When House Budget Committee Chairman Paul Ryan met with President Obama at the Blair House in February 2010, he warned that the CLASS Act program in Obamacare was “a Ponzi scheme that would make Bernie Madoff proud.” Last October, Health and Human Services Secretary Kathleen Sebelius admitted Ryan was right. She announced there was no “viable path forward” to implement the provision — and why would there have been, considering that its only real purpose was to make Obamacare’s bottom line look better so that it would pass Congress in the first place.
Now, Social Security and Medicare trustee Charles Blahous has come forward with a new report detailing another of Obamacare’s accounting frauds. Blahous charges that $470 billion of the law’s Medicare cuts are used to both: 1) add money to Medicare’s Trust Fund and 2) fund new subsidies for buying health insurance. If this “double-counting” is eliminated, Blahous argues, Obamacare would add, not subtract, at least $346 billion to deficits over the next 10 years.
Blahous’ study — which was peer-reviewed and not merely an ideological think tank product — must have struck a nerve, because the White House immediately attacked the report, calling it “another brand of new math.” They turned to the Congressional Budget Office, who has recently certified that Obamacare will reduce the debt by $143 billion through 2019.
But the CBO has also previously acknowledged the “double counting” problem that Blahous identifies. In a January 2010 letter to Sen. Jeff Sessions, ranking member of the Senate Budget Committee, the CBO wrote, “The act’s effects on the rest of the budget — other than the cash flows of [Medicare] — would amount to a net increase in federal deficits of $226 billion over the same period.”
The Centers for Medicare & Medicaid Services, the government agency that administers Medicare, has also acknowledged the double-counting problem. The CMS wrote in an April 2010 report, “In practice, the improved [Medicare] financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.”
Medicare’s financing system is complicated, so think of the issue this way: Imagine that you are a family diligently saving $200 every month for college. Someone comes along and tells you that your kids will never get into college unless you also spend $200 on tutoring now. “But won’t this cost me $400 total?” you ask. “No,” they tell you, “Just write yourself a $200 IOU every month to cover what you were saving before.” When it comes time to pay for your child’s tuition, no college will to accept your IOUs as legal tender.
This is the problem Obama’s accountants hoped no one would notice. The money that Obamacare spends on health insurance subsidies today will only make it necessary to borrow more money to pay for Medicare later. This is why the only “new math” here is being performed by the White House.