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Two recent news reports indicate that the President is "strongly considering" cuts to Medicare and Social Security in his upcoming budget, which is to be released in less than ten days.The question's been asked for four years: Why would Obama want to cut these popular and successful programs, especially when there are better solutions out there (and Social Security doesn't even contribute to the deficit?)
It's time to ask a new question: Why wouldn't he cut them?Bad NewsLast Friday the Wall Street Journal reported that the President's cuts would be "aimed in part at keeping alive bipartisan talks on a major budget deal." No, you're not experiencing déjà vu. We've heard this story before.The Journal was vague on the President's specific cuts, though it did cite the "chained CPI" cut to Social Security. (The Administration described those cuts as a minor "technical change," although they're technically less accurate than the current and already inadequate formula. They'd come to 6.5 percent of a 75-year-old's benefits and 9.2 percent of a 95-year-old's.)
The New York Times reported that the President and House Republicans "have quietly raised the idea of broad systemic changes" to these programs as part of a broad "fiscal deal." It also provided more detail on the President's newest proposed Medicare cut, which would combine the deductibles for outpatient and hospital Medicare coverage. That would increase annual out-of-pocket costs for 80 percent of Medicare recipients (while typically lowering them for people who are hospitalized during the year.)
The rationale is that it will discourage the use of unnecessary medical care. That's a misguided notion. But the President and his staff has shown a proclivity toward this kind of shallow wonkery in their support for misguided concepts like the excise tax on health insurance plans with higher than average costs. The White House economic team may very well believe that this plan would "discourage people from seeking unneeded treatments" (as the Times puts it).Bad PolicyNevertheless, both cuts are bad ideas. The Medicare change is based on a model of health economics which fails to understand how health care decisions are made in the real world and relies on old (and challenged) studies, including one from the RAND Corporation, which claim such cuts reduce the use of unneeded services without reducing the use of necessary care.