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Counting and Double-Counting In Medicare

Saturday, 14 April 2012 07:30

Steve Rattner put his ignorance on public display again in a column in the NYT.  He told readers that counting the savings projected in Medicare as a result of the cost controls in President Obama's health care reform as lowering the budget deficit amounts to double-counting. There is a simple word for Rattner's claim: wrong.

The logic is simple. The Medicare program is counted as part of the overall budget. (If Rattner has other information on this point, he could do a great service by sharing it with NYT readers.) However, part of Medicare (Part A, which covers hospital insurance and most other medical bills of seniors) is also required to be funded by the designated Medicare tax. Any savings in this portion of the program will improve the finances of the Medicare trust fund and also reduce overall expenditures, thereby leading to lower budget deficits.

This really is not rocket science. We finance some categories of transportation spending from the Highway Trust Fund, which relies on revenue from the gas tax. If we reduced this transportation spending it both frees up money in the trust fund and also reduces the budget deficit. There is no double-counting here, it is just counting pure and simple.

It is bizarre that this accusation of double-counting keeps coming up. It is wrong and does not belong in a serious newspaper.

(btw, health care costs in the United States are a huge problem. If the elites were not such ardent protectionists, they would be looking to have free trade in Medicare and health care more generally.)

Comments (3)Add Comment
Rattner is right on accounting, but wrong on policy.
written by AndrewDover, April 14, 2012 9:21

Rattner did NOT tell

"readers that counting the savings projected in Medicare as a result of the cost controls in President Obama's health care reform as lowering the budget deficit amounts to double-counting." as Prof Baker wrote.

Rattner wrote you can count them ONCE; for
1) the reform bill,
2) Medicare fiscal situation.

Rattner wrote:
"Given that context, the government’s accounting practice — counting $748 billion of cost savings and $259 billion of revenue increases toward BOTH Medicare and the cost of the Obama plan — is particularly troubling."

However, that is a matter of accounting, and presentation, not policy.

Rattner's policy is:

"It’s fine to ask the wealthiest to pay disproportionately for important social programs. But the top taxpayers, ..., can’t be expected to shoulder the entire $1 trillion burden ..."

Seeing as Rattner and Romney are both in the group that would have to pay the additional 3.8% unearned income Medicare contribution, I can understand why they oppose it, differing in degree. Hopefully, the electorate will see past the negative ads coming and return to the historic burden of the highest earnings taxpayers.


$210 billion of the $409 billion raised in taxes (2010-2019) from the heathcare act came from:

"Broaden Medicare Hospital Insurance Tax Base for High-Income Taxpayers - additional HI tax of of 0.9% on earned income in excess of $200,000/$250,000 (unindexed) [1], and Unearned Income Medicare Contribution on 3.8%
on investment income for taxpayers with AGI in excess of $200,000/$250,000 (unindexed)"

written by skeptonomist, April 14, 2012 9:22
Rattner refers to the amount, $37T, that would have to be in a trust fund if Medicare were to be pre-funded. Of course Medicare is not pre-funded and claiming that this number is the amount the program is "underfunded" is deliberately deceptive nonsense. But beyond that, by this time the dangers of a large trust fund should be evident from the experience with Social Security. Incumbent politicians continually counted the money going into the SS Trust Fund as general income when reckoning deficits, making them appear much smaller, and then Republicans referred to the obligations as "pieces of paper" when it became a question of honoring them. Since there has been no baby boom in the last 40 years there is no need to build up new large surpluses in any entitlement trust funds. The programs are not really dependent on trust funds.
The elites who determine Obama's policies want to keep health care overpriced. But protectionism is only one way they do it
written by Rachel, April 14, 2012 11:11
We simply pay too much for health care. Our doctors are overpaid, our CT scans, MRI and drugs cost too much. Let Americans use Medicare to obtain health in other countries, or import more professionals, and prices would come down somewhat.

In San Francisco, for example, we have a LOT of GPs. And the average GP makes about $150 K. Not bad! But significantly less than average GP makes in the US.

But the market power of the big hospitals in San Francisco is another factor, and a very important one in keeping prices high for the consumer. With all their market power, they can force the consumers (patients) to accept overpriced hospital rooms, machines,drugs, surgeons and nursing. They can push them all on to the cities and unions and others. It's not the insurance companies doing this. It's the hospitals.

So we in the Bay Area pay much more for hospital care than they do in the LA area. And what do the ignorant (and self-seeking) Republicans say? "Darn those entitlements!"

Meanwhile, the ignorant (and self-seeking) Democrat elites say little, but seek to pass on the excess costs to tax-payers, while cutting back on "entitlements" at the same time.

And no one mentions the issue of market power. (Except in a few health economics journals.)

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.