Sessions, Hatch Ask Medicare Trustees to Account For Medicare Double Counting in Next Estimate on Medicare Solvency

Senators “Reject Notion” that Payroll Tax Increases in Health Law Can Be Used to Fund Both Future Medicare Benefits, New Entitlement Spending

WASHINGTON – In a letter released today, U.S. Senators Jeff Sessions (R-Alabama), Ranking Member of the Senate Budget Committee, and Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, urged the Medicare Trustees to provide an alternative projection in this year’s annual 2011 Medicare Trustees Report estimating when the Hospital Insurance (HI) trust fund will be exhausted if those savings under the health law are not used to pay for future Medicare benefits, but for spending in the health law.

“Only in Washington can you take half a trillion dollars from one program, give it to another program, and say you are using the money for both.  You can’t spend the same money twice.  If a corporation tried to pad their books by engaging in this kind of double-counting lawmakers would quickly cry foul.  But this is exactly what we are doing with the health care bill.  It’s the Washington-style accounting that helped create our fiscal crisis in the first place,” said Sessions.  “Despite attempts from the bill’s authors to conceal its true cost, we know in reality it will add nearly $700 billion to the debt in 10 years, and potentially much more.  We need fact-based budgeting – not fantasy budgeting.  We have a responsibility to Medicare recipients, and to all American taxpayers, to practice the honest, sound accounting necessary to protect the finances and the future of this nation.”

“You don’t need a Ph.D. in math to know you can’t simultaneously take over half-trillion dollars from Medicare to fund the $2.6 trillion health law and make Medicare stronger.  But that’s exactly what the White House did in this budget-busting, gimmick-riddled law,” said Hatch. “Our nation is facing a budget crisis that threatens our economic future.  Cutting discretionary spending alone will not solve this crisis.  We need to start examining our entitlement programs.  But in order to safeguard our entitlements for future generations of Americans, we have to have accurate information today about the real health of Medicare.  The American people deserve an honest and accurate accounting of this program; I hope the Trustees provide us with that essential information.”  

In the letter to the Trustees, the Senators note that Richard Foster, the Administration’s Chief Actuary, has found that “…HI financing cannot be simultaneously used to finance other Federal outlays (such as coverage expansions under the PPACA) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.”

By law, the Medicare Trustees are required to submit an annual report on the solvency and health of the Medicare HI Trust Fund by April 1st.

The full letter to the Medicare Trustees is below and can be accessed HERE: 

The Honorable Timothy F. Geithner                          The Honorable Hilda L. Solis
Secretary of the Treasury                                        Secretary of Labor
Department of Treasury                                          Department of Labor
Washington, DC 20220                                           Washington, DC 20210

The Honorable Kathleen Sebelius                             The Honorable Michael J. Astrue
Secretary of Health and Human Services                    Commissioner of Social Security
Department of Health and Human Services                Social Security Administration
Washington, DC 20201                                           Baltimore, MD 21235

Charles Blahous, Ph.D.                                            Robert Reischauer, Ph.D.
Public Trustee                                                         Public Trustee

Dear Honorable Trustees:

We strongly reject the notion that the spending reductions from and the payroll tax increases to the Medicare Hospital Insurance (HI) trust fund enacted in the new health care law (the Patient Protection and Affordable Care Act, or PPACA) can both improve the government’s ability to pay future Medicare benefits and finance new entitlement spending outside of Medicare. While we recognize your specific charge as a Medicare trustee allows you to assess the financial status of the program by focusing narrowly on the flow of dollars through the trust fund, Congress and the American people often look at Medicare from a broader budgetary perspective. Therefore, we ask the Trustees to provide an alternative projection in the 2011 Medicare Trustees Report estimating the date of exhaustion for the HI trust fund assuming that the estimated Medicare HI savings under PPACA are not set aside to pay future Medicare benefits but instead are used to finance new spending (outside of Medicare) in the health care law.

According to the Centers for Medicare and Medicaid Services (CMS), PPACA contained $413 billion in Medicare savings to the HI trust fund between fiscal years 2010-2019. Proponents of the new law claim that these savings will be used to extend the solvency of the HI trust fund, while at the same time financing the new health insurance entitlement program. However, both the Congressional Budget Office (CBO) and the independent Office of the Actuary at CMS said the Medicare HI savings can be used by the government either to make Medicare more solvent or to offset new spending in the health care law, but that the same dollars cannot be used to achieve both.

A memorandum issued by the CMS Actuary on April 22, 2010 regarding the impact of health care law on the HI trust fund concluded that:

            In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as coverage expansions under the PPACA) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.

An earlier letter from CBO dated December 23, 2009 on the same issued explained:

            The key point is that savings to the HI trust fund under PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on the other parts of the legislation or on other programs…To describe the full amount of HI trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.

We are writing now so that the Trustees Report for 2011 will include alternative estimates that directly acknowledge and address this critical accounting issue, unlike last year’s report. We believe our request is fully consistent with the intent of the Social Security Act and its provisions governing annual reports to Congress. IN the past, the CMS Actuary has published alternative scenarios to supplement the annual Trustees Report, which provides precedent for complying with our request.

Congress and the American people deserve an accurate assessment of Medicare’s finances and its impact on the federal budget, after taking into account gimmicks like the double-counting of Medicare savings under the new law. We are confident that you agree with the basic principle guiding our request—that the same dollar cannot be spent twice. We look forward to a timely response.

Sincerely,

JEFF SESSIONS                                                 ORRIN HATCH
United States Senator                                     United States Senator

Cc: Donald M. Berwick, M.D.
Administrator
Centers for Medicare & Medicaid Services
Secretary, Boards of Trustee

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