Democrats say latest Trump budget cuts Medicare, but it’s not that simple
Democrats didn't wait long after President Donald Trump unveiled his budget for 2020 to call him out for cutting Medicare, a program he promised to leave untouched.
"The Trump administration wants to cut hundreds of billions of dollars from the #Medicare budget, all while giving billionaires and giant corporations huge tax breaks with the #GOPTaxScam," tweeted Democratic presidential candidate Elizabeth Warren, D-Mass., on March 12.
Democratic Hawaii Sen. Brian Schatz talked of $845 billion in cuts over the next 10 years.
'It's right there in the budget that the president released this week," Schatz said.
Reading the summary table in the budget, Schatz has a point.
The administration's projects Medicare spending that is $846 billion less than what the government would have spent if everything stayed on the same path it's on today.
Whether that's a cut is a more difficult question. While Democrats criticize Trump for cutting Medicare, President Barack Obama regularly offered his own version of steps to rein in the growth of Medicare. In his last budget, Obama proposed trimming spending by about $420 billion over 10 years. (Republicans accused Obama and Democrats of cutting Medicare many times, a claim we never rated better than Half True.)
The reality is, spending rises every year in Trump's budget, except for the last one in 2029 (which is mainly a fluke of timing related to when Medicare pays its bills).
To complicate things more, that $846 billion isn't what it appears to be. Two hefty pieces of Medicare — extra payments to hospitals that serve a lot of uninsured patients and funds for teaching hospitals — were moved out of Medicare and into the regular general fund budget. There were cuts, but not nearly as much as the Medicare line items would suggest.
Adding those dollars back reduces the total reduction to $595 billion for Medicare.
But is that actually a cut?
"This issue has been around for decades," said Tricia Neuman, the Kaiser Family Foundation's Medicare policy director. "It is a proposed reduction relative to the baseline. A cut sounds worse than a reduction, but the effect is the same. If these proposals were adopted, there would be less money paid to providers for specific Medicare services than there would have been."
Most of the proposed changes target payments to hospitals and other providers — and that might not affect Medicare patients.
Neuman and many other researchers and analysts believe there is room to spend less without hurting recipients.
"In general, these proposals are in areas where there is evidence we pay providers too much," said Matthew Fiedler, at the Brookings Institution Center for Health Policy. "One big proposal is to make payments site-neutral. Currently, we often pay more for the same service when it's delivered in a hospital rather than in a doctor's office, even when there's no evidence the site of service makes a difference."
Two of the plans along these lines would save a combined $160 billion, according to the Health and Human Services Department.
In 2009, researchers at the Dartmouth Center for Health Policy and Clinical Practice reported that "Higher spending does not result in better quality of care, whether one looks at the technical quality and reliability of hospital or ambulatory care, or survival following such serious conditions as a heart attack or hip fracture."
It's important to note that not all of the proposed cuts land on providers.
Neuman pointed to changes in Medicare's Part D prescription drug insurance program that directly affect recipients. While one change would cap out-of-pocket costs for people with the very highest drug costs, another would expose people below that cost level to higher fees. At the end of the day, the Trump budget reduces payments for people who rely on prescription drugs by $50 billion.
Those $50 billion might be the clearest example of Medicare cuts in the Trump budget. The remaining $545 billion potentially could be absorbed by providers.
With Democrats running the House, Trump's budget has no chance of passage. That's typical for any presidential budget, and it's particularly true for this one.
As an expression of policy priorities, this budget largely resembles past efforts to control the growth of Medicare spending by targeting provider payments. We continue to rate this promise as a Compromise.
White House, A Budget for a Better America, March 11, 2019
US. Health and Human Services Department, FY 2020 Budget in brief, March 11, 2019
Congressional Budget Office, Medicare—CBO's April 2018 Baseline, April 2018
White House, FY 2017 Budget, Feb. 9, 2016
Medicare Payment Advisory Commission, Medicare payment policy, March 2019
Medicare Payment Advisory Commission, Report to the Congress: Medicare and the Health Care Delivery System, June 2018
Office of Management and Budget, Fiscal Year 2016 budget, Feb. 2, 2015
Centers for Medicare and Medicaid Services, CMS Office of the Actuary releases 2018-2027 Projections of National Health Expenditures, Feb. 20, 2019
Centers for Medicare and Medicaid Services, Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers, June 5, 2018
Committee for a Responsible Federal Budget, Analysis of the President's FY 2020 Budget, March 11, 2019
Dartmouth Center for Health Policy and Clinical Practice, Health Care Spending, Quality, and Outcomes, Feb. 27, 2009
PolitiFact, GOP ad says Bruce Braley 'voted to cut $700 billion from Medicare to support Obamacare', Sept. 9, 2014
Washington Post, Democrats engage in 'Mediscare' spin on the Trump budget, March 15, 2019
Interview, Matthew Fiedler, fellow, Center for Health Policy, Brookings Institution, March 18, 2019
Interview, Tricia Neuman, senior vice president, director, Program on Medicare Policy, Kaiser Family Foundation, March 19, 2019
No service cuts but the trust fund took a hit
Protecting Medicare was was one of Trump's earliest campaign pledges. "Save Medicare, Medicaid and Social Security without cuts. Have to do it," he said in his presidential campaign announcement speech.
So far, the promise of Medicare remains in force. There have been no cuts in services or a change in the government's responsibility to fund the program.
That said, Medicare's resources to pay for those services has shrunk, and both Trump and House Republicans have proposed ways to trim Medicare spending over the next decade.
On the resources side, a side effect of the Republican 2017 Tax Cut and Jobs Act was a loss of tax dollars flowing into Medicare's Hospital Insurance Trust Fund. That's the main pot of Medicare money, and the Medicare Trustees forecast in their 2018 report that the fund would run out of money in 2026. A year earlier, they said it would last until 2029.
On Trump's watch, it lost three years of solvency.
In a presentation at the American Enterprise Institute, a market-oriented think tank, the chief actuary at the Centers for Medicare and Medicaid Services, Paul Spitalnic, said two of the lost years were due to lower than expected wage growth.
But the other lost year came from the Republican tax cuts.
"The Tax Cuts and Jobs Act of 2017 decreased individual tax rates and as a result, there is somewhat less income coming into the trust fund," Spitalnic said. "That does have an effect of making depletion of the trust fund a year earlier."
Critics of this analysis counter that the Medicare actuaries made some poor assumptions in 2017, which made 2018 look worse than it really was. On the other hand, both parties have relied on the trustees' forecast for decades.
In terms of budgets, the White House FY 2019 budget plan proposed reducing the growth of Medicare to generate $236 billion in savings by 2028. The administration said it would save money through better negotiations on drugs, shifting some payments away from the trust fund and reducing Medicare fraud.
The House Republicans had their own package of changes that they said would trim spending by $537 billion by 2028.
As ever, the debate is whether slowing the growth of Medicare is the same as cutting it. But the House proposal would make real cuts. It raised the eligibility age from 65 to 67, and increased deductibles. It also turned Medicare into a voucher program. When the Congressional Budget Office scored a similar proposal, it found that people using traditional Medicare would end up paying more.
Still, neither Trump's nor the House Republican plans became law.
For now, benefits remain as they were, but there has been a modest impact on funding that could affect the program in the future.
We rate this as a Compromise.
Medicare Trustees, 2018 report, June 5, 2018
Medicare Trustees, Medicare amendments since the 2017 report, June 5, 2018
Centers for Medicare and Medicaid Services. 2018 Expanded and Supplemental Tables, June 5, 2018
American Enterprise Institute, The 2018 Medicare Trustees Report: Fiscal challenges and future reforms, June 6, 2018
No cuts to Medicare enacted yet
As a presidential candidate, Donald Trump pledged that he wouldn't cut Medicare, the federal health-care program that mainly serves Americans 65 and older.
So far, nothing has been enacted on Trump's watch that cuts Medicare benefits, said Erin A. Taylor, a policy researcher at the RAND Corp. "To my knowledge there has been no actual policy enacted yet during the Trump administration that would cut Medicare funding in such a way as to have significant impact on beneficiaries," she said.
However, Trump did offer a number of ideas for overhauling pieces of Medicare in his fiscal year 2019 budget proposal. Some, Taylor said, could leave Medicare beneficiaries better off, while some might not; it is hard to say at this time whether the gains for beneficiaries would outweigh the losses.
Over 10 years, Trump's 2019 budget proposal says it would cut Medicare spending by a cumulative $236 billion, including by reductions in "waste" and "fraud" and by changing the way drugs are priced and paid for in the program.
The largest cuts, Taylor said, would come from reducing Medicare's payments for uncompensated care in hospitals and from changing payments for graduate medical education. But "the effects of these changes may trickle down to beneficiaries in terms of changes in sites of service or effects on incentives on the parts of hospitals to provide care, but those effects may not be negative," Taylor said.
The changes to the Medicare Part D drug program would have a more direct impact on beneficiaries, though it's hard to tell how exactly the changes might flow through the system.
"On the positive side, requiring Medicare plans to pass through a proportion of manufacturer rebates to beneficiaries at the pharmacy could serve to reduce costs for beneficiaries," Taylor said, though she added that the system would be technically difficult to implement.
On the other hand, she said, the budget proposes not to count those cost reductions towards the calculation of the beneficiary's out-of-pocket spending. This means it would take beneficiaries longer to reach the catastrophic phase of the benefit.
Another possible benefit, at least for those with very high drug costs, is that those who reach the catastrophic phase would pay nothing for their prescriptions for the rest of the year, as opposed to the 5 percent share they would pay currently.
The budget also proposes to eliminate generic-drug cost sharing for low-income subsidy beneficiaries; this increases the government's cost burden, but it could encourage these beneficiaries to take needed medications, Taylor said.
A final potential negative: The budget proposes to reduce the number of drugs required to be covered on plan formularies. This could restrict the ability of beneficiaries to access the medicines they need, and may require them to go through an appeals process to gain coverage.
The budget proposal does call for $236 billion in Medicare reductions, which would contradict Trump's campaign promise. On the other hand, the budget proposal is a non-binding document, it includes some provisions that would benefit users of Medicare, and more than a year into Trump's presidency, nothing has been enacted that is contrary to his promise not to cut Medicare. So we rate the promise In the Works.
Email interview with Erin A. Taylor, policy researcher at the RAND Corp., Feb. 15, 2018
Future of Medicare funding uncertain under Trump presidency
President Donald Trump's vow to save Medicare from budget cuts is facing a snag as the 2018 budget makes its way through Congress.
The promise, along with maintaining current funding levels for other entitlement programs, was one of Trump's earliest campaign pledges. "Save Medicare, Medicaid and Social Security without cuts. Have to do it," he said in his presidential announcement speech.
The 2018 White House budget proposal released in May left Medicare benefits largely untouched compared with Medicaid, which would see a more than $600 billion decrease over 10 years compared to current spending levels. Still, Medicare spending would decrease by more than $50 billion in the next decade compared with current levels.
Though the proposed budget doesn't spell out large direct cuts to Medicare, cuts to other programs would indirectly affect the senior health insurance program. For instance, the budget included eliminating the State Health Insurance Assistance Program, which provides Medicare beneficiaries with counseling and assistance to navigate the health care system.
However, those cuts won't necessarily happen because the White House budget proposal is more of a wish list that the president gives to Congress, where both the House of Representatives and the Senate must create and agree on a final budget to be signed by the president.
The House's current budget resolution, which was released in July, asked to cut Medicare by $487 billion between 2018 and 2027. Much of this would be done by turning Medicare into a voucher-like program, increasing income-related premiums and limiting medical malpractice litigation by capping attorney fees and awards, according to the plan.
Again, that $487 billion cut won't necessarily make it into the final budget, especially since the House resolution currently doesn't contain legal language that would help ensure the full cut through a special legislative process called reconciliation.
Even though the budget resolution has a line that calls for reduced Medicare spending, it doesn't actually include a way to make that happen, said Marc Goldwein, the senior vice president of the Committee for a Responsible Federal Budget. He said Congress could end up making some moderate cuts to Medicare this year, but "they're clearly not prioritizing it."
Congress and the White House must agree on a budget before Oct. 1 or pass a continuing resolution to avoid a government shutdown during budget negotiations.
But even if Medicare doesn't undergo cuts in the next budget, it's still possible that the program could be affected by an Obamacare repeal or replacement.
"It's unclear given the uncertainty surrounding dealings in Washington right now," said David Lipschutz, an attorney with the Center for Medicare Advocacy. "But we are certainly not out of the woods."
An effort to repeal portions of the health care law died on the Senate floor on July 28 when Republican Sen. John McCain voted against it, but that hasn't stopped the GOP from trying again. Another Obamacare partial repeal proposal by Sens. Bill Cassidy, R-La,, Lindsey Graham, R-S.C., and Dean Heller, R-Nev., has the support of McCain and Trump, according to press reports.
A process that temporarily allowed health care legislation to advance in the Senate with 50 votes rather than the usual 60 votes -- Republicans' best chance at passing a health care bill -- will end on Sept.30.
Lipschutz said the upcoming deadline could pressure Republicans to hastily pass legislation on health care.
If a new partial repeal looks anything like past efforts to change health care, Medicare would likely be affected by cuts to Medicaid spending, one-third of which goes to low-income seniors who are enrolled in both Medicare and Medicaid. (The Congressional Budget Office projected over $800 billion in cuts to Medicaid by 2026 in its analysis of the Obamacare Repeal Reconciliation Act of 2017.) The Commonwealth Fund calculated that, under the previous repeal bill, around 11 million Medicare beneficiaries would lose coverage for long-term services under Medicaid, such as nursing home care.
The overall change to Medicare spending will depend on what makes it into the final 2018 budget and what happens with Obamacare. But current legislative proposals, some of which have garnered Trump's support, plan for funding cuts that affect Medicare in some way, whether directly or indirectly. Trump has not signed either into law yet, so for now we rate this promise Stalled.
Congressional Budget Office, Obamacare Repeal Reconciliation Act of 2017 cost estimate, July 19, 2017
U.S. House of Representatives, 2018 spending plan blueprint, July 19, 2017
The White House, 2018 budget proposal, May 23, 2017
Office of Sen. Bill Cassidy, press release, Sept. 12, 2017
The Commonwealth Fund, "AHCA Would Affect Medicare, Too," May 17, 2017
Donald Trump campaign website, copy of interview with The Daily Signal, "Why Donald Trump Won't Touch Your Entitlements," screengrab from Jan. 28, 2017
Time, "Here's Donald Trump's Presidential Announcement Speech," June 16, 2015
USA Today, "Senate narrowly defeats 'skinny repeal' of Obamacare, as McCain votes 'no,'" July 28, 2017
The Hill, "McCain backs Graham-Cassidy Obamacare repeal effort," Sept. 9, 2017
POLITICO, "Trump wants one last Senate push on Obamacare repeal," Sept. 5, 2017
Los Angeles Times, "Republicans face Sept. 30 deadline for fast-track Obamacare repeal," Sept. 1, 2017
Phone interview with David Lipschutz, an attorney with the Center for Medicare Advocacy, Sept. 12, 2017
Phone interview with Marc Goldwein, the Senior Vice President of the Committee for a Responsible Federal Budget, Sept. 12, 2017