The Dems' Medicare Accounting Gimmicks

It's well-known by now that Sen. Reid's plan would increase the Medicare payroll tax to help offset the costs of the Senate health reform bill. These new taxes though would also be laundered through the Medicare trust fund, creating an entirely fictitious improvement in Medicare's financial health.

I argued in this piece for AEI's The American online magazine that the health reform bill proposed by Sen. Max Baucus would reduce the 10-year budget deficit only through an accounting trick by which increased Social Security taxes – which should, you know, be saved for Social Security – would be counted against the cost of the plan's increased health coverage.

But it seems that no entitlement is left un-raided: the legislation put forward by Senate Majority Leader Reid, which contains the raid on the Social Security trust fund, would also impose some accounting tomfoolery on Medicare. It's well-known by now that Reid's plan would increase the Medicare payroll tax to help offset the costs of the plan. What I didn't know, though, is that these new taxes would first be laundered through the Medicare trust fund, creating an entirely fictitious improvement in Medicare's financial health. The new taxes are credited to the Medicare trust fund, created an entitlement to new revenues from the rest of the budget. But the actual revenues will immediately be used to cover non-Medicare health costs. Looks like double-counting to me. The folks over at e21 explain.