Monday, December 10, 2012

Prelude To Cuts

In the spirit of bipartisanship and comity, let us be generous:  the utterances of Senator Tom Coburn (R-OK) are incompatible with objective reality.

On Sunday's Meet The Press, Dr. Coburn claimed (as caught by Crooks and Liars)

It doesn't really matter what happens at the end of this year because ultimately the numbers and the bond holders throughout the world will determine what we'll spend and what we won't. So, we can play the political game that is being played out in Washington right now or we can be absolutely honest with the American people and say, 'Medicare is going bankrupt, Social Security disability will be bankrupt in two years, Social Security trust fund will be bankrupt in five years, Social Security total will be bankrupt in 16,17 years.

Medicare is divided into four parts, one of which (Part C) is administered through the private sector through any number of Medicare Advantage Plans.  Of the other three, the Medicare Trustees Report, according to a summary prepared by the Center for Medicare and Medicaid Services

projects that the Supplementary Medical Insurance (SMI) Trust Fund is financially balanced because beneficiary premiums and general revenue financing are set to cover expected program costs... SMI Part D, the Medicare prescription drug program, had an average growth rate of 7.2 percent over the last 5 years.  Cost projections for Part D are lower than in the 2011 Trustees report, due to lower spending in 2011 and greater expected use of generic drugs.

HI expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years.  Trust Fund interest earnings and asset redemptions are required to cover the difference.  HI assets are projected to cover annual deficits through 2023, with asset depletion in 2024.  After asset depletion, if Congress were to take no further action, projected HI Trust Fund revenue would be adequate to cover 87 percent of estimated expenditures in 2024 and 67 percent of projected costs in 2050.  In practice, Congress has never allowed a Medicare trust fund to exhaust its assets.  

There is no concern that Medicare Part D, the notorious prescription drug program created by President George W. Bush as a sop to the pharmaceutical industry, will go bankrupt.Neither can Part B, the Supplementary Medical Insurance Trust Fund, go bankrupt.   Coburn is doubtless speaking of Part A, which is expected to cover 67% of costs in 2050.   Or, as the good Doctor would put it, "going bankrupt."  In a fact check, CNN explained, more thoroughly and clearly than have I,

When officials talk of Medicare insolvency, they're talking specifically about the trust fund for Medicare's hospital insurance, or Medicare Part A, which covers inpatient hospital stays, care at a nursing facility, hospice care and some home health care. The other parts of Medicare, though costs are rising, are "adequately financed" for now, the program's trustees say.

The Part A fund's overseers -- the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds -- said back in 2009, before the Affordable Care Act passed, that the banked money used to make up the difference between income (such as taxes) and expenses for Part A would be depleted in 2017.

But then the Affordable Care Act passed. The trustees reported that the act's lower expenditures (cutting rates to providers) and increased revenues (a payroll tax hike for wealthier people in 2013) "improves the financial outlook for Medicare substantially."

The trustees reported in 2010 that health care reform would delay the Part A trust fund's insolvency until 2029. By 2011, the trustees moved that insolvency estimate back to 2024.
By that date, the trust fund would be depleted. But that doesn't mean the Medicare Part A program would collapse. Revenues would be able to pay for most of the costs. The Centers for Medicare and Medicaid Services, which administers the program, said this year: "Projected (trust fund) revenue would be adequate to cover 87% of estimated expenditures in 2024 and 67% of projected costs in 2050."

Coburn makes three claims about Social Security: 1) disability will be "bankrupt" in 2014; the trust fund will be "bankrupt" in 2017; 3) in "total," it will be "bankrupt" in in 2038 in 2039.

Social Security is not going bankrupt in the manner the Senator would have people believe it.  With no infusion of additional revenue, it will be able to pay most of its obligations for decades.  Coburn, in faux panic mode, is anxious that people believe that without "reform," Social Security will be obsolete in a few years.

Disability is the most tenuous, with the fund needing replenishment by 2016.    The trust fund will be depleted- as "bankrupt" would seem to mean- in 2033, not in 2017.  After that point, 75-78% of Social Security benefits (given no change in policy) would be paid (through payroll taxes and taxation of Social Security benefits) until 2087.

But the public won't support the evisceration of two-thirds (Medicare and Social Security) of the social insurance the poor, the elderly, and much of the middle class depend upon unless alarmists such as Tom Coburn are allowed to shred the truth and create an alternate reality.  As pointed out by Bob Somerby, in April criticizing Kevin Drum for condoning use of term "bankrupt" to describe Social Security

It would indeed be a very bad thing if the Social Security trust fund ran dry and promised benefits had to be cut. (The trustees now project that this will happen in 2033.) But people have been led to believe, for the past three decades, that Social Security won’t be there at all by the time they reach retirement age. Almost surely, the terms “bankrupt” and "bankruptcy" have played a key role in this disinformation campaign.

Because we’re away from our sprawling campus, we won’t provide any links. But voters have been deeply misinformed about the future of Social Security dating to the 1980s.

This isn’t a hyper-legalistic matter; we're not talking about a minor "rhetorical stretch." This is one of the greatest disinformation campaigns of the past fifty years. This campaign should be studied in detail, although orgs like the AP never will, and you know all about our professors!

Of course, when people are led to believe that Social Security won’t survive at all on its present course, they can easily be persuaded to favor extreme “reforms.”

Medicare, whose financial problems lie not in the program itself but in health care costs generally, is now being similarly denigrated- and not only by Republicans.     At the Democratic National Convention, former President Clinton, recognizing that the insolvency date of Medicare would be moved up if Mitt Romney were elected and repealed the Affordable Care Act, maintained "So, if (Romney is) elected and if he does what he promised to do, Medicare will now go broke in 2016."   The following day, Vice President Biden declared "The plan (Romney is) proposing would cause Medicare to go bankrupt by 2016."

While Social Security probably will not be harmed until after resolution of the fiscal slope negotiations, Medicare is on the chopping block currently.  And with both, disinformation is enhanced by manipulation of the language by the major players.

and to the millions of Jewish readers of this blog....   HAPPY CHANUKAH

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