“Nothing’s ‘Free'”, Says WashPost

Today the Romney-Ryan campaign came out with a new ad blasting the Affordable Care Act’s cost offsets, specifically its Medicare cuts and its tax increases.

WONKBLOG – By Dylan Matthews on August 22, 2012

Let’s take the claims here one by one.

  • Obama is raiding $716 billion from Medicare…– This one’s true. The most recent CBO analysis of the Affordable Care Act, released last month, estimated the 10-year Medicare cuts in the bill at $740 billion, so if anything the ad’s number is low.
  • …changing the program forever.– Also likely true. You can’t cut $740 billion from a program without changing it a whole lot. To recap, the cuts consist mainly in cuts to Medicare Advantage, which partners with private insurers and actually ends up increasing costs, and in hospital reimbursement rates, which hospitals agreed to in exchange for the influx of customers that comes with the bill’s implementation. In the past, reimbursement cuts have hurt quality at some hospitals, though the previous cuts were much larger than those in Affordable Care Act. So the bill does change Medicare, but how much and in what ways is yet to be determined.
  • Taxing wheelchairs and pacemakers… – Also true. The ad is referring here to the ACA’s 2.3 percent tax on sales of certain medical devices, which is set to take effect later this year. The law includes a “retail exemption,” which excludes items you can typically just buy at a store, such as glasses, contact lenses, or hearing aids. But it does include wheelchairs and pacemakers. A Bloomberg Government analysis predicted the bill would curb spending on such devices, albeit mildly. The provision’s defenders, such as the Center for Budget and Policy Priorities (CBPP), note that devices affected by the tax amount to under 1 percent of total health care spending, and thus dispute the significance of the tax. But it’s real and works as the ad describes.
  • …and raising taxes on families making less than $120,000 – True in particulars but not necessarily in practice. The ad is referring here to the CBO’s finding (pdf) that 76 percent of those paying the penalty under the individual mandate fall under 500 percent of the poverty line, or $120,000 for a family of four. There are other provisions that hit non-high earners as well. The medical device tax, for instance, raises costs for pacemaker and wheelchair users making under $120,000 a year. The tax on tanning booths hit low-income tanning afficionados, and the limits on flexible spending accounts and Health Savings Accounts hit across the board.  But the law’s tax increases are generally quite progressive. The excise tax on expensive health plans only applies to plans costing more than $27,500 for a family of four, which only the very rare middle-income family reaches. The law increases the Medicare payroll tax by 0.9 percentage points for income over $200,000, and imposes a 3.8 percent tax on investment income for families with gross income of $250,000 or more. And the bill’s insurance premium tax credits, which make up the bulk of the coverage provisions, are quite progressive as well. Thus for many families, the tax credit will overwhelm any increases in medical device or tanning costs, and the bill will be an overall tax cut for them.
Unfortunately, neither the Joint Committee on Taxation nor a reputable private group has done a detailed distributional analysis to see exactly how much each income group would see taxes rise or fall.
“The Romney-Ryan plan will restore Medicare funding and restore and strengthen the program for the next generation.” – The campaign has indeed reversed course from Ryan’s budget and pledged to reverse the Affordable Care Act’s cuts. Their own plan’s effects on the program are less clear. Experts say reversing the cuts could hasten the program’s insolvency, and CBPP estimates that premium support plans, specifically the one proposed by Ryan in 2011, could raise premiums for seniors by an average of $6,350. The potential for such a plan to cut costs overall is also very much in doubt. As Peter Orszag noted earlier this week, the Medicare Advantage plan’s history suggests that bringing private insurers into the fold doesn’t do much of anything to control Medicare costs. So this line is accurate about the Romney-Ryan plan’s approach to Medicare funding, but the “strengthen” part is to be determined.

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