Fox and Friends ran another segment this morning accusing HHS Secretary Kathleen Sebelius of admitting to “double counting” Medicare savings from the Affordable Care Act by saying that the $500 billion in cuts would extend the life of the Medicare Trust Fund and reduce the deficit. Republicans have made this argument even before ACA became law and Sebelius’ rather tumultuous appearance last week before the House Energy and Commerce Committee provided critics with another opportunity to reignite the debate:
REP. JOHN SHIMKUS: What’s the $500 billion cut for? Preserving Medicare or funding health care? Which one?
SHIMKUS: So you’re double counting.
What Shimkus calls “double counting” is actually the “unified budget process,” which is the way Congress keeps track of its dollars. Here is how it works: the $500 billion dollars (which comes in over a period of 10 years) is credited to the Medicare trust fund, which receives a treasury security worth that amount that will be paid out in interest when necessary. The actual $500 billion, however, will remain in the general fund of the federal treasury and is counted towards deficit reduction. If the trust fund cashes in its bond (and uses it to extend the life of Medicare), then that money is transferred from the general treasury to the Fund. However, since the same $500 billion cannot be used to reduce the deficit and extend the life of the trust fund, treasury would have to find that money somewhere else. But, given the principles of unified accounting and trust fund accounting, that money is said to reduce the deficit and extend the life of the fund.
The federal government has used this kind of system from time immemorial and Republicans have long argued that cutting Medicare is necessary for deficit reduction AND strengthening the program. Consider this 1997 press release from the Senate Republican Policy Committee making this very same case about the Balanced Budget Act:
- Getting to a Zero Deficit: This legislation is necessary despite continued improvement in the federal deficit. Without the federal policy changes contained in the reconciliation bill, the deficit under CBO’s most recent estimates (without the so-called fiscal dividend that balance will yield) would double to $139 billion by 2002. The deficit was $107 billion in FY 1996 and is currently projected to be $67 billion this year. However, without this legislation, it will not get to zero. The positive economic performance to date largely has been due to low inflation and business restructuring at home and the opening of new markets overseas that has resulted in higher-than-anticipated receipts.
- Medicare: The Balanced Budget Act of 1997 (BBA 97) makes the most significant changes to the Medicare program — the federal government’s health care program for all seniors — since its inception in the 1960s. It modernizes the program by granting new health care options for seniors — while maintaining and strengthening the traditional system. Further, it more equitably distributes federal managed care and new Medicare Choice payments between geographic regions. It also extends the life of the program’s funding mechanism, the Medicare trust fund (known as the HI or Part A trust fund).
Read the full release here.
ThinkProgress intern Kevin Donohoe contributed research to this post.