TLC — Washington Style

The Theft

The Medicare Act was signed into Law by President Lyndon Johnson in January, 1965. It was intended as a national HSA with individual accounts called lockboxes. Each worker puts a small amount away each month during the work years, collected by the government through a payroll tax. Each person’s contributions were kept in a virtual lockbox with a specific name on it.

Based on a 40-year employment period, receiving an average national salary, and with tax-deferred growth at some nominal, safe compound rate (say 3%), the average American would have amassed over $200,000 in 2013 dollars. That did not happen, because of the theft.

Some time between 1965 and 1970 (I could not discover precisely when), Congress broke open all those tens of millions of lockboxes, confiscated tens of billions of dollars, and dumped them into the General Account, to spend on anything Congress wanted. They replaced all the cash with government-issued IOUs.

Cash can be invested and can grow. IOUs cannot and therefore do not. As demand for service grows while the money-to-pay-for-care shrinks, Medicare becomes insolvent, due to the theft.

The Lie

The Balanced Budget Act (BBA) of 1997 was supposed to put Medicare on a path to fiscal stability. The Act included a calculation called SGR (sustainable growth rate) that adjusted physician payments up or down depending on the prior year’s Medicare budget balance. If Medicare spent more than it collected (as it invariably did), the next year’s physician reimbursement schedule would be reduced to achieve balance.

(Ask yourself why balancing Medicare accounts is done solely on the backs of the doctors while the bureaucrats get more and more “healthcare” dollars? Why must medical dollars shrink to compensate for increased spending on the bureaucracy?)

The SGR formula quickly created payment reductions to doctors so severe that general physicians could no longer accept Medicare patients and keep their doors open. As more and more enrollees could not get care, Congress enacted the “DocFix,” the big lie.

The DocFix does not fix anything—it makes things worse. The Docfix is literally Congress’s temporary postponement of what it instituted in 1997: deferral of reduction in physician reimbursements required by its own fiscal solution—the SGR. Without SGR, i.e., with the DocFix, Medicare’s march to bankruptcy accelerates.

In the past eleven years, a DocFix has been applied seventeen times. In that same period, the adjustments to Medicare physician reimbursements have consistently been less than the national inflation rate. Thus, even with the deferral of SGR draconian cuts, now up to 25-27%, physicians caring for Medicare patients have been subjected to a Cost-Of-Living-Adjustment … downward!

Washington’s DocFix lie to the public goes like this. “Seniors: We are fixing things so you can still see your doctor when you want. Give me your vote!” The truth is simple.

Medicare doctors are a vanishing species. The mechanism to balance Medicare accounts (SGR) is not being used (DocFixes) and therefore the Trust is fast approaching insolvency … leading to a cover-up.

Cover-up

Recall mid-1990’s headlines about Medicare Trust Fund bankruptcy by 2012-15 according to the Congressional Budget Office (CBO.) Public response to these dire predictions was a major impetus for the Balanced Budget Act of 1997 with its SGR reduction in physician payments. The result, according again to the CBO, was an improvement so that Medicare would not go broke until 2025.

Last week, the President said that things were even better, as the bankruptcy date had been pushed back to 2030, due largely to his signature domestic achievement—the Affordable Care Act. That was two lies in the service of one cover-up.

The CBO is usually described as a non-partisan independent watchdog government agency tasked with producing accurate, objective financial evaluations of the past as well as reliable predictions of the future. However, the CBO functions under White House Executive Orders as well as Congressional Advisories. The CBO’s Report on Medicare Trust Solvency is a cover-up.

The explanation is simple and subtle. All those “improvements” in Medicare solvency—bankruptcy pushed back to 2015, then 2025, now 2030—are calculated assuming the SGR had been implemented. The CBO accounted the Medicare Trust as though the $716 billion in ACA cuts had actually happened, which they have not! Thus, billions in “savings” are imaginary, more Washington magical thinking.

The cover-up is as though you say you have more money in your checking account by simply ignoring the last seventeen checks that you wrote (seventeen DocFix's). Nowhere in my accounting courses did any professor say fictitious accounting was acceptable practice, i.e., not counting certain debits because, well, they will make me look bad.

Medicare is inherently unstable. No economic system can survive when Supply (dollars and doctors) is limited and shrinking, while Demand (services and goods) is unlimited and expanding.

Recent political attack ads are using the phrases such as, “My opponent is voting to end Medicare as we know it,” and “Medicare will not be there for you because my opponent does not care about you. I care, so vote for me!”

Our reality is this: Medicare will “end” (destroy) itself and will not “be there for you” all because of Washington’s TLC: theft, lie, and cover-up.