Exposing the Medicare double count

Perhaps the easiest way to understand this is to look at Social Security. If we generate $1 in savings within that program, then that’s $1 that Social Security can spend later. If we also claimed this same $1 to finance a new spending program, we would clearly be adding to the total federal deficit. There has long been bipartisan understanding of this aspect of Social Security, which is why Congress’s paygo rules prohibit using Social Security savings as an offset to pay for unrelated federal spending.

No such prohibition exists in the budget process against committing Medicare savings simultaneously to Medicare and to pay for a new federal program. It’s this budget loophole, unique to Medicare, that gives the health law’s spending constraints and payroll tax hikes the appearance of reducing federal deficits. But it is appearance, not reality. If you have only $1 of income and are obliged to pay a dollar each to two different recipients, then you will have to borrow another $1. This is effectively what the health law does. It authorizes far more in spending than it creates in savings…

Medicare spending cuts and tax increases have always been double-counted—recorded both on the paygo scorecard and added to the Hospital Insurance Trust Fund. No budgetary rules were bent. But the fiscal stakes in the Affordable Care Act are extraordinarily high. The health law’s Medicare hospital insurance spending cuts and tax hikes are now claimed to have eliminated most of the program’s medium- and long-term deficits—even as they have also paved the way for the most expensive entitlement expansion in a generation.