CUTTING SPENDING TO REDUCE THE DEFICIT Part 2

ABSTRACT: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. Obamacare takes initial steps to make our whole health care system more cost effective. One proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67. This would save only $13 billion per year over 10 years and would only shift the cost for health insurance somewhere else.

Cuts to Medicaid mean that fewer low income individuals, primarily low income children and seniors, would have health insurance.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available.

FULL POST: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends over $7,500 per person per year. This is 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. (See post of 12/9/11 for more details.)

The real issue is the need to make our whole health care system more cost effective. Obamacare takes initial steps to do just that. It includes cuts in payments to Medicare health insurers and health care providers of $700 billion, requiring them to be more efficient, but not cutting any benefits to seniors. Nonetheless, during the 2012 campaigns, Republicans attacked this as a cut to Medicare, despite the fact that their Vice Presidential candidate, Paul Ryan, the chairman of the House Budget Committee, had included these cuts in his budget the previous two years. Ironically, Republicans have also taken steps to eliminate the cost control board created by Obamacare that is charged with limiting the growth of Medicare spending. [1]

President Obama has continued his efforts to reduce Medicare costs by proposing giving Medicare the right to negotiate with drug makers for lower prices. [2] The Veterans Administration and large health insurers already do this and save significant amounts of money, but President Bush’s Medicare drug benefit prohibited Medicare from doing so, providing a windfall to the pharmaceutical corporations.

Another proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67 and increase premiums for high income recipients. The Congressional Budget Office reviewed these proposals and concluded that they would save only $13 billion per year over 10 years. Moreover, increasing the eligibility age would only shift the cost for health insurance somewhere else and would leave some people without health insurance.

Cuts to Medicaid mean that fewer low income individuals would have health insurance or that their benefits would be cut. Medicaid beneficiaries are primarily low income children and seniors, with Medicaid paying for many seniors’ nursing home care. An expansion of Medicaid is an essential part of reducing the number of Americans without health insurance under Obamacare.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available. Despite our riches, the US is less generous in its benefits for seniors and low income families than other countries with advanced economies. Surely, we can find the will and a way to maintain, if not improve, our benefits for these members of our society.


[1]       New York Times editorial, 11/18/12,  “A bad idea resurfaces,” The New York Times

[2]       Krugman, P., 12/3/12,“The GOP’s big budget mumble,” The New York Times

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