obama isn’t taking any money out of the Medicare trust fund! For that reason, he plainly can’t be using that money “to pay for Obamacare.”

He isn’t taking seniors’ Medicare money to finance his risky takeover. Sorry—that just isn’t happening.

How did it reach the point where the Republican nominee can make such baldly inaccurate statements, over and over again? More strikingly, how did it reach the point where GOP ads could be taken, almost word for word, from the work of our own top liberals?
Current Republican ad: Obama has cut $716 billion from Medicare…to pay for Obamacare.
Sarah Kliff, WonkBlog (8/14/12): McDonough looked at all the various Medicare cuts Democrats made to pay for the Affordable Care Act.
How did it reach the point where well-placed liberals sound so much like Republican disinformation specialists? How did it reach the point where Paul Krugman could link to that WonkBlog post—not to warn us against its dangerous language, but to say we should read it?

We promise—they’re laughing hard about our incompetence inside the Romney camp. How did it reach the point when the GOP can take our own language, almost word-for-word, and use it to broadcast a “lie?”

You’re asking very good questions! The whole thing started with a statement by Barack Obama—with a statement which was perfectly accurate, but perhaps a tiny bit misleading in certain ways.

The Affordable Care Act passed the Congress on March 22, 2010. The next day, Obama signed the bill in the East Room and made a statement.

Under his breath, Joe Biden called it a big freaking deal. In part, Obama said this:
OBAMA (3/23/12): This legislation will also lower costs for families and for businesses and for the federal government, reducing our deficit by over $1 trillion in the next two decades. It is paid for. It is fiscally responsible. And it will help lift a decades-long drag on our economy. That's part of what all of you together worked on and made happen.
The bill was paid for, Obama said; the bill would reduce our deficit. Those statements were perfectly accurate—but they help explain how we got to the place where Romney is making flagrant misstatements about Medicare theft as the band plays on.

Is the health law “paid for?” Within two years, Obama’s statement had been corrupted to the point where Kliff was saying that Obama included “various Medicare pay for” the bill.

In an ad, the Romney campaign was saying the same darn thing—and Ed Schultz called it a “lie.”

How did we reach this remarkable place? Consider what Obama meant when he said the bill was paid for—when he said it would reduce our deficit.

Obama was talking about basic federal book-keeping. Restricting ourselves to a ten-year span, here’s what Obama meant:

The Affordable Care Act includes a wide range of provisions. Some of those provisions will reduce (projected) federal spending over the next ten years. Some of the provisions introduce new federal spending.

Some of the provisions introduce new federal taxes.

As is conventional, budget authorities totaled all these changes in projected spending and revenue over the next ten years. On balance, the new revenue and the reductions in spending slightly outweighed the new spending over that ten-year period.

In that sense, the bill would have a slightly positive effect on federal deficits over that ten-year period.

As Obama said, the bill was projected to “reduce our deficits” over those next ten years. This brings us to the matter of the reduction in future Medicare spending:

In one part of the health care law, Obama made changes in Medicare spending. In the upcoming ten-year period, Medicare would spend less money that had previously been projected—$716 billion less.

That was one of the spending reductions in the health care bill. There was also a lot of new spending in the bill—in particular, the spending which would allow the federal government to help insure thirty million new people.

As a book-keeping matter, the spending reductions in Medicare helped balance out the new spending. But that didn’t mean that Medicare submissions would be used to pay for the new health coverage.

In fact, the Medicare money was all going to stay in the Medicare trust fund. All that money would be spent on Medicare services, just as would have occurred in the absence of the new law. But due to Obama’s spending reductions, the money would now be spent after the ten-year period under review.

The government would be spending less money on Medicare during that ten-year period than had previously been projected. But none of that money would be used to pay for those 30 million new recipients of health coverage.

As an exercise in book-keeping, the reduction in Medicare spending helped balance out the increase in spending found elsewhere in the bill. But this was just a book-keeping measure. None of that $716 billion was being removed from the Medicare program, from the Medicare trust fund.

That wasn't what was changing. This was the actual difference:

Because Medicare spending was being slowed, that money would be spent in the second decade after the bill’s passage, rather than in the first.

Is this hard to explain? In our country, yes—it is! When it comes to matters like these, we are quite a bit like the Walpiri, who don’t have the language, habits or skills which let them count past two.

We’re hopeless incompetents in these areas. So are the Walpiri, when they’re asked to count fingers and toes.

The Walpiri can’t count their fingers and toes. We can’t discuss federal budgets. We don’t even know how to start.

It’s very easy to get us confused about matters like this. For that reason, it’s easy for disinformation machines to lie in our faces—and they’ve been doing so for at least the past four decades. In some cases, all they have to do is repurpose our own misleading constructions.

To some extent, that’s what has occurred in the current case.

We liberals were happy to hear that the health legislation was “paid for.” In all honesty, we sometimes sounded like primitive people; we sometimes made it sound like Obama had found a magical way to extend health coverage to 30 million new people, without any cost. Whatever! As the months turned into years, we liberals got increasingly lazy in our proclamations—in our descriptions of the way the health law is “paid for.” Before long, our brightest liberals were saying things like this:

McDonough looked at all the various Medicare cuts Democrats made to pay for the Affordable Care Act.

Gack! That was a very careless construction. Inevitably, it made it sound like Obama took money from the Medicare program, then used that money to buy health coverage for 30 million new people.

That isn’t what happened. But it’s a very short walk from our own words to that ad’s Medicare “lie.”

Sometimes, presidents do reduce spending within some program, transferring that money to some other use. Sometimes presidents eliminate entire programs, using the money elsewhere.

Sometimes, presidents do such things. That isn’t what happened here.

We know, we know—it’s confusing! Somewhat similarly, the Walpiri find it confusing when they have to keep track of more than two spears.

In matters like these, we modern Americans are very dumb and very unpracticed. We liberals have made ourselves this way through decades of intellectual sloth.

Right-wing think tanks have lied about similar topics for decades. As they’ve done so, the liberal world has peacefully slept in the woods:
Standard disinformation concerning Social Security:
The money isn’t there—we’ve already spent it!
The trust fund is just a pile of worthless IOUs!
It’s like the right hand giving money to the left hand!
The program will soon be “bankrupt!”
For decades, disinformation machines have worked quite hard to confuse the public about such matters. In response, your liberal intellectual leaders have slept in the woods and stared into air—to a man, to a woman.

Go ahead! Name the liberal intellectual leader who has made the slightest attempt to address the reams of disinformation which have been used to confuse an entire nation. Name the individual person. Name the liberal journal.

There are no names you can offer. Our tribe is slothful, intellectually lazy.

Our tribe is very dumb.

Our leaders are feckless, uncaring—useless. Consider what Howard Dean said on the Ed Show this Monday night. To watch the whole segment, click this:
SCHULTZ (8/27/12): Let’s turn to Howard Dean, former governor of Vermont and former chairman of the DNC. Governor Dean, good to have you with us tonight.

DEAN: Hi, Ed, how are you?

SCHULTZ: I’m doing fine. Sometimes polls grab people. This one has grabbed me because of the lies that have been put out there about Medicare and it's absolutely hard to believe that we’re so, Americans can be disconnected from this issue.

What has Mitt Romney done to give the American people confidence that he’s going to be a better steward of the program, Medicare, which has served the country’s seniors for generations?

DEAN: My own guess is— These are lies. The 700 and whatever it is million dollars comes out of the insurance companies’ pockets. And in fact, Romney’s plan actually makes Medicare go broke by 2016. So, you know, it is a fat lie.
Ignore the fact that Dean said “million,” not billion. Major pundits and major pols make that slip all the time. (It’s a weakness of our number system that those numbers rhyme.)

Ignore that verbal slip. Are you impressed by the fact that Dean didn’t know how many billions we’re talking about? If you’ve been reading the posts at this site, you know the actual figure, as Schultz plainly did.

The figure is $716 billion. Howard Dean didn’t seem to know that.

Your lizard brain is going to tell you that this tiny point doesn’t matter. Our lizard brain had a different reaction. This is what our lizard says:

Howard Dean spent fifteen seconds preparing for this spot. As he continued, you can see the price we liberals pay for accepting these miserable slackers:
DEAN (continuing directly): There’s two problems. The first is that these enormous corporations, the business community, has funded these lies, to hundreds of millions of dollars go behind this stuff. If you repeat it often enough, people believe it. It’s sort of the old Russian propaganda stuff. It’s exactly the same technique.

The second problem is this age group was not disposed to like Obama in the first place. This is the hardest age group for President Obama. I think a lot of it has to do with their age, to do with the enormous change, the first African-American president, a new generation. And they’re just resistant to change and frightened.

So, I think it is a sleazy tactic by the Romney people, but it’s not surprising. Politics is a tough game, but there’s so much money behind these lies, that’s what’s making them effective, and they’re told to a population that didn’t like Obama much to begin with in the first place.

Dean played the Russian "Big Lie" card, as he did in more detail in his previous visit with Ed. And he told us that seniors believe these “lies” because Obama’s black.

That always makes us liberals feel happy. But ask yourself this: Did this horrible slacker ever explain what these “lies” consist in? If a senior citizen was watching this show, did she hear Dean explain what’s wrong with the “lies” Romney is telling?

To a very tiny extent, yes, she possibly did. Mostly, she heard herself insulted by an upper-class pundit who didn’t even seem to know how much money is involved here.

We’ve relied on slackers like Dean forever. This is where that has led:
Republican ad: Obama has cut $716 billion from pay for Obamacare.
Sarah Kliff: McDonough looked at all the various Medicare cuts Democrats made to pay for the Affordable Care Act.
Your lizard brain is screaming now. It’s insisting that Dean is On Our Side.

Your lizard brain is easy to play. Over in the Romney camp, the disinformation machine is laughing at us very hard.

Tomorrow: Unheard of within our failing culture! Actual Medicare information, courtesy of


  1. The complaint about supposed Medicare lies are quibbles. ObamaCare did reduce Medicare benefits by $716 billion. This amount of money will somehow be taken from Medicare and put into ObamaCare. Now, perhaps this transfer won't be via the Medicare Trust Fund, but in some other parts of the federal budget. And, of course, the money wasn't literally stolen. Barack Obama didn't take the money out of Medicare at the point of a gun.

    However, IMHO these quibbles are trivial compared to the dishonesty in the costing of ObamaCare. That costing was done, as Bob mentioned, with a mismatch of years of income and years of outgo. It was based on unrealistic cost figures, because the "doc fix" was separated out. In some tricky sense, Obama wasn't lying. However, in a real economic sense, he was dreadfully misleading us.

    That's why the chief actuary of the Centers for Medicare and Medicaid Services (CMS), found that President Barack Obama's new healthcare reform law would cost $828 billion over the next decade while saving $577 billion.

    P.S. the original actuarial projections for Medicare were off by a factor of ten. That is, Medicare's costs have been ten times as large as had been projected. I'm worried that the actual costs of ObamaCare will also turn out to be a lot higher than the official projections by the Centers for Medicare and Medicaid Services. A few years from now, if the US looks like Greece does today, it won't be any consolation that certain formal, but unrealistic, calculations said that wouldn't happen.

  2. Some people will never learn.

    For instance, a letter writer in today's Arizona Republic claimed that taxes shouldn't be raised to cover Social Security.
    All the "government" needs to do to "fix" Social Security is to return the money it has "stolen" over the years.

    Some people have no clue how the federal debt got so far out of hand.

    Most of them will never learn, either, because their ideology won't permit them to accept facts.

    When Bill Clinton was President, the baby boomers wheer in their peak earning, (and tax-paying years.)

    Now, they are withdrawing what they put into Social Security and Medicare all their careers.

    That's whats wrong with the budget today.

    When we had a surplus, Republicans said "Deficits don't matter, Reagan proved that!"

    So instead of implementing a plan to keep the safety net going, we slashed revenues, borrowed money and spent like drunken sailors.

    Greece, for instance, didn't cut taxes. They were never able to collect them in the first place. But taxes not collected, for whatever reason, force governments to borrow to pay current bills.

    The US basically acted like someone borrowing $1,000,000, putting it in a bank and declaring, "I'm a millionaire!"

    1. I pretty much agree with you, gm. I'd suggest one amendment. You say, the baby boomers are withdrawing what they put into Social Security and Medicare all their careers. That's true, from the baby boomers' POV. However, from the government's POV, almost all of the money that the baby boomers put into SS and Medicare was used to pay benefits to the baby boomers' parents. Retirees can't withdraw the money they put in, because that money is gone.

      P.S. The Republicans' focus on the "Trust Fund" is misplaced. SS and Medicare are essentially Pay as you go programs. The trust funds are tiny, in comparison to the true actuarial liabilities of these plans.

    2. Wrong, David. The "Trust Fund" was created in the Reagan Adminstration to provide a surplus into Social Security while Baby Boomers were in their peak earning years in order to draw down on it as they retire.

      So in effect, Baby Boomers were BOTH paying for their parents' Social Security as well as their own.

      As for the trust funds being "tiny, in comparison to the true actuarial liabilities of these plans" there is no way you can redefine "tiny" to spin it to describe the Trust Fund, and to attempt that you try to compare it to "true actuarial liabilities" shows you do not fully grasp that phrase either.

    3. Well, the social security trust fund is currently $2.7 trillion. The present value of the unfunded liability for the next 75 years is $8.6 trillion. Just so you know, the $8.6 trillion figure takes has reduced by taking the benefit of the current trust fund balance of $2.7 trillion.

      The present value of the infinite horizon liability is $20.5 trillion.

      The social security trust fund for disability insurance is projected to be exhausted in 2016.

  3. David in Cal writes [my emphasis]:

    >>>>>The complaint about supposed Medicare lies are quibbles. ObamaCare did reduce Medicare benefits by $716 billion. This amount of money will somehow be taken from Medicare and put into ObamaCare.<<<<<

    David, this is a central point. Please specify the benefits going to Medicare beneficiaries which ObamaCare reduces. (To be clear, benefits going to individuals in their roles as insurance executives or hospital investors are not benefits that go to Medicare beneficiaries. Are these reductions of which you speak solely those which will result from that panel which will declare some services and therapy regimens as ineffective and as those, going forward, for which Medicare will no longer pay?)

    1. CMike -- If I understand your point, ObamaCare took $716 billion away from Medicare providers, but not from Medicare recipients. The trouble is, one generally gets what one pays for. A reduction in payments to providers will lead to a reduction in quantity and/or quality of service.

      Consider that Medicare has been around for decades. Throughout that period, the government has been working to make it as efficient as possible. I don't think the Obama Administration suddenly found $716 billion of waste that they could cut out of the system. And, if they had found that amount of waste, they should have fixed Medicare on it's own, without tying the fix into the new program.

      CMike, you wouldn't buy this argument if Repubicans were cutting benefits. E.g., suppose Republicans cut Food Stamps by 20%, but claimed that there was no real cut, because the Food Stamp recipients could simply buy the same food for less. That excuse wouldn't pass the laugh test.

      Furthermore, I doubt that the supposed Medicare savings will be fully realized. I think that over time, payments to providers will be increased back to where they would have been absent ObamaCare.

    2. David in Cal writes [my emphasis]:

      >>>>>If I understand your point, ObamaCare took $716 billion away from Medicare providers, but not from Medicare recipients. The trouble is, one generally gets what one pays for. A reduction in payments to providers will lead to a reduction in quantity and/or quality of service.<<<<<

      This is why engaging in a discussion with a conservative is a useless exercise. At this site we've been over and over the fact that medical care expenditures in the United States are from 50% to more than 100% more than they are other countries with developed economies without our system delivering superior results. Paul Krugman cites the work of Kenneth Arrow over and over to make the point that health care is fundamentally different from most other goods and services sold in the market.

      And here we are right back at, "The trouble is, one generally gets what one pays for."

    3. Are you saying that a reduction in the payments would have **no effect** on the quantity/quality?

    4. Anonymous @ August 29, 2012 8:30 PM,

      I'm saying that if there are less medical services available, per person, to Medicare beneficiaries or, in an ever advancing "current best practices" sense, if these individuals are receiving services of poorer quality at the end of the decade than they are now, it won't be because of the payment restructuring and reductions required by the Patient Protection and Affordable Care Act.

    5. "it won't be because of the payment restructuring and reductions required by the Patient Protection and Affordable Care Act."

      I take this as clarification of your desire to muddy the water in a narrow discussion of reduced payments in the *current* system.

      Your broadened focus on why we spend as much as we do compared to other nations, and whether we or they should make changes is worthy in another conversation or if you insist on the drift of topic.

      I had of course meant my question in the sense of the change taking place with all other factors held equal. And in this sense David's comment "one generally gets what one pays for" is perfectly fine as he is obviously speaking about the current state of things _in_the_US_market_. And with this clarification, which didn't seem to be needed, we can expect the reduction in quality/quantity mentioned in accordance with the most elementary economic principles.

  4. Medicare reimbursements are reduced by the $716 billion. Normally the insurance companies would increase premiums or co-pay to make up for the loss, but supposedly the Insurance Companies agreed to eat the loss in expectation that the government mandating that people purchase their products would increase revenues enough to cover it and more. So benefits are not reduced in any sense that I've seen. Unfortunately our dialogue on this topic consists of "Obama stole $716 billion" versus "Romney and Ryan want to throw old ladies off cliffs into the ocean."

    1. Yes! Finally, an easy way to understand it and also explain it!

    2. Except that the 716 statement was made by The Republican candidates for President and Vice President and the (false equivalent) Democratic statement about the little old ladies has been made by.....A) no one, and B) the strange voices CecilaMe hears in her head.

    3. Frankly, you ought to be worried about who has gotten into your head. Judging by your posts, it's obvious that would be me.

  5. Just to add to what ABL said, in addition to the Insurance Companies accepting a smaller amount of reimbursement in anticipation of a larger pool of "clients", hospitals also accepted a smaller amount of money in reimbursement for the larger pool of now newly insured people coming to them as opposed to the "free riders" who added to the high cost of medical care.

  6. ABL wrote: Medicare reimbursements are reduced by the $716 billion. Normally the insurance companies would increase premiums or co-pay to make up for the loss, but supposedly the Insurance Companies agreed to eat the loss in expectation that the government mandating that people purchase their products would increase revenues enough to cover it and more

    ABL, I'm on Medicare. There's no insurance company involvment. Medicare pays the doctors and hospitals directly, not through insurance companies. So, this "supposedly" explanation doesn't seem to make sense.

    1. I think Anonymous @ August 29, 2012 8:15 PM is closer to the precise point. Even with all the cherry picking by offering Medicare Advantage policies to seniors who would want a gym membership, the for profit private insurance costs for Medicare Advantage exceed the costs to the system of traditional Medicare.

      Private insurance didn't put up much of a fight to maintain their Medicare Advantage subsidies because the industry nets out better by losing them but gaining the expanded customer base promised by the Patient Protection and Affordable Care Act. The PPACA is, after all, a Heritage Foundation inspired scam.

      Surprised to hear you didn't go for the private insurance option David in Cal if, for no other reason, than just to stick it to the Man and hasten the collapse. Here's a Washington Post article from October, 2009:

      >>>>>...Medicare Advantage was established in the 1970s (under a different name) when private insurers convinced Congress that they could deliver care at lower costs than Medicare. The program blossomed in the late 1990s when Congress bolstered it with millions in additional federal subsidies to for-profit HMOs. It has proven popular among younger, active seniors who had managed-care plans as workers, and about a quarter of Medicare's 45 million beneficiaries are enrolled.

      Many private plans require no additional monthly premiums, yet the government pays an average of $849.90 in monthly subsidies to insurance companies for a person on Medicare Advantage, according to the Kaiser Family Foundation. That is about 14 percent more than the government spends on people with standard Medicare, according to the nonpartisan Medicare Payment Advisory Commission.

      "The promise of Medicare Advantage and Medicare HMOs was to save the government money, to save consumers money, all the while providing additional benefits and coordinating care," said Joseph Baker, president of the Medicare Rights Center. "That promise has been unfulfilled overall because the plans are overpaid by the federal government at this point."<<<<<

    2. CMike -- your post makes sense to me. I had read elsewhere that one way ObamaCare would save money would be to more or less end Medicare Advantage. If this is correct, then ObamaCare really does reduce Medicare benefits. It's incorrect to claim the Republicans are lying about the cuts.

      I have seen the claim that Medicare Advantage isn't a "real" part of Medicare, so eliminating it isn't "really" cutting Medicare benefits. That seems like a quibble to me.

  7. Bob said:
    The figure is $716 billion. Howard Dean didn’t seem to know that.
    The only evidence I see is that Howard Dean said "...the 700 and whatever it is million dollars."
    Not privy to his intentions, I did not then conclude he did not actually know it was $716 billion.
    I may be mistaken, but I think you assumed too much in this case....

  8. Whatever the amount and the issue the voters still are confused and we do require a white paper explaining the full facts and not just create any thoughts that continue the lies.

    ND Virginia

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