Wednesday, September 19, 2012

“Medicare Quantitative Easing:” Sebelius Channels Ben Bernanke

The Administration announced today its projection that Medicare Advantage enrollment will rise next year.  What it did NOT mention in its announcement is why the program’s enrollment may climb: Because of a Medicare Advantage demonstration program costing more than $8 billion, and implemented solely by executive fiat, that looks suspiciously like an attempt to avoid the effects of Obamacare’s $300 billion in Medicare Advantage cuts prior to the 2012 election.  In other words, even as the Administration implements the cuts with one hand, its demonstration program – which amounts to a three-year Obamacare waiver for seniors – temporarily undoes the cuts with the other, because Secretary Sebelius has decided to spend an additional $8 billion purely on her say-so.

This attempt by the Administration to essentially print money so its Medicare Advantage problem goes away before the 2012 election has not escaped criticism.  Both the Medicare Payment Advisory Commission and the Government Accountability Office have raised serious questions about the demonstration program.  One report by GAO suggested the program may exceed the Administration’s statutory authority.  The Associated Press also reported on the Medicare Advantage demonstration last year, noting that the program “could head off service cuts that would have been a [political] headache for Obama and Democrats in next year’s elections.”  Even a former Democrat staffer who worked in the Clinton Administration admitted that the effort amounted to a political stunt: “It’s fair to say that [Medicare] could not tolerate dislocation, given the political climate.”

Some conservatives have criticized Chairman Bernanke’s latest efforts at quantitative easing, noting that the Federal Reserve’s initiatives to print money could prove difficult to unwind in the longer term and lead to inflation.  Likewise, Secretary Sebelius’ efforts to print $8 billion to solve a political problem could prove the tip of the iceberg in its long-term fiscal effects.  The Administration assumes all the Medicare spending reductions will go into effect, but the Medicare Advantage demonstration program illustrates how the Obama White House has already reversed one of the major spending reductions – the Medicare Advantage cuts – to fend off political dissent during the President’s re-election campaign.  So either seniors will lose access to Medicare Advantage plans, the Obama Administration will continue to undo the cuts – thus causing the deficit to increase – or some combination of the two will take place.  Either way, Secretary Sebelius’ “political quantitative easing” when it comes to Medicare Advantage is not likely to end well for seniors, or for taxpayers.