Venango County Tea Party Patriots

A non-partisan, non-profit, non-member, association dedicated to educating the public and promoting the principles of fiscal responsibility, constitutionally limited government and free market economics, and all other lawful activities.

Congressional Budget Office

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Millionaires on Medicaid

Expanding Medicaid coverage to an estimated nine million more Americans—as mandated by the Affordable Care Act—reinforces the idea that Medicaid only serves the poor. That perception is not accurate. And it distracts from a looming budgetary threat to the program: long-term care.

More than two-thirds of annual spending on long-term care for the elderly is paid by state and federal governments, $60 billion of which flows from Medicaid. With 10,000 baby boomers reaching retirement age every day for the next 19 years, the Congressional Budget Office projects that spending on long-term care will more than double by 2050—to 3% of GDP from 1.3%.

We might accept these rising costs if benefits flowed only to the elderly poor, as originally intended. But that is not the case. Significant long-term care benefits flow to individuals in the top 20% of retirement earnings, enabled by Medicaid’s generous asset-exclusion limits.

In many states, an elderly person may own a home valued at $802,000, plus home furnishings, jewelry and an automobile of uncapped value while receiving long-term Medicaid support. In addition, they are allowed to have various life-insurance policies, retirement accounts with unlimited assets, $115,920 in assets for a spouse, income from Social Security, and a defined-benefit pension plan. By most standards, such a household would be considered wealthy.

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Obamacare Adding Fuel to Health Care Spending Crisis

Today’s Congressional Budget Office (CBO) report [2] reiterates the long-standing and obvious fact that there is a health care spending crisis approaching, resulting largely from the structurally flawed Medicare program and made significantly worse by Obamacare’s new unfunded entitlement spending.

The key points:

  • Medicare spending is unsustainable, but it’s even more unsustainable than the CBO says. The CBO report shows that Medicare spending will be 3 percent of gross domestic product (GDP) in 2013, rising to 4.9 percent of GDP by 2038. While this is a huge problem, when rational assumptions are made, the problem gets much worse. This level of Medicare spending assumes that current law will go into effect, which includes a 25 percent pay cut for Medicare physicians in January 2014 and Obamacare’s over $700 billion worth of Medicare payment reductions over the next decade—both of which, if kept in place, would have a severely negative impact on seniors’ ability to access care.
  • Medicare has an inevitable demographic challenge [3] that has already begun, and it is going to get much worse. The baby-boomer generation began enrolling into Medicare in 2011 at the rate of 10,000 new beneficiaries per day and will continue to do so until 2030. The number of beneficiaries will grow from about 52 million in 2013 to over 81 million in 2030. This will dramatically increase Medicare spending—a problem that has been forecasted for decades and has been ignored. Medicare needs structural reforms [4] in order to put it on a sustainable spending path.
  • Obamacare is the single biggest factor driving the growth in mandatory health care spending over the next decade. Obamacare’s exchange subsidies and Medicaid expansion are projected to account for 53 percent of the increase in health care spending through 2023. This means Obamacare’s spending accounts for more than even the aging population and excess health care cost growth.

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CBO Says Financial Crisis Likely

The Congressional Budget Office released its 2013 long-term budget outlook on Tuesday, stating that “a large and continually growing federal debt …would increase the probability of a fiscal crisis for the United States.”

The report says under current laws and policies, the federal debt could reach 100 percent of Gross Domestic Product in 2038.

It also projects that the federal government’s health care spending “will grow considerably in 2014 because of changes made by the Affordable Care Act.”

CBO says federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product. “That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007,” the report said.

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