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Response To The McCain Campaign On Medicare And Medicaid Cuts

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"Response To The McCain Campaign On Medicare And Medicaid Cuts"

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Our report showing that McCain’s health care plan would lead to Medicare and Medicaid cuts has come under criticism. Our defense of the paper’s methodology and conclusions can be found here, here and here. Below is our response to the McCain campaign.

The McCain campaign is playing a shell game, and we are surprised at how uncritically it has been treated by the media. The onus is on the McCain campaign to make its policies square with the facts. That a discrepancy exists between the two reveals a problem with their policy positions, not our analysis.

Here are the facts: accounting for the tax exclusion rollback McCain has proposed, his health care plan has a budget hole of $1.3 trillion over ten years, according to highly-regarded independent analysts. McCain’s plan will be budget-neutral, according to the McCain campaign, and McCain will balance the budget in his first term, according to McCain’s own statements and his campaign’s website.

On October 6, the Wall Street Journal reported: “John McCain would pay for his health plan with major reductions to Medicare and Medicaid, a top aide said, in a move that independent analysts estimate could result in cuts of $1.3 trillion over 10 years to the government programs.” In fact, the cuts could be much larger if they are used to help pay for McCain’s corporate tax cuts, as a McCain aide told the Washington Post they would be back in July.

But instead of owning up to the cuts that will be necessary to pay for its plan, the McCain campaign is claiming the savings will be pain-free, and will come from cutting waste and inefficiency. But there is simply no evidence to suggest that anywhere near $1.3 trillion can be saved from cutting waste – and plenty of evidence to suggest this is a huge exaggeration. In fact, McCain’s cut is so large that it means Medicare spending will not keep up with inflation.

The McCain campaign has a long track record of wildly exaggerating its budgeting claims. McCain’s claim that he could save $100 billion a year from eliminating wasteful spending was derided as “fantasy” by the Washington Post’s fact-checker, and stamped with “Four Pinocchios.” Its claim that a key provision of its tax policy that would cost $75 billion a year would actually be budget-neutral was called “so intellectually dishonest it’s outrageous” by Ronald Pearlman, an assistant secretary for tax policy under President Reagan.

Now, the campaign is claiming that cutting subsidies to insurers through Medicare Advantage would save $1 trillion over 10 years. That’s more than six times the actual savings of $149 billion that the Congressional Budget Office says is possible. It’s also a proposal McCain voted against. On a conference call last week, policy advisor Douglas Holtz-Eakin alluded to “places to go” for additional savings – such as chronic care and information technology – but McCain has not endorsed specific steps to encourage the adoption of these reforms or their expected savings. There is little reason to believe that they could generate over $100 billion a year that would be needed.

This savings shell game is not new. When the McCain campaign first introduced their health care plan, they indicated that they intended to pay for it by subjecting health benefits to both payroll and income taxes. (The campaign never said so explicitly, but its figures for the plan’s budget cost and its impact on a typical family could not be understood any other way.) Based on this information, CAPAF produced a report showing how this would result in a massive tax increase on the middle class. Once this fact began to gain attention, the McCain campaign reversed course, and said it would get the money from Medicare and Medicaid.

The bottom line is this: CAPAF’s aim is to go beyond the politics and present a picture of what the policy agenda would look like in a McCain administration. We would analyze detailed numbers from the McCain campaign if such numbers existed, but they do not. Until they do, we will continue to use the information available to us – facts from independent analysts and the McCain campaign’s public statements – the same information that is being provided to the American people.

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