StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



How Newt Gingrich Added $16 trillion to the National Debt

22 Nov 2011
Posted by Bruce Bartlett

According to the latest Medicare trustees report (p. 146), the unfunded liability of Medicare Part D is $16.1 trillion.

 

Conservatives Should Vote "Yes" on Medicare
November 20, 2003
Every conservative member of Congress should vote for this Medicare bill. It is the most important reorganization of our nation's healthcare system since the original Medicare Bill of 1965 and the largest and most positive change in direction for the health system in 60 years for people over 65.
In a bold and unexpected move, the new Medicare bill includes a decisive shift to health savings accounts, which will allow every American to accumulate tax-free health dollars. HSAs allow account-owners to build savings and earn tax-free interest on their HSA contributions. HSA account owners can use their savings for tax-free spending on qualified health expenses, including health insurance premiums and deductibles, prescription drugs, and long-term care services including long-term care insurance.
If you are a fiscal conservative who cares about balancing the federal budget, there may be no more important vote in your career than one in support of this bill. Since health expenditures comprise almost 14 percent of the U.S. GDP, a shifting away from the failed bureaucratic third-party payer model and back to a market-mediated binary payer model, where the customer controls his own first health dollars, is the single most significant reform that can be made in saving the country from skyrocketing health costs and steadily increasing calls for taxpayers to finance more and more of the healthcare system through higher taxes.
Although some conservatives may complain about the cost of the drug benefit, this benefit was designed within the framework of the budget resolution. The Medicare drug benefit is a necessary improvement to a Medicare system that was designed before modern pharmaceuticals became a key to staying healthy. Does anyone believe it makes sense to pay billions for kidney dialysis and not pay for the preventive care drugs that lets people keep their kidneys healthy for only pennies per day? Let's face it, a Medicare drug benefit is inevitable. Liberals, some of whom are running for president, would pass it without any of the changes contained in this bill, and have said as much. However, to meet the future demands of retiring baby boomers the same liberals would either raise taxes massively or shift to a bureaucratic rationing of care--both disastrous policies.
Conservatives now have a chance to pass a sound Medicare drug benefit that includes very significant improvements to the Medicare program. This bill has reforms to increase co-morbidity management, disease management, a transition to electronic prescribing (which will save lives and money), and an incentive for hospitals to invest in IT and report on quality outcomes so people can make informed choices about which hospital to go to by being able to compare quality outcomes.
There are also reforms that create choices in Medicare plans including managed care, preferred provider organizations, and fee for service. This bill is about halfway between the very limited choice of today's Medicare and the amazing range of choices in the Federal Employee Health Benefit Plan (which provides the insurance for all federal employees, including members of Congress) but it moves us significantly in the right direction. It is a major step toward giving the baby boomers a multi-choice Medicare system for the 21st century.
Finally, in two breakthroughs with the liberal model of one-size-fits-all in a bureaucratically defined and controlled care system, this bill provides for some increase in costs for the wealthiest retirees (over $80,000 a year) and for a series of pilot projects of new approaches to creating more honest payments for the most expensive services. These pilot projects will offer seniors a range of choices and were carefully negotiated with AARP so that they provide a real opportunity to learn how to bring cost constraints into Medicare while also protecting seniors from unfair or inappropriate risk at a time in their lives when they are least able to sustain risk.
Obstructionist liberals would like all the money and none of the reforms. They will vote to reject a drug benefit for seniors in order to avoid positive reforms, which they know will increase individual choice, increase the range of options, and use market forces--instead of bureaucratic rationing--to bring costs under control. Obstructionist conservatives would like all of the reforms and none of the compromise. They would like to live in a world of 60 conservative votes in the Senate and no need to compromise with anyone, anytime over anything. But that is not the current reality.
I spent 16 years in a minority House Republican Party that enjoyed voting no, and enjoyed being in the opposition minority. Gradually, beginning with President Reagan, we built a positive conservatism that cut taxes, reformed welfare and Medicare, strengthened defense, and created a more prosperous America. By 1994, beginning with the Contract With America, we began to learn the difficult and different challenges of legislative leadership and governing instead of simply opposing. Now President Bush, Speaker Dennis Hastert, and Majority Leader Bill Frist, working with Chairmen Bill Thomas and Chuck Grassley and Democrat Senators Max Baucus and John Breaux, have produced a Medicare bill that provides a drug benefit for seniors, choices for the baby boomers, and the opportunity for a major shift toward health savings accounts for all Americans.
Obstructionist conservatives can always find reasons to vote no, but that path leads right back into the minority and it would be a minority status they would deserve.
Newt Gingrich is a senior fellow at AEI.

Gingrich

I was confused until I found the line where it says the story is from 2003.


Let him explain this one

Another phony wannabe fiscal unconservative. When will we get a good candidate


"If you are a fiscal

"If you are a fiscal conservative who cares about balancing the federal budget, there may be no more important vote in your career than one in support of this bill."

Comedy gold. In a world where a tax cut increases revenue, a vote for a bill adding 16 trillion to the national debt is the most important vote of a fiscal conservative's career. Balance the budget by cutting taxes and increasing spending.


why they're called the "Tea Party"

"When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less."


Just another conartist

Reading this just makes you think about how bankrupt conservatism has become. I mean really bankrupt. I'm just finishing Crisis of the Old Order by Schlesinger, and these guys are nothing like conservatives were in the 1920s. Those conservatives raised taxes and cut spending so dedicated were they to fiscal retrenchment. They would likely view the current crop of conservatives as worse than the New Dealers.


Can you explain this?

Medicare Part D is operated by private insurers, yet you say that it has $16 trillion of unfunded liability. I'm confused. If it's a privately run program, with each insurer charging its own rates, where does the deficiency come from, and why is it the responsibility of the Federal government?


There's a name for it.

Corporate welfare.


Confusion

Maybe it's late out and I'm just misreading the report, but it seems to say that there is no unfunded obligation. Page 145: "Table III.C23 shows that because of the automatic financing of Part D, there is no unfunded obligation."

I see the "general revenue contributions" part of the chart on 146 listed as 16.1 (trillion). Is that not being paid?


There is a big difference, in

There is a big difference, in budget parlance, between "funded" and "paid". By having the general fund pay for Medicare costs under Part D, the cost is "paid". It is not "funded" because there was no new revenue to pay for the cost. We simply pay it out of increased borrowing. Paid out of borrowing, not funded.


General Revenue

The General Revenue amount ($16.1t - 75%) is the present value of the portion of future expenditures for which the government is responsible. Beneficiary premiums comprise 16%. The administration of the program may be private, but the funding certainly is not.

It's not listed as "unfunded" becuase technically funding's been allocated - it's coming out of the government's general revenue account.


unfunded liability

Using "unfunded liability" for Medicare and Social Security is technically incorrect.

Unfunded liability is a concept and a term used primarily with pension accounting where the defined benefit exceeds plan assets. The important term here is (contractually) defined benefit. Neither Medicare nor Social Security is a defined benefit as Congress and the President can change the benefits at any time. If memory serves me correct, the only Medicare and SS benefits you are legally entitled to our your contributions (though there have not been many court cases)and benefits awarded to other comparable beneficiaries.

Federal employee and Military pensions by contrast are defined benefit plans (the Military Retirement System (MRS) had an unfunded liability of approximately $908 billion in 20009).

Its a confusing concept but using unfunded liability needlessly confuses the debate. This is especially true since we are holding Medicare and SS (dedicated and specific tax revenues) to a much higher standard than all other federal programs that are paid only from general revenues.SS and Medicare have no more of an unfunded liability than defense spending or Medicaid or any other government program.


Clarifying the Debate

The fact that one does not have a contractual right to social security benefits (or even return of one’s contributions) was established by the Supreme Court in the 1960 case Fleming v. Nestor. There, the court stated

"To engraft upon the Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands." The Court went on to say, "It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments."

http://www.ssa.gov/history/nestor.html

The case for Medicare being a “contractual right” would, if anything, be weaker than that for social security.

Even though these programs do not constitute “contractual rights”, they certainly are implied, if not explicit but unenforceable political promises even under the contractual doctrine of “reasonable reliance” (perhaps because “reliance” would not be “reasonable”).

You are, however, overstating your case by drawing such a technical distinction about “unfunded liabilities”: The actuarial calculation is quite useful if only to establish that, say, a $16 trillion “unfunded liability” can only be resolved by:

1. Cutting promised benefits by $16 trillion;
2. Raising taxes by $16 trillion to cover those unenforceable promises;
3. A combination of 1 and 2 that adds up to $16 trillion.

In other words, the concept of “unfunded liability” does give one a sense of the magnitude of “the problem”.


Guess it's just me

Guess it's just me, but the health of the middle class would be the best measure of prosperity, and this guy and his party's policies have decimated the middle class. He must be talking about the top earners and their 900% pay raise since Reagan.

Someone is doing the work and someone else it getting the reward. Republican Crony Capitalism. And all the GOP presidential candidates want is more of it.


Did he Increase or Decrease the National Debt?

Passage of the Medicare D benefit in 2003 was fiscally irresponsible, no doubt about it. It was also politically expedient.

What is lacking here, as usual, is the necessary context and non-partisan objectivity. The Medicare Drug benefit was passed by Republicans in order to gain votes among the elderly (particularly those in a potentially swing state such as Florida) and to head off even more expensive proposals being pushed by Democrats. For a flavor of that debate, here's the position of Hillary Clinton as reported by the New York Times when the drug benefit bill was working its way through Congress:

"Though to many Americans Mrs. Clinton embodies the efforts to expand government-sponsored health coverage, she was one of just 11 Democrats to vote against the Medicare drug bill that the Senate passed in June. She said on Friday that she would oppose any bill that emerged from a House-Senate conference committee, unless the committee came up with a bill more generous than the ones already passed."

http://www.nytimes.com/2003/10/11/nyregion/medicare-drug-bills-assailed-...

Hillary's objection, as well as the objections of almost all the other Democrats at the time was not that the Medicare Drug proposal was not "paid for" through higher taxes, it was simply that it was not nearly "generous enough".

Newt Gingrich is certainly responsible for increasing the national debt by expanding Medicare (even if I don't necessarily vouch for the $16 trillion), but the fact is that had he and others not done so and the D's had gotten *their* wish, the national debt would probably be much higher than it now is. That, folks, is the counterfactual.


Contrast

Medicare Part D was deficit financed. The ACA is fully paid for.


Contrast This

I’m sure you are familiar with the concept that money is fungible. As such, if it was fiscally prudent to “fully pay for” ACA (a dubious claim, anyway), would it not have been even more fiscally prudent to use the revenue raisers in the ACA to pay for the deficit funded Medicare D program? Everything the government spends money on is, to an extent, “deficit financed”. In fact, this was even more so in 2010 when ACA was passed than it was in 2003.

The Medicare D bill almost did not pass Congress. The reason for this is that some fiscally responsible Republican Congressmen threatened to vote against it and a nearly united Democratic Congress actually did vote against it, not because it was not “paid for”, but because it was not generous enough. In fact, it is largely due to the latter fact that the bill got enough support from conservative Republicans to get it through Congress. Here is Bruce Bartlett’s concluding remarks in an article he wrote for Real Politics in 2005:

“At 5:00 a.m., after the vote had been held open for two hours, President Bush was awakened, and he said he would be forced to sign an even more expensive Democratic bill should the Republican measure go down to defeat. This got a couple more Republicans to switch their votes and provided the margin of victory. Almost three hours after the vote began, the drug bill finally passed by a vote of 220 to 215.”

http://www.realclearpolitics.com/Commentary/com-11_22_05_BB.html

In that article Bartlett also criticizes the Republicans for trying to delay the report of a higher cost estimate for Medicare D. In the meantime, though, by any measure, the Medicare D program enacted in 2003 has come in under the original cost estimate, not above it according to PolitFact.com who fact-checked a claim by Rick Santorum that the program has come in 40 percent under budget. According to the “TruthoMeter, it came in under budget, but a reasonable range would be 28 percent to 40 percent and thus Santorum’s claim would be at the very high end. That column by PolitFact.com also points out the reason why the CBO cost estimates and the Medicare Trustee Report estimates are so vastly different. Among other things, the Trustee Report includes premium contributions from participants---and the estimated cost is over 75 years.

This Bartlett column is a classic case of selectively choosing facts and I suspect the Truth o’ Meter would not be quite as kind to him as it was to Santorum.

http://www.politifact.com/truth-o-meter/statements/2011/jun/15/rick-sant...


Sure, and Democrats could

Sure, and Democrats could have used the new revenues in the ACA towards filling the hole left by the deficit financed Bush Tax Cuts. Or they could have used the money to pay for deficit financed wars. They could have used that money partially repay the $2.5 trillion "borrowed" from the social security "trust fund." They could have used that money to clean up any number of messes. As it stands, the ACA includes a number of cost savings experiments for Medicare which the CBO didn't score.

But the fact of the matter is that Republicans allowed PAYGO to expire and then passed Medicare Part D (and various other things) without funding it. You coud argue that "maybe" Democrats wouldn't have paid for an alternative plan, but we do actually have history to go on. During the previous decade, the Democrats (and one unfortunate Republican president) balanced the budget with revenue increases and spending cuts. Likewise, the various forms of the ACA, on the other hand, were repeatedly scored to reduce the deficit -- over $100 billion in the first decade, and about $1 trillion over the second.

There could be a $4 trillion "grand bargain" right now if not for Republcan intransigence. Democrats will cut entitlements. Republicans will not raise taxes. That is the contrast.


Responsible adults

Darkbloom is right. The deal is that Republicans spend money on new things (drug benefits, wars, etc) and Democrats must later figure out how to pay for them. Moreover, they can't do it by raising taxes. Republican-endorsed welfare programs must be paid for by cutting Democratic-endorsed welfare programs. Otherwise, the Democrats are to blame when Republican welfare programs increase the deficit.

All sarcasm aside, Darkbloom, you assert that the Republicans passed Medicare Part D to head off a more "generous" program by the Democrats, and the proof you cite is Bartlett quoting Bush lobbying reluctant Repub. representatives to vote for it? Really? Are you aware that Republican's had control of both the Senate and the House? Did you know that final passage was a year before elections?


Holy Toledo!

Thanks Bruce for this post, which has certainly animated a lot of response. The # of unfunded billions you cited is way scary as it is, but I'm also sure it's an under-estimate because most of what pharma bas in the pipeline are biotech and cancer drugs. There are major statutory and de facto protections on access to cancer agents, and virtually an absence of any semblance of pricing to value. The other thing is one biotech drug can blast throught the Medicare Part D stop loss.

I'm not a big fan of cutting the SGR, as much as I am paying primary care physicians a lot more, and really encouraging primary and preventive care. THis change has been faought bitterly and successfuly by specialists in the RBRVS, but managed care plans can pay PCPs what they want, and limit their specialist networks, as well as substantially icnrease copays to disincentivie waste. We also pay for a lot that frankly we shouldn't and pay a lot more for various things than do our EU counterparts.




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