Obamacare Needs Lifesaving Deficit Surgery

When President Obama signed his health reforms into law he promised they would reduce the deficit. Now, less than three months later, the White House is working overtime to break that pledge.

Obamacare will reduce the deficit.

It’s one of the basic promises of the White House. Indeed, when signing the bill into law, the President described his health-reform plan as “[t]he most significant effort to reduce deficits since the Balanced Budget Act of 1993.” With the federal government swimming in red ink, that’s an important promise.

It’s also the promise, unfortunately, that – less than three months later – the White House is working overtime to break. The White House is now focused on overturning one of the most important cost-reduction proposals.

First, some background. Obamacare is rich in new subsidies for the middle class (subsidized health-insurance exchanges, for instance) and the elderly (filling the Medicare donut hole), combined with a significant expansion of Medicaid. The result is nearly a trillion dollars of new spending over a decade. How to fund it all? Taxes, penalties, fees. And, yes, a big cut to Medicare reimbursements. Or, to drop the technical Washington speak, doctors serving Medicare patients will get less for their work. To be clear: the White House proposed no new fee cuts, but simply to carry out the programmed cuts mandated by the Balanced Budget Act of 2007.

The Tax Foundation summarizes the financing with this simple pie-chart:

Notice the big blue slice on the right – the cuts to Medicare. Roughly half of that is because of the reduction in doctors’ pay. It works out to about 1 in every 5 dollars of the financing of Obamacare. The Medicare “savings” are slated to start this year, with fees down by 21%, and continuing on.

Jump ahead a couple of months. This past weekend, the president hit Republicans because, in his view, they are holding up a vote on undoing the physician fee cut. The president is urging Congress to push off the scheduled fee cut by a year, after already pushing back the cuts for a couple of months. The House passed the necessary bill; the Senate has yet to vote.

President Obama suggested that doing otherwise would “punish hardworking physicians [and] the millions of Americans who count on Medicare.”

As I’ve noted before, no Congress in recent years has been particularly effective about reining in Medicare costs. Congress reversed planned cuts in 1999. And 2004. And 2005. And 2006. And 2008. In fact, since 1997, when members of both parties agreed to automatic cuts if spending rose faster than population and economic growth, the program has been cut just once, in 2002.

And in this debate, we can see a predictable result with the Senate voting in the next week or two to scrap the cut. The President’s push to undo the cuts now – and not champion a larger reform of Medicare – suggests that Obamacare will not be deficit neutral, or even close to it.

Democrats have hit Republicans for their fierce opposition to Obamacare. Last week, in a conversation with me, former DNC Chairman Howard Dean listed “opposing the right wing” as one of three reasons for changing his mind on the president’s plan.

But if the right has been hard in its criticism, has the left been exactly honest in its aims or financing?