Obama Administration Report is a Devastating Critique of ObamaCare

Rick Foster is my hero. Over the past year, he has proved over and over that he cannot be bullied, intimidated, threatened, cajoled, browbeaten, buffaloed, hornswaggled, seduced, tricked, duped, bamboozled, bribed, blackmailed, coerced or bought off. In a place like Washington, D.C., this means that most days he probably eats lunch alone. It’s amazing that he still has his job.

Rick Foster is the Chief Actuary of Medicare, and his office has just released a devastating critique of the Administration’s health reform law.

Before getting to details, let me say there is nothing in the report that is surprising to independent health economists. The conclusions are consistent with everything The Lewin Group and other private estimates have been saying for months. What is surprising is that one of the most respected agencies of the U.S. government is completely undermining the Alice-in-Wonderland fables being spun by the White House, on Capitol Hill and in the mainstream media. To wit:

  • You cannot take close to one trillion dollars away from one group of people and spend it on another group of people and somehow leave those footing the bill better off.
  • You cannot give millions of people large increases in medical care without creating any new doctors, new nurses or other paramedical personnel.
  • You cannot arbitrarily reduce what you are paying providers by billions of dollars and still expect to get the same quantity and quality of care.
  • You cannot give millions of patients and thousands of doctors new incentives to waste medical resources and then expect health care spending to go down.

In other words, the Chief Actuary is simply saying reality is reality. Economics is economics. A is A.


It seemed like the real thing but I was so blind
Much to mistrust, love’s gone behind

Convenient summaries of the Actuary’s report have been produced by the Republican staff of the House Ways and Means Committee and by the Senate Republican Policy Committee. Although these are partisan groups, the summaries appear to be quite faithful to the source. Here are the salient findings (with page numbers in the Actuary’s report):

  • Health care costs will go up, not down. National health expenditures will increase from 17 percent of GDP now to 21 percent under the new law and will be higher than without the legislation. [Page 4] Net federal spending on health care will also increase.
  • Health care shortages are “plausible and even probable.” Because of the increased demand for health care, “supply constraints might initially interfere with providing the services desired by the additional 34 million insured persons.” [Page 20]
  • 14 million employees will lose their employer coverage. Employees of small firms are especially at risk (despite small employer tax credit subsidies). [Page 7]
  • 2 million employees who lose coverage will have to enroll in Medicaid. [Page 3]
  • A Medicaid insurance card is not a guarantee of care. An estimated 18 million people will be added to Medicaid. [Page 3] However, because there is no corresponding increase in the supply of caregivers, “it is reasonable to expect that a significant portion of the increased demand for Medicaid would be difficult to meet, particularly over the first few years.” [Page 20]
  • One in ten insured workers will see their health benefits taxed. By 2019, more than 10% of insured workers will “be in employer plans with benefit values in excess of the thresholds (before changes to reduce benefits) and this percentage would increase rapidly thereafter.” [Page 13]
  • Higher taxes will lead to higher premiums. The new taxes on medical devices, prescription drugs, and insurance plans “would generally be passed on through to health consumers in the form of higher drug and device prices and higher insurance premiums.” [Page 17]
  • There are more than one-half trillion in Medicare cuts. The new health law cuts “$575 billion” from Medicare. [Page 4]
  • Medicare cuts would threaten almost one in every seven hospitals. About “15 percent of Part A providers would become unprofitable within the 10-year projection period.” [Page 10]
  • Overall access to care for seniors would go down. Because of the law’s payment reductions, “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program. [Page 10]
  • 7.4 million people will lose access to Medicare Advantage plans. Enrollment in MA plans will be cut in half (from its projected level of 14.8 million under the current law to 7.4 million under the new law). [Page 11]
  • False advertising: The new “Medicare Tax” doesn’t go to Medicare. “Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.” [Page 9]
  • False advertising: Budgetary double-counting does not improve Medicare’s solvency. Medicare cuts “cannot be simultaneously used to finance other federal outlays (such as the coverage expansions) and to extend the [life of the Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.” [Page 9]
  • The new long-term care insurance plan (CLASS Act) is unsound. The program faces “a significant risk of failure” because the high costs will attract sicker people and lead to low participation. [Page 15]
  • The promise to those with pre-existing conditions is unfunded. “By 2011 and 2012 the initial $5 billion in Federal funding for [high risk pools] would be exhausted, resulting in substantial premium increases to sustain the program.” [Page 16]
  • The law does almost nothing to limit actual fraud and abuse. The fraud provisions in the law will save only about two percent of $47 billion in suspect claims.

Comments (30)

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  1. Ken says:

    Very interesting. Thank God for Rick foster. We need more like him.

  2. Virginia says:

    Reality is a real pain in the rear.

  3. Patrick says:

    Just goes to show you who the greatest salesman in the world still is. He sold people on electing him and sold #278 Senators and Congressman that this would be good for us. Snake Oil?

  4. Ripper McCord says:

    Foster’s report is meaningless because its author is a liar who has proven himself susceptible to partisan GOP pressure and fully capable of fudging numbers to affect the outcome of pending legislation. In fact, Foster did exactly this when Congress last considered a major change to our health care system: the Medicare Prescription Drug Improvement and Modernization Act of 2003, otherwise known as Medicare Part D.

    Had it not been for Foster’s willingness to cook the numbers and deliberately underestimate the cost of the Medicare drug bill, it very likely would not have passed at all, given it’s slim margin of a single vote in the House and the outrage of lawmakers upon discovering they had been duped.

    Although Foster had already concluded the new drug benefit would cost $500-$600 billion over 10 years, Congress was told the cost would not exceed $400 billion. Foster provided the fudged numbers under pressure from the Bush administration and his boss, CMMS Andministrator Thomas Scully. According to an internal report, Scully had threatened to fire Foster if he released the real numbers. Scully denied this but acknowledged instructing Foster to withhold the real cost projections.

    Given Foster’s past ability to knowingly produce reports for Congress that miss the mark by hundreds of billions of dollars, I am amazed he still has his job.

  5. Heather says:

    This article and the facts it shows are proof positive that we need to repeal and replace Obamacare. We need to make that A #1 PRIORITY!! Either get it repealed or have it declared null and void (Unconstitutional) by the Supreme Court.

  6. Uwe Reinhardt says:

    Why is the embedded disabled by request? Bare shoulders too much for Texans?

    I am stunned that, acvcording to this summeray, there are all thes ecosts to sundry Americans and not one single American benefits from the health reform program. At least that’s what I infer from this dire post.

    I had not known that, assuming instead that some folks would benefit.

  7. Deanna says:

    The new 3.8% “medicare tax” on un-earned income(rents, royalties, dividends, sale of property,etc.) doesn’t actually go to medicare? This will be quite a large sum of money. Where will it go?

  8. Marti Settle says:

    Obama’s Healthcare Reform Act was designed to appeal to the most ignorant Americans who will cheerfully slit themselves in their collective throats for more free stuff.

  9. Don Levit says:

    If it is like all other “earmarked” taxes, the dollars first go into the Treasury’s General Fund.
    Then, accounting credits (just numbers) go into a custodial account “reserved” for the Medicare trust fund.
    These credits then move into the Medicare Trust Fund.
    Like other “earmarked” taxes (and “unearmarked” taxes), all taxes are used for the general welfare.
    The only difference between earmarked and unearmarked taxes is that earmarked taxes need no annnual appropriations, as long as the trust funds show positive balances.
    Although, according to the report, this seems to be a unique type of earmarked tax (maybe it is an unearmarked, earmarked tax).
    Don Levit

  10. Kenneth A. Fisher, M.D. says:

    Until a few months ago the cost of health care and the percent of gross domestic product it consumes was a major concern. Our goods were not competitive on the world market in large part because of health care costs, manufacturing jobs were leaving the country and the standard of living of the middle class was compromised, all in large part because of these costs. Despite these expenditures 47 million citizens are not insured and our outcomes are poor compared with those of other industrial countries. Yet the Congress has made no attempt to understand and address the fundamentals as to why our health care system delivers such poor value for the dollar. Trying not to offend any constituency our political leaders have crafted a bill that ignores our glaring deficiencies. A plan to address these problems and provide universal coverage while decreasing the percent of gross domestic product is available on my blog, http://drkennethfisher.blogspot.com. Thank You, Kenneth A. Fisher, M.D.

  11. Larry C. says:

    In response to Uve Reinhardt, I would say that the actual report does list benefits — more poeple are estimated to get insurance, for example than the CBO estimated. But we’re hearing about benefits everyday — as newspaper after newspaper virtually reprints the White House talking points.

    What is most interesting about the Actuary’s report is what we are not told about every day — and that is the negative side of the bill that John Goodman summarized.

  12. Roy says:

    Medicare Fraud Hotline is a Fraud!

    I have reported several times to Medicae Fraud Hotline about Fraudulant charges Medicare is paying in my behalf from a Company out of Florida called Christian Health Net aka Med Care.
    After last Firdays phone call I found out after you report a fraud case, it take the Fraud Hotline Dept. 6 – 9 months before they look at your case.
    Three months ago after calling Medicare Fraud HotLine I thought case closed I helped Medicare, my Country and myself, NOT.
    6 – 9 months before they look at each call that is called in.
    In the mean time, Medicare keeps paying these Fraudulant Companies.
    No wonder why Medicare is broke, No wonder why the Government is broke.

    After stating the above to the Medicare Fraud Hotline, they hung up on me twice.

    What is so HOT about a Government Dept. that waits 6 -9 months to investagate a single case after it is called in.

    So what I have read from this report from Mr. Foster, I better get my life in order and get ready to DIE and leave my love ones with the burden of burying me sooner than expected.

    Is there no way to IMPEACH OBAMA for all the LIES and corruption within this current Administraion?

    This is a crying shame that OBAMA is killing AMERICA as we knew it, and continues to stick the knife in deeper everyday.




  13. Harv Randecker says:

    Well, well. So the health reform law will cost what everyone said it would. What a surprise! So, in order to curb that criticism, I hear that Congress will be debating a bill that will place price controls on insurance carriers. Obviously, the public should be in charge of controlling those costs by being good consumers so once, again, we’re getting taken by the folks in Congress who we used to think represented us! Restore our representative republic!!!

  14. Protonius says:

    Even without Rick Foster’s calculations, fundamental elements of the Obamacare plan were and are, in my (and many others’) opinion, blatantly suspect and seriously flawed.

    For example:

    1. How can a law that is GROUNDED AT ITS CORE on VIOLATING SEVERAL PROVISIONS OF THE U.S. Constitution possibly be expected to be a GOOD law for the United States of America?

    How can a law that is GROUNDED AT ITS CORE on VIOLATING SEVERAL PROVISIONS OF THE U.S. Constitution NOT be suspect for containing unworkable provisions, hidden meanings, flawed calculations, and illegal mandates, and dangerous precedents which — unsupportable pro-Obamacare rhetoric aside — might, in reality, be DAMAGING to the nation?

    How can a law that is GROUNDED AT ITS CORE on VIOLATING SEVERAL PROVISIONS OF THE U.S. Constitution, re the Federal Government overstepping its Constitutionally-limited authority vis-a-vis the authority of the several states, NOT be open to serious AND WELL-GROUNDED legal challenge?

    How likely is it that a law that is GROUNDED AT ITS CORE on VIOLATING SEVERAL PROVISIONS OF THE U.S. CONSTITUTION, possibly does NOT contain highly suspect elements, when, INSTEAD of it being presented to the nation as being so WELL-DESIGNED and so broadly ATTRACTIVE that every American will be EXTREMELY EAGER to VOLUNTARILY sign into it, this law is instead based on the OPPOSITE idea — i.e., that Americans MUST BE FORCED to sign onto the new system, and that the way to FORCE them to do that is to authorize the Federal Government to MANDATE — IN DEFIANCE OF CONSTITUTIONALLY SPECIFIED LIMITATIONS ON FEDERAL POWER and IN DEFIANCE OF CONSTITUTIONALLY SPECIFIED PROTECTIONS OF THE RIGHTS OF ALL AMERICANS — that, in essence, EVERY AMERICAN SHALL HENCEFORTH BE CLASSIFIED AS A CIVIL OR CRIMINAL FELON UNLESS HE OR SHE BUYS A DESIGNATED PRODUCT (AND BUYS IT FROM A PRIVATE COMPANY)?

    But there are other aspects to this issue too. For example, and just as John Goodman (and Rick Foster) point out, how could it possibly make sense that Medicare would benefit if over $500-billion would be TAKEN AWAY from that already sufferingly-strapped program? Where is the logic? And that’s on top of the recent, pre-Obamacare, 20% cuts that reportedly also went into effect as to doctors’ Medicare-reimbursement levels. Cut Medicare and that’s supposed to HELP Medicare? Who’s kidding who?

    Oh, wait a second — didn’t Obama also assert that Medicare would improve because his Obamacare plan would also cut WASTE out of the Medicare system? Well, by all means, cut “waste” — including malfeasance and corruption wherever it exists; but if “waste” was the problem — and if it was a problem of such huge financial proportions that cutting it would more than make up for the over $500-billion that Obamacare would cut from Medicare, then I ask the following:

    Why didn’t Obama seek, as one of his primary and most immediate of goals, to cut all that “Medicare waste” and recoup all those huge funds, starting THE DAY THAT HE TOOK OFFICE?

    And why, instead, was this proposed “solution”, of “cutting waste from Medicare”, used as a selling-point for Obamacare even though Medicare, not being part of the (so-called) health-system that Obamacare would set up, arguably should have been addressed as an entirely separate issue?

    And how is it that this proposed “solution”, of “cutting waste from Medicare”, was used as a selling-point for Obamacare, even though there was great disagreement and lack of clarity as to the numbers that would actually be involved?

    Even in a high school mathematics class, if the instructor asks a student to explain why the student’s believes his or her arithmetical calculations are correct, can you imagine if the student were to answer not with the requested proof but with the statement “Because I think so”?

  15. Nathan C. says:

    These actuarial reports show that Obamacare cannot reduce healthcare costs overall in this country, but will just provide an entitlement to a portion of the small segment of uninsured and low income people, while growing government payrolls.

    The report cannot account for the likelihood of more people demanding more of this ‘free money’, and the politicians and bureaucrats granting it. Neither can it account for the tragic loss of quality and choice that will occur, for everyone, as our care is socialized.

  16. Breck says:

    Dr. Fisher is grossly mistaken — businesses aren’t leaving the U.S. chiefly due to health care costs. I’m sure that’s one factor that makes overseas labor less expensive, but not the primary one, by a long shot.

    John Goodman has, many times, ably rebutted the false notion that health care outcomes in the U.S. are worse than in European nations. In fact, we do a far better job of treating almost any disease you can name, and it’s only questionable studies of infant mortality and overall life expectancy that allow Dr. Fisher to claim with a straight face that we have worse outcomes in the U.S.

    The reason for inefficiency in U.S. health care is that 75% of it is already under government control, from Medicare setting prices to state mandates for insurance coverages. Combined with our third party payer system that takes incentives for cost control away from consumers, there is almost no room for free markets to operate in the health care industry.

    The right answer is to change the third party payer system, through incentives not legislation, and force real market competition onto doctors and hospitals, again through incentives, not legislation. John Goodman has repeatedly laid out how to do that too.

    In my opinion, the Obama crowd will soon throw up their hands and declare that health care is still broken and the only way to “fix” it is a single payer, national health care system that offers “free” care to everyone and forces all doctors and hospitals to become employees of the government. That will assuredly kill the golden goose of American health care which has led the world in innovative treatments and cures for a wide range of scourges.

    I’d love to see a 60-year-old smoker and ex-president standing in a long line for lung cancer treatment, with no other place in the world to turn for better treatment. Canadians and Brits can now fly over here for care when their system fails, but when the socialists put us into that boat as well there’ll be nowhere to turn. Yet, I’d rather repeal ObamaCare so we can all avoid that fate.

  17. Don Levit says:

    While the Medicare contribution doesn’t go to Medicare (what’s in a name, anyway)?, it states just below that provision on page 9 “Conversely, the revenues from fees on manufacturers and importers of brand-name prescription drugs are earmarked for the part B account in the Medicare SMI trust fund. From the standpoint of the Federal Budget, these amounts are new receipts and serve to reduce the Budget deficit. From a trust fund perspective, however, the situation is,more complicated.”
    As you may know, the Part B premiums are divvied up between the Government and the beneficiaries – 75% paid by the Government and 25% by the beneficiaries.
    The Part B trust fund has a very low balance, because 100% of the premiums are paid to cover the costs.
    Note here that Rick Foster states there are 2 perspectives of government accounting – the Budget Perspective and the Trust Fund Perspective.
    From a paper entitled “Social Security and Medicare Trust Funds and the Federal Budget,”.
    Page 13 – “From the Trust Fund Perspective, SMI is always fully funded.” (as long as beneficiaries pay 25%, and the Federal Government can print money).
    From the Budget Perspective,SMI draws huge transfers.
    (the 75% comes from general revenues, a current budget expense).
    This is why in a paper published one year earlier, in 2008,(same link, but put in 2008, instead of 2009), it states “It is important to recognize that the signals of financial stress from the trust fund analysis are much milder than those faced by the federal budget as a whole (trust fund v budget perspectives). The difference between the 2 perspectives is most dramatic in the case of the SMI program.”
    Don Levit

  18. Don Levit says:

    John mentioned on page 9 about the false advertising – “Medicare cuts cannot be simultaneoulsy used to finance other federal outlays and to extend the (life of the Medicare) trust fund despite the appearance of this result from the respective accounting conventions.”
    Well, from a common sense srandpoint, that would be correct.
    However, if one government agency, the Medicare trust fund, loans the accounting credits to another government agency, the Treasury, this false advertising becomes real.
    In fact, it’s been done for years!
    From a paper entitled “Social Security and Medicare Trust Funds and the Federal Budget,”: “These interest credits increase trust fund income exactly as much as they increase credits in the Treasury’s general fund. So, from the standpoint of the federal budget as a whole, these interest credits are a wash.”
    From a paper entitled “Federal Debt and the Commitments of Federal Trust Funds,”which is at: http://www.cbo.gov/ftpdocs/39xx/doc3948/10-25-LongRangeBrief4.pdf it states, “What is in the trust funds is simply the government’s promise to pay itself back at sometime in the future.” (is that what is known as eternal life)?
    “When trust fund balances are drawn down, the govermment will not be using resources saved for a rainy day. It will be using resources generated either by running a surplus in the rest of the budget (fat chance or slim chance, why are they the same) or by borrowing from the public .”
    Don Levit

  19. Earl Grinols says:

    Let me understand Ripper McCord’s argument: Foster was prevented from telling the truth about the Medicare Drug Improvement and Modernization Act of 2003. Now Foster says he wants to tell the truth about the current health reform law and is not being prevented from doing so. Thus this proves that Foster always lies? I do not see the logic.

  20. Patti L says:


    Thanks for the links on trust fund accounting. I’m still trying to figure out how it all works.

    If I’m understanding this correctly, we could run all federal income taxes through the medicare trust fund and then replace them with bonds. That would probably extend the trust fund for a century because we’d have a trillon dollars more of bonds in the trust. But, would it help the Federal Government’s ability to redeem the bonds, of course not. All the government’s trust funds hold no assets and are only as solvent as the Federal Government. Do I have this right???

    If so, shame on AARP for putting that this extends the solvency of medicare by 10 years. Surely they know better!!

  21. Patricia Smith says:

    Why is any senior – no, why is anyone over 50 years of age paying AARP to represent them? With friends like that who needs enemies? And, by the way, they kept my dues for that year in which I resigned. Hit them where their only true pain can come – hit their pocketbook.

  22. Charles Johnsen says:

    A note to Kenneth A. Fisher: A political system will set prices and allocate resources based on political necessities, not scientific, medical, compassionate, or market necessities. The only true reform of the medical market place that will work in the long run is a constitutional amendment: Congress shall make no law regulating or subsidizing or control prices for medical or health care. I hope this will also abolish the FDA.
    I cannot understand how a medical professional could be so mean spirited and cruel, especially to the poor, as to propose further politicizing of medicine.

  23. Al Peden says:


    Thanks for publicizing this. I know Rick Foster, and everything you say about him is true. Would that there were more like him.

  24. Don Levit says:

    You are correct, except the part about running all the taxes through the Medicare trust fund.
    Only the Medicare taxes are credited to its particular custodial account.
    The trust fund credits have been loaned to the Treasury to pay current expenses – that’s the asset part.
    The liability part does not come due until the trust fund’s expenses exceed their income, which occurred with the HI trust fund in 2008, and will occur with Social Security this year.
    This is when the debt becomes explicit, real, like the public debt in that principal and interest need to start being paid to redeem Treasury securities (to the extent expenses exceed income, not including interest).
    In a paper from 1991 entitled “Social Security and the Public Debt” written by James Duggan at the Office of Economic Policy, at the Treasury, which can be found at. Page 6 “The primary deficit (or surplus) in the U.S. federal budget has two principal components: the balance in the general fund and the balance in the Social Security account. Past balances in the Socual Security account have been too small to have had any significant effect on the overall budget balance and on the Federal debt. Since 1985, however, the Social Security balance has been a growing component of the Federal budget, and in the future, Social Security will be a consequential element in U.S. debt policy.”
    This means, in my opinion, that the Social Security surplus has been particularly large since 1985, and has helped the total debt look smaller, for the surplus reduces total debt. Once Social Security has no surplus to reduce the debt (as will hapopen this year), the total debt will be larger.
    Page 20 “Of more concern, is the rate of increase in the debt ratio following the inception of annual Social Security deficits.”
    Page 26 “This paper has stressed the public debt implications of the long-run financial status of the Social Security program. The central conclusion is that, under current Social Security law, projected Social Security deficits could result in a very high and unstable debt/GNP ratio in the next century unless extraordinary fiscal restraint is exercised.”
    “Any adjustments could be disruptive if implementation is deferred until Social Security deficits begin.”
    I guess you could say we have been adequately warned, as far back as 1991!
    Yes, the ability of Social Security and Medicare to pay benefits is based on the full faith of the government to back its promises.
    When revenues and expenses are all part of one big pot, including ever-increasing debt, one’s faith needs to be stronger and blinder to provide peace of mind.
    Don Levit

  25. Patti L says:

    Thanks Don, I get it now. Not happy….but I get it.

  26. Don Levit says:

    Can you provide some details on the Social Security solution?
    Don Levit

  27. […] 18 million of the newly “insured” will actually be on Medicaid, according to the Chief Actuary of the Centers for Medicare & Medicaid Services, who will suffer from limited access to care. And this blog has previously discussed research […]

  28. Woodrow Wilcox says:

    I am not surprised by the report.

    I tried to warn America that the problems with Medicare, Medicaid, and the VA health system would be multiplied and forced on everyone with Obamacare.

    You can check my almost 200 articles at http://www.medicareproblems.net.

  29. Colony14Author says:

    Read The Obama Timeline to learn how we got into this mess.

  30. Keith says:

    It’s good to see that someone still tells the truth on the government!!!