The Senate health bill might make the Medicare trust fund look better without adding significantly to the resources available for keeping Medicare solvent.
Congressional Budget Office Director Douglas Elmendorf has come to that conclusion in a letter responding to a question from Sen. Jeff Sessions, R-Ala., about the possible effects of H.R. 3590, the Patient Protection and Affordable Care Act, on the Medicare Part A hospital insurance trust fund.
If Congress leaves current laws in place, then the Medicare Part A trust fund might empty out sometime around 2017, Elmendorf writes in the letter, which summarizes the work of CBO analysts.
If the government implements the PPACA bill and a manager's amendment as written, then PPACA could "reduce net outlays for Part A of Medicare by $245 billion over the 2010-2019 period relative to that baseline," and it could lead to $358 billion in overall improvement in the Part A trust fund balance, Elmendorf writes.
But, outside of the Medicare Part A trust fund, PPACA would increase the federal deficit by $226 billion over that same 10-year period, Elmendorf writes.
Similarly, from 2020 to 2029, PPACA would help the hospital insurance fund while increasing the size of the deficits in other parts of the federal budget, Elmendorf writes.
Elmendorf notes that the hospital insurance trust fund is really an accounting mechanism, and that transactions between the trust fund and the U.S. Treasury have no net effect on federal borrowing from the public.
"From a unified budget perspective, any increase in revenues or decrease in outlays in the [hospital insurance] trust fund represents cash that can be used to finance other government activities without requiring new government borrowing from the public," Elmendorf writes. "Similarly, any increase in outlays or decrease in revenues in the HI trust fund in some future year represents a draw on the government's cash in that year."
If the Medicare Part A trust fund balance grows, that may make it look as if the government has set aside $358 billion in additional resources to pay for future Medicare benefits, but "only the additional savings by the government as a whole truly increase the government's ability to pay for future Medicare benefits or other programs, and those would be a much smaller ($132 billion plus interest savings to be achieved over time)," Elmendorf writes.
"Unified budget accounting" shows that Congress would use a majority of PPACA trust fund savings to pay for other spending, and, therefore, a majority of the PPACA Medicare Part A trust fund savings "would not enhance the ability of the government to pay for future Medicare benefits," Elmendorf writes.
Elmendorf also addresses a question about how the Senate health bill would affect the gross federal debt.
The bill would increase the amount of federal government debt in the Medicare Part A trust fund by $358 billion over the baseline value, but it would reduce the amount of government debt held by the public by $132 billion, Elmendorf writes.
A change in the amount of government debt held by the public is a useful measure of a proposal's effects on the government's financial conditions, but a measure of the amount of government debt held by government accounts "conveys little information about the federal government's future financial burdens and has little economic meaning," Elmendorf concludes.
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