Says the federal agency in charge of Medicare and Medicaid will disburse $803 billion in benefits this year, making "it larger than all but 15 of the world's economies."
Michael McCaul on Monday, July 19th, 2010 in an e-mail
Rep. Michael McCaul says CMS will disburse $803 billion, making it larger than all but 15 of the world's economies
Republicans balked at President Barack Obama's July decision to appoint the top federal administrator for Medicaid and Medicare without a congressional hearing, saying Congress deserved the chance to quiz the appointee, Donald Berwick, on how he intends to manage the federal behemoth called the Centers for Medicare and Medicaid Services.
Later that month, U.S. Rep. Michael McCaul, R-Austin, chimed in with a financial reason he wishes Berwick had undergone a public grilling: "The CMS will disburse $803 billion in benefits this fiscal year, which makes it larger than all but 15 of the world’s economies." The U.S. Senate Republican Policy Committee, which publishes policy papers for GOP senators to consider, had said as much weeks earlier. McCaul serves on a similar panel advising House Republicans.
We wondered whether McCaul's international comparison was on point.
In its cost estimates for fiscal 2010, CMS notes that it distributes "more benefits than any other federal agency" — $803.1 billion in this fiscal year that runs through September. A CMS spokeswoman told us that figure still holds.
Mike Rosen, a McCaul spokesman, pointed us to the International Monetary Fund, which publishes a report twice a year — most recently in April — analyzing global economic developments, including data on inflation, unemployment and countries' gross domestic product.
The IMF estimated that this year, the United States has the largest GDP among 182 other countries, $14.79 trillion, followed by China ($5.36 trillion), Japan ($5.27 trillion) and Germany ($3.32 trillion).
By that yardstick, Rosen said, CMS's annual spending would rank 16th among those countries, behind Korea's gross domestic product ($991 billion) and ahead of the Netherlands ($797 billion).
Paul Van de Water, an analyst at Washington's liberal-leaning Center for Budget and Policy Priorities, agreed the CMS would rank 16th — the new health care law has little effect on Medicare and Medicaid spending this year — but said the billions in benefits merit some perspective.
"The United States is a big country, and health care is much more expensive in the U.S. than anywhere else, so it's not surprising that health care for the elderly, disabled and poor costs a lot of money," Van de Water said. The United States has the world's third-largest population, according to the CIA World Factbook, behind China and India. "U.S. government spending on national defense and homeland security will total about $750 billion this year; that number exceeds a lot of foreign GDPs, too, but the comparison provides no information about appropriate defense policy."
Van de Water said a more reasonable benchmark is the size of the U.S. economy. CMS "estimates that total health care spending in the U.S., for all people and programs, in calendar year 2010 will equal 17.3 percent of the U.S. gross domestic product," he said. "Of that amount, federal spending on Medicare and Medicaid is projected to equal 5.3 percent of GDP." Defense spending: also about 5 percent.
Thomas Saving, an economist and director of the Private Enterprise Research Center at Texas A&M University, agreed the GDP comparison would be more valuable. He noted that total health care expenditures in Japan, which has the world's the third-largest GDP, are about 9 percent of its GDP — or about half the U.S. ratio.
Saving said McCaul's "comparison has no useful information," pointing out that the population of the smaller economies are tiny when compared to the populations in countries with the largest GDPs — or states, for that matter. "Another not useful fact is that (national) CMS benefits are smaller than the Texas state GDP," he added.
"Social Security benefits are 4.8 percent of the U.S. GDP — also larger than most of the world's economies," Saving said. "We are a big country in population and a rich country in per-capita GDP.
Offering a less critical take, Brian Blase, a health policy analyst from the conservative-leaning Heritage Foundation, said McCaul's comparison illustrates a bigger point: "The U.S. spends an awful lot on health care, primarily on Medicaid and Medicare. We spend more (total) on health care for seniors and poor people than most of the other countries could spend if they spent all their income."
However, Blase agreed McCaul's claim is "somewhat misleading" and said "if you really want to do a comparison, you want to put it in per capita terms." How come? Gross numbers can be misleading without context. For instance, China recently passed Japan as the country with the second highest GDP, but it's "nowhere close to as wealthy as Japan right now because Japan's population is a fraction of the population of China," he said.
Rosen of McCaul's office stood by the congressman's statement in an e-mail: "We were not comparing our health care expenditures to that of other countries... The numbers are the numbers. 16th is 16th."
Our take? True, the CMS is poised to spend some $800 billion this year, more money than the size of all but 15 nations' economies. But this dramatic point isn't a meaningful comparison, because it lacks any context — such as spending per person — that puts the numbers in perspective.
We rate McCaul's statement Half True.