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The Politics of Medicare

Courtesy of James Kwak at Baseline Scenario

The politics of Medicare were aptly summed up by Brad DeLong last May:

“The political lesson of the past two years is now that you win elections by denouncing the other party’s plans to control Medicare spending in the long run–whether those plans are smart like the Affordable Care Act or profoundly stupid like the replacement of Medicare by RyanCare for the aged–sitting back, and waiting for the voters to reward you.”

This is one manifestation of an important political dynamic, which is an important theme of White House Burning: the smart political bet is to accuse the other side of fiscal irresponsibility while being as irresponsible as possible yourself.

That’s the context in which to interpret the latest Republican claims that Barack Obama is trying to end Medicare, reported by Sam Stein. Mitt Romney apparently is accusing Obama of both bankrupting Medicare and of reducing Medicare spending, which are patently contradictory accusations. Yet despite its popularity, the program is so poorly understood that he and his advisers apparently think that they can get mileage out of this line of attack.

To be clear, Medicare costs are rising and projected to continue to grow faster than GDP. But Medicare is largely funded out of general revenues, so the only policy that could actually bankrupt the program is one that reduces general revenues—that is, tax cuts. The Affordable Care Act implemented several measures that are intended to reduce Medicare spending without changing its basic fee-for-service benefit structure; the Independent Payment Advisory Board, which Republicans love to demonize (and which I’ve written about before), is prohibited by law from making changes that would reduce benefits. In other words, these provisions should reduce spending while maintaining the current benefit structure.

There is a reasonable debate about how successful those measures will be. But you can’t simultaneously criticize the ACA for bankrupting Medicare and for cutting Medicare spending too much. And you shouldn’t criticize the ACA for bankrupting Medicare when you are pushing huge tax cuts that will undermine the funding for the program.


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