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Obamacare law was ‘funded’ and expected to save billions; not so for Medicare Part D
"Obamacare? Expensive?" says a photo-quotation mashup that a reader sent us on Facebook.
Beneath a photo of President George W. Bush making a face, the caption reads, "Bush’s Medicare D was far more expensive than the Affordable Care Act, and, unlike the ACA, was never budgeted."
The Facebook-shared image is unattributed, but its caption tracks word-for-word with an Oct. 18, 2013, tweet and blog post by writer and pundit Andrew Sullivan.
Sullivan’s post doesn’t elaborate on Part D -- Medicare’s prescription drug program, created in 2003.
But others have made similar comparisons.
Economist Paul Krugman wrote in a Dec. 29, 2009, New York Times blog entry about "the trouble Republicans have been having as they try to explain why, if they consider the fully-funded, deficit-reducing Democratic health care reform unaffordable, they voted for the completely unfunded Medicare drug benefit six years ago."
Did Congress "budget" enough for the promises made under the Obamacare law but not those in Medicare Part D -- and was Part D "far more expensive"?
Via email, Krugman told us, "Not sure about what ‘never budgeted’ means, or exactly how ‘more expensive’ is defined. But the ACA designated cost savings and revenues to pay for the outlays; Part D just specified outlays with no offset."
Alan Auerbach, an economist at the University of California-Berkeley and research associate at the National Bureau of Economic Research (a nonprofit, nonpartisan organization), told us by email, "It's certainly true that the ACA was funded while Medicare Part D was not."
Part D is an optional insurance program for prescription drugs for senior citizens on Medicare. Private insurance companies offer a variety of plans subsidized by the government, and beneficiaries get to choose the plan that's best for them. Obamacare requires Americans to buy health insurance, extends Medicare to cover more people and makes numerous other changes.
Auerbach said, "The ACA was funded in the sense that taxes were increased to pay for the estimated expenditure cost. Medicare Part D provided a new benefit with a substantial long-run cost... and did not raise any taxes."
Steve Ellis, vice president of Taxpayers for Common Sense, told us by email, "Medicare Part D was always coming out of general revenues (unlike most of the rest of Medicare)," because the federal deficit was a less prominent concern at the time, "whereas ACA/Obamacare was drafted in a more deficit-conscious era." Ellis’ group, based in Washington, D.C., describes itself as a nonpartisan watchdog advocating more transparency and less waste in government spending.
In a Nov. 3, 2013, fact-check, PolitiFact summed up tax increases in the Obamacare law, aside from the penalty Americans will pay if they don’t have approved health insurance: Medicare payroll taxes for the wealthy, investment income taxes and others on insurance companies, the health care industry and more are included. Other provisions are intended to push Medicare costs down.
Medicare Part D wasn’t "funded" in that a source of money was not created or dedicated to offset all its costs -- say, a tax increase or other funding mechanism.
Medicare trustees’ March 23, 2004, report explained Part D would be financed with general revenue (mostly federal income taxes) plus the enrollees’ premium payments and some money from the states.
Because the premium amounts and the amount of general revenue would be reset each year, they could be adjusted to cover anticipated costs, the report said: "Thus, Part D income will automatically track Part D expenditures fairly closely."
Which cost(s) more?
Part D and Obamacare are intended to extend into the future. How does one measure the cost of such efforts? One way is to look at projected costs over a 10-year span, as PolitiFact Virginia did in a Dec. 7, 2010, fact-check.
Which 10-year span? The photo-quotation that touched off this story gave no context.
First we looked at the cost estimates available to members of Congress when they voted.
On Nov. 20, 2003, the nonpartisan Congressional Budget Office estimated that Part D’s gross cost would total $409.8 billion from 2004 through 2013. The net cost of the entire Medicare Modernization Act, including Part D and expected revenue increases, was given as $394.3 billion ($501 billion in today’s dollars).
On March 18, 2010, the CBO and Congress’ Joint Committee on Taxation estimated that the Obamacare law’s net effect would be to save the government -- that is, reduce the federal deficit -- $138 billion from 2010 through 2019 ($148 billion in today’s dollars).
Later estimates have varied, and realities are also kicking in.
PolitiFact found in a June 15, 2011, fact-check that Medicare Part D costs were coming in 28 percent to 40 percent lower than projected by the CBO in 2003. Among the reasons: Fewer people than expected used the program and expiring patents made some name-brand drugs cheaper.
The Obamacare law isn’t fully implemented yet, but Ellis said, "The tricky thing about the ACA/Obamacare is that it counts on a lot of moving parts and a lot of assumptions to get to the savings number. If things don’t work out as planned, it won’t be a deficit reducer… whereas after nearly a decade we know what Medicare Part D cost."
Bob Moffit, a senior fellow at the conservative Heritage Foundation’s Center for Health Policy Studies, pointed out by phone that the Medicare trustees have expressed doubt that Congress will leave its cost-reducing measures in place -- particularly the "sustainable growth rate" formula meant to lower Medicare payments to doctors.
The Medicare trustees’ May 31, 2013, report said, "At a minimum, readers should not assume that the SGR-related payment rate reductions will take place."
That report’s forecasts included a prediction that Part D’s general revenue outlays from 2013 through 2022 could total $852 billion but, the trustees wrote, "Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current-law projections in this report."
As for the Obamacare law, the CBO said in a May 14, 2013, blog post that its most recent prediction of the act’s total budget impact was a July 24, 2012, estimate that repealing the law could raise the federal deficit by $109 billion ($111 billion in 2013 dollars) from 2013 through 2022.
But "projections of the effects of the ACA" are "highly uncertain," the CBO warned, with other factors including the law’s overall effect on the nation’s health systems and the Supreme Court decision allowing states to opt out of expanding Medicaid eligibility. The law had required states to widen Medicaid access.
Krugman gives a different measure in his late-2009 blog entry: "According to the Medicare trustees, Part D created a $9.4 trillion unfunded liability over the next 75 years." The trustees’ 2013 report updated that estimate to $9.2 trillion for 2013-2087.
A June 17, 2013, PolitiFact Virginia fact-check showed that January 2013 Government Accountability Office estimates of the Obamacare law’s cost over 75 years could result in two scenarios: It could raise the national debt $6.2 trillion if its cost containment measures were phased out, or it could save the government $13.3 trillion if it works as intended. A GAO analyst said the report did not say whether one outcome or the other is more likely.
The image shared on Facebook said, "Bush’s Medicare D was far more expensive than the Affordable Care Act, and, unlike the ACA, was never budgeted."
It’s a vague claim without context. Looking for a reasonable way to evaluate it, we found the Obamacare law was "funded" and Part D "unfunded" and that, using estimated 10-year costs at inception, the former was projected to save $148 billion and the latter to cost something under $501 billion (in 2013 dollars).
We rate the claim as Mostly True.
MOSTLY TRUE – The statement is accurate but needs clarification or additional information.
Click here for more on the six PolitiFact ratings and how we select facts to check.
Andrew Sullivan, tweet and blog post, Oct. 18, 2013
The New York Times blog post by Paul Krugman, Dec. 29, 2009
Email interview, excerpted, with Paul Krugman, Nov. 14, 2013
Email interview, excerpted, with Alan Auerbach, University of California-Berkeley, Nov. 13-14, 2013
Email interview, excerpted, with Steve Ellis, vice president, Taxpayers for Common Sense, Nov. 15, 2013
Telephone interview with Bob Moffit, senior fellow, Center for Health Policy, conservative Heritage Foundation’s Nov. 14, 2013
PunditFact fact-check, "The health care law raises taxes and cuts Medicare, says Scott Brown," Nov. 3, 2013
Medicare trustees’ "2004 Annual Report," March 23, 2004
PolitiFact Virginia fact-check, "Bobby Scott says Republicans created $1 trillion prescription drug plan," Dec. 7, 2010
Congressional Budget Office letter to U.S. Rep. Bill Thomas, Nov. 20, 2003
Congressional Budget Office letter to U.S. Rep. Nancy Pelosi, March 18, 2010
PolitiFact fact-check, "Did Medicare Part D come in 40 percent under budget because of its design?," June 15, 2011
Medicare trustees’ "2013 Annual Report," May 31, 2013
Congressional Budget Office blog post, "CBO’s Estimate of the Net Budgetary Impact of the Affordable Care Act’s Health Insurance Coverage Provisions Has Not Changed Much Over Time," May 14, 2013
Congressional Budget Office letter to U.S. Rep. John Boehner, July 24, 2012
PolitiFact Virginia fact-check, "Morgan Griffith says GAO estimates Obamacare will add $6.2 trillion to long-term deficits," June 17, 2013
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Obamacare law was ‘funded’ and expected to save billions; not so for Medicare Part D
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