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Tag: Congressional Budget Office

The Lethal Linkage of Medicaid Costs and Tuition

President Barack Obama has been busy recently traveling to college campuses across the country, talking about student loan debt and pitching his proposal to keep the interest rates on some federal loans at 3.4 percent for another year. His Republican rival, Mitt Romney, also supports a one-year extension.

While I agree with both that we need to make it easier for students to afford college, the president is not telling the whole story about how we got here and how we’re going to pay to fix it.

What the president needs to tell students is that his own health care policies are the principal reason that tuition and student debt are rising.

Medicaid mandates on states are soaking up dollars that would otherwise be spent on state universities and community colleges, forcing up tuition and resulting in more student loans and debt. Even worse, the federal government is trying to make a profit by overcharging students on their current loans and using part of the profit to pay for the new health care law.

According to the Congressional Budget Office, this takeover produced approximately $61 billion for the government — $8.7 billion of which went to pay for the new health care law.

The president’s new student loan proposal would, for one year, keep rates at 3.4 percent on new subsidized Stafford loans (those for which the federal government pays interest until students graduate), rather than increasing to 6.8 percent under current law. These loans account for about 40 percent of all federal student loans. According to the Congressional Research Service, the average student takes out approximately $3,600 in these new loans and will save about $7 a month in interest payments.

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Bernie Madoff Accounting for Medicare

On the eve of the release of this year’s Medicare Trustees report, the Obama administration released its own version of it. In the administration’s telling:

  • Health reform (ObamaCare) will save taxpayers $200 billion in the Medicare program through 2016.
  • About 90% of these savings will be produced by lowering “excessive payments” to Medicare Advantage plans, lower payments to doctors, hospitals and other providers to reflect their “improved productivity,” and through efficiencies gained by what is learned from “demonstration projects.”
  • The demonstration projects include pay for performance, bundling, Accountable Care Organizations, and other frequently discussed ideas.

But whereas the Trustees report is expected to be a serious document, reflecting accepted accounting principles, the administration’s document was clearly a piece of political propaganda — one that stretched the truth so much that the word “spin” would be a charitable description. For example, the administration’s document failed to mention that:

  • The Congressional Budget Office has studied the demonstration projects on three separate occasions (here, here and here) and each time has concluded that they are producing no serious savings and are unlikely to do so in the future.
  • Medicare’s Actuary has determined that reductions in payments to Medicare Advantage plans will not only result in lower benefits for the one in four seniors who are in these plans, but that about 7 ½ million enrollees will actually lose their coverage and have to seek more expensive Medigap insurance elsewhere.

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