The $716 Billion Whopper

Get Instant Quote

Now That’s a Whopper

Health care is always a talking point for politicians, but in 2012 it’s been more important than ever. With the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010, the American health care system has been thrown into a vicious debate between the left and right. With an election looming on the horizon, I’d like to address and debunk a Republican talking point about the PPACA: the myth that Obama is cutting $716 billion from the Medicare budget.

This is possibly one of the most strident and blistering accusations lobbied at the Obama administration. Republican politicians and conservative pundits have used this point to demonize the entire bill, and the Democrats in general. Mitt Romney has gone on record several times stating this belief, and has even repeated the claim during the first Presidential debate: “on Medicare for current retirees, [Obama] is cutting $716 billion from the program.” It’s a vitally important part of the current GOP campaign, and it’s easy to see why. With a growing population of elderly Americans relying on Medicare, a massive $716 billion spending cut seems abhorrent. Seniors have expensive healthcare needs, and cannot easily return to work or afford a private insurance plan.

Obama’s supposedly merciless funding cut is closely tied to another claim: that he is ‘robbing’ Medicare in order to pay for the rest of the PPACA. Mitt Romney accused Obama of raiding Medicare in August 2011, and his running mate Paul Ryan compared the seniors’ fund to a piggy bank being smashed open. It’s a terrifying notion for any concerned senior American—but it’s not true. Like most political platforms, the Medicare funding cut contains a grain of truth that has been twisted, spun, and warped into a frightening but false claim. While the PPACA does trim over $700 billion from Medicare, the cut has long-term benefits for everyone—and current recipients will not see any reduction in quality or quantity of care.

In debunking this complex claim, it’s first vital to understand that Medicare is in financial trouble, and this PPACA cut can drastically extend the life of the program. If you’ve ever had to stick to a household budget, you know that there are two ways to increase your bank account. The first way is to bring in more cash each month, and the second way is to trim the fat from your spending. For instance, you can switch to a cheaper brand of paper towels, and cancel that cable subscription you never use. While you’ve cut your grocery and entertainment budget, you’ve reduced unnecessary spending and are saving money over time.

The spending reduction in the PPACA works the same way. Firstly, the cuts do not affect beneficiaries, but rather focus on the insurance companies and hospitals. The budget concerns are all about Medicare Part A, which covers hospital insurance and inpatient care, as well as the privately-run Medicare Advantage plans. Currently, the income for Part A comes largely from payroll taxes, and the money sits in a trust fund held by the National Treasury to be paid out to hospitals. Unfortunately, Medicare is extremely inefficient, resulting in more unnecessary payments than the account can sustain. Payroll taxes have been increased several times over the past 40 years in an attempt to extend Part A’s trust, but the current income just isn’t enough to sustain it indefinitely.

By eliminating redundancies and improving the system, the PPACA will reduce unnecessary Medicare spending by $716 billion over the next ten years. The overall Medicare budget is projected to increase every year; the Act will try to limit the rampant growth by making the system better from the ground up. And what about the claim that the cuts from Medicare will go to paying for the rest of the PPACA? There is some truth to this, although it must again be stressed that there will be no cuts to the current Medicare budget or any recipients. Rather, the projected $716 billion savings will help offset the costs of the other parts of the bill, which will help reduce the federal deficit. And finally, the Part A trust fund cannot be ‘robbed’ by Obama or anyone else; the money is held as treasury bonds, and can only be cashed for Medicare alone.

The 2012 Presidential Election is a crucial time in American history. There are intense ideological divides at play, and citizens are frustrated at the state of their economy and concerned for the future. With such heightened tempers and desperate grabs for voter attention, it’s important to understand the truth behind the politics, and to be as informed as possible before heading to the polls on Tuesday.