Obamacare’s expansion of insurance coverage is projected to cost $2 trillion over the next decade, according to the Congressional Budget Office, with the costs covered by a reduction in projected Medicare spending and higher taxes.
Throughout the health care debate, critics questioned whether the Medicare savings being claimed on paper would ever actually materialize. Historically, lawmakers have been pressured into overriding scheduled spending cuts when it actually comes time to make them.
Medicare Advantage is an early test for Obamacare. The program gives beneficiaries the ability to gain private coverage that offers benefits beyond traditional Medicare and currently has nearly 16 million enrollees. A 2012 CBO report finding that that Obamacare reduced deficits by $109 billion over 10 years also found that the bill produced $156 billion in Medicare Advantage savings from cutting payment rates. In other words, under that CBO estimate, doing away with Medicare Advantage savings – with all else being equal – would mean that Obamacare would go from reducing deficits to increasing them.
In February, CMS announced plans to trim Medicare Advantage payments to plans by 1.9 percent in 2015. This unleashed a ferocious lobbying effort by the insurance industry and Democrats had a growing fear of attacks from Republicans over disruption in benefits for senior citizens during an election year. Then, on Monday, CMS reversed course and said they would actually increase payments slightly, by 0.4 percent. …
… Obamacare’s finances aren’t going to be rocked by this one change to Medicare Advantage in 2015, but if this is indicative of a broader trend in which the health care law doles out benefits while the taxes and spending cuts that were supposed to offset the costs get scaled back, it will make the law difficult to sustain.