Fact Checking The Sunday Shows - June 5, 2011

June 06, 2011 10:09 am ET

The first Sunday in June saw potential GOP presidential candidate Sarah Palin and Mississippi Governor Haley Barbour (R) dominating the misinformation in the Sunday talk shows. On Fox News Sunday, Palin distorted the truth about the economic recovery, blasting the Federal Reserve's quantitative easing efforts as ineffective and claiming that we've "hit a brick wall," when in fact economists agree that rounds of bond-buying easing helped stabilize the economy and that May's jobs numbers are merely a road bump. She also lied about the source of April's positive job-creation numbers, left out some key information about the U.S.'s corporate tax rate, and distorted Moody's warning about raising the debt ceiling. Palin and Barbour both had lots to say about the Republican budget proposal — all of it false. They both suggested that no one but Rep. Paul Ryan (R-WI) has offered a viable plan to save Medicare, even though the Democrats have discussed building on reforms in the health care law in order to contain costs and save the program. Palin claimed the GOP plan will "save" Medicare (but it won't) and that it doesn't affect current seniors (but it does). Barbour repeated the old falsehood that the GOP plan will give seniors options just like those of Congress (which it won't). He also attacked the Obama administration with claims that it has helped Wall Street at the expense of Main Street; that President Obama is responsible for high gas prices; and that health care reform discourages job creation. The facts do not support those claims either.

Fox News Sunday

CLAIM: Palin Claimed Quantitative Easing "Hasn't Worked"

CHRIS WALLACE (host): Let's start with the economy and bad news on Friday -- just 54,000 jobs were added in May, the lowest number in eight months. Unemployment rose to 9.1 percent. When you add that to poor numbers on growth, on housing, on manufacturing, where are we in this recovery?

SARAH PALIN: And you add, too, the fact that this quantitative easing, one and two, hasn't worked and we're talking about Q.E. 3 already and the devalued dollar is an addition to this problem.

FACT: First And Second Rounds Of Quantitative Easing Helped Stabilize The Economy

NYT's Leonhardt: Both Rounds Of Quantitative Easing "Have Been At Least Moderately Successful." From the New York Times:

Two thoughts: First, the Federal Reserve's two recent rounds of long-term bond-buying - known as QE1 and QE2 - are not nearly as mysterious as they're often made out to be. They are simply an attempt to bring down long-term interest rates using similar mechanisms that the Fed uses to bring down short-term rates, as Ben S. Bernanke, the Fed chairman, has tried to explain.

And these attempts have been at least moderately successful. After the Fed signaled its intention to buy more bonds last summer - QE2 - stocks surged and some long-term rates fell. These developments clearly helped the economy. How much? It's hard to know. [New York Times, 3/30/11]

CEPR Director Baker: First Round Of Quantitative Easing "Helped To Bring Down Long-Term Interest Rates And Stabilize The Economy At A Time When It Was Sliding Rapidly." From a post by economist Dean Baker, co-director of the Center for Economic and Policy Research:

The Fed's decision to try another round of quantitative easing must be understood in this context. The U.S. economy is operating far below its potential and is not likely to return to potential output any time soon without some outside boost. The Fed's decision to buy $600 billion in government bonds over the next eight months is a step in this direction.

This is a follow up to an earlier round of quantitative easing announced at the beginning of 2009 in which the Fed bought $1.25 trillion of mortgage-backed securities and another $300 billion of government bonds. That move helped to bring down long-term interest rates and stabilize the economy at a time when it was sliding rapidly. [Huffington Post, 11/8/10]

St. Louis Federal Reserve Bank President: First Round Of Quantitative Easing "Modestly Successful So Far." From the Wall Street Journal: "'Recent market behavior suggests that the Federal Reserve's new quantitative easing program has been 'modestly successful so far,' James Bullard, president of the Federal Reserve Bank of St. Louis, said Monday. Bullard said the rally in stocks, the rise in Treasury yields and the increase in implied inflation expectations in that market since the Fed began its plan to purchase $600 billion in Treasurys showed signs of a 'classic monetary easing' helping to boost economic expectations. He was speaking in an interview on CNBC." [Wall Street Journal, 12/20/10]

Federal Reserve Chairman Ben Bernanke: Second Round Of Quantitative Easing "Successful." From the Daily Beast: "His voice quivering slightly, Bernanke used dry, professorial language to defend the Fed's second round of quantitative easing and its limited scope. 'Relative to what we expected, I think the program was successful,' he said. 'We were very clear that this was not going to be a panacea.' He added that the program's end was unlikely to have any adverse effects on the economy or the financial system. 'Markets have well anticipated this step,' he said." [Daily Beast, 4/27/11]

Krugman: "The Central Bank Should Be Doing Much More Quantitative Easing." According to the Daily Beast: "'The central bank should be doing much more quantitative easing, not stopping with the U.S. still facing high unemployment and the unemployed themselves increasingly desperate,' [Nobel Prize-winning economist Paul] Krugman wrote. '[Bernanke] has been intimidated by the inflationistas, and is looking for excuses not to act.'" [Daily Beast, 4/27/11]

FACT: Economists Agreed Quantitative Easing Was Necessary To Sustain Economic Growth And Reduce Risk Of Deflation

Nouriel Roubini: Without QE, "The Risk Of A Double-Dip Recession And Of Deflation Would Become More Significant." A CNBC.com article reported:

"There is a huge divide between the position of the United States and that of Germany, " Roubini said.

"The Fed believes we need to do (a second round of asset buying) while the ECB and the Germans are dead against it. On that particular issue I think the Germans have it wrong," he said.

Given that growth is low and falling and with inflation low and falling, the buying, also known as quantitative easing or QE2, was necessary, Roubini, whose analysis firm Roubini Global Economics recently opened an office in London, said.

"To me QE2 was a necessary evil because with growth so below potential and with inflation following a risk of deflation, if we had not done QE2, the risk of a double-dip recession and of deflation would become more significant." [CNBC.com, 11/11/10; emphasis added]

Moody's Mark Zandi: QE Is Necessary To Support The Recovery And Avoid Deflation. In a post titled "FOMC Preview: Whatever Is Necessary," Mark Zandi, chief economist of Moody's Analytics, wrote:

A double dip could set off a deflationary cycle. Core inflation has already slid below 1%, and wage growth is not much stronger. In a renewed recession, employers would resume cutting payrolls, but with unemployment surging, they could also demand that remaining workers take permanent pay cuts. That hasn't happened widely to date, although some employers have imposed temporary cuts. Household debt burdens, which have been falling, would rise again, creating more credit problems. Financial institutions would clamp down on lending even more tightly, further exacerbating the economy's problems. Fiscal policymakers seem incapable of responding to this scenario given the unpopularity of previous stimulus efforts and the fractured political process. All this is fodder for a Japanese-style "lost decade" scenario for the U.S.

None of this has been lost on Federal Reserve officials and has motivated their increasingly clear message regarding prospects for more QE. Financial markets appear to be assuming about $500 billion in QE over the next six months. Since early August, 10-year Treasury yields have fallen about 50 basis points and fixed mortgage rates by 25 basis points; stock prices have risen more than 5%, the broad trade-weighted dollar has lost 5% in value, and inflation expectations have noticeably firmed. Policymakers need only to meet these expectations at this week's FOMC meeting, and they will have already made significant progress supporting the recovery. [...]

High inflation down the road is a threat, but the threat of deflation today is much more pressing. The monetary policy response to above-target inflation is straightforward: raise interest rates. The response to deflation is not at all clear. [...]

In response to the Great Recession, the Bernanke Fed has adopted a zero interest rate policy, worked hard in its guidance to convince investors that zero interest rates are here to stay for a long time, created new credit facilities and mechanisms for managing interest rates and reserves, and embarked on a massive program of quantitative easing. If history is any guide, he will do whatever is necessary to get the country moving again. [Economy.com, 11/1/10; emphasis added]

Economist Adam Posen: "Insufficient Monetary Action Risks Turning Sustained Low Growth And Near Deflation Into A Self-Fulfilling Prophecy." From an email sent from Adam Posen, an American economist and external member of the Bank of England's Monetary Policy Committee, to the New York Times' David Leonhardt:

My basic argument is that the current macro policy discussion is mostly missing the point. Our situation (in the U.K., the U.S., and arguably in most of the major Western economies) is one where policy makers face a long uphill battle, in which monetary ease has an ongoing role to play, even if it may not deliver recovery on its own. Insufficient monetary action risks turning sustained low growth and near deflation into a self-fulfilling prophecy. This happened in Japan in the 1990s, and in U.S. and Europe in the 1930s. I don't think things will be "that bad" in the sense of an outright depression, but we face a real risk of long-term stagnation with some distracting upward blips and slowly eroding capacity. [...]

Ultimately, doing more monetary stimulus is the right move for the long term - this is not about impatiently preventing a double dip. Doing more would prevent erosion of our productivity and work force, and forestall (I hope) falling into a self-fulfilling trap. It also is an important insurance policy against political illiberalism and protectionism arising. It is just as important to future generations that we deliver them an intact democratic system and liberal world economy, as to consider the commonly spoken debt-burden concerns. [New York Times9/29/10]

Peterson Institute Senior Fellow: QE Would Encourage Business Investment, Support The Housing Market, And Boost Exports. In a July 21 Huffington Post article, Joseph E. Gagnon, a senior fellow at the Peterson Institute for International Economics, wrote:

[T]he Fed should bring down the rates on longer-term Treasury securities by targeting the interest rate on 3-year Treasury notes at 0.25 percent and aggressively purchasing such securities whenever their yield exceeds the target. That is a 65-basis point reduction from the current rate of 0.90 percent. This step would also push down longer-term yields and reduce a wide range of private borrowing rates, encouraging business investment, supporting the housing market, and boosting exports through a weaker dollar. Moreover, pushing down yields on short- to medium-term Treasury securities is precisely the strategy for fighting deflation recommended by Ben Bernanke in 2002. [...]

These measures are all within the Federal Reserve's established powers. They pose essentially no risk to the Fed's balance sheet. They would reduce unemployment roughly as much as a 2-year $600 billion fiscal package and yet they would actually reduce the federal budget deficit. And they can be reversed quickly should the balance of risks shift from deflation to inflation. [Huffington Post7/21/10]

CLAIM: Palin Claimed "We've Hit A Brick Wall" With Economic Recovery

SARAH PALIN: You know, President Obama tried to explain to the public the other day that this is just a bump in the road. But, you know, you try telling that bump in the road analogy to those families out there trying to keep their home, trying to keep their businesses afloat, trying to fund their child's college education and just fuel up their own vehicle. And the people will tell you it's not a bump in the road. We've hit a brick wall.

FACT: Overall Recovery Trends Show May Numbers A Speed Bump, Not A Brick Wall

Economists: Slowed Job Growth Is A Temporary "Soft Patch." From the Huffington Post: "Economists still believe the lull in activity will be temporary. They cite high gasoline prices, bad weather and disruptions to motor vehicle production because of a shortage of parts from Japan as factors weighing on growth. 'It is clear we have temporarily entered a soft patch,' said Christopher Probyn, chief economist at State Street Global Advisors in Boston, before the report. 'Nobody knows how soft and how long, but the best case view is that the fundamentals of the recovery remain intact and the economy will re-accelerate in the second half of the year.'" [Huffington Post, 6/3/11]

Economist: "Soft Spot" Is "Not Necessarily An Indication That This Economy Is Not Going To Be Able To Create A Whole Lot Of Jobs Going Forward." During a PBS interview, economist Joel Naroff of Naroff Economic Advisors stated:

We had been moving along at a pretty solid pace. Indeed, businesses were adding jobs at a rate that was much more than any of us had expected coming into the year. But the speed bump that the higher gasoline prices has created has caused businesses to ask the question, is this recovery going to pick up the kind of speed that they were hoping it would, and if not, do they really needs the jobs right now?

So, I think what they're starting to do is basically say: I'm going to hold off a little while, see if the gasoline prices come back, see if people start spending again, and, if we do have that pickup that would come with the lower gas prices, then we can start hiring once again.

I think this is a soft spot, but necessarily -- not necessarily an indication that this economy is not going to be able to create a whole lot of jobs going forward. [PBS, 6/3/11, emphasis added]

There Have Been 15 Consecutive Months Of Private-Sector Job Growth. Below is a graph prepared by the Office of the Democratic Leader showing monthly private-sector job gains and losses:

private-sector job growth

[Office of the Democratic Leader, 6/3/11, via Flickr]

New York Times: April Jobs Numbers Show "The Largest Gain In Four Years." According to the New York Times: "The Labor Department's monthly snapshot of the job market, released on Friday, showed that employers added 290,000 jobs in April - the largest gain in four years - and that they did so across a broad swath of industries. The United States has now added jobs for four consecutive months." [New York Times5/7/10]

AP: "The Nation's Economy Posted Its Largest Job Gain In Three Years In March." According to the Associated Press: "The nation's economy posted its largest job gain in three years in March, while the unemployment rate remained at 9.7 percent for the third straight month. The increase is the latest sign that the economic recovery is sustainable and healing in the job market is beginning." [Associated Press4/2/10, via ABC]

CBO: The American Recovery And Reinvestment Act Has Created Up To 2.4 Million American Jobs. According to CNNMoney: "The Congressional Budget Office attributes between 800,000 to 2.4 million jobs and 1.2 to 3.1 percentage points of economic growth to stimulus." [CNNMoney, 1/13/10]

CLAIM: Palin Claimed April Jobs Gains Were Due To McDonald's Hires

SARAH PALIN: The month of April was tough, too. There were jobs added to the marketplace, Chris, but remember, that was McDonald's out there with their big push to hire 50,000-some people. So, I think there were some numbers skewed last month, too.

FACT: McDonald's Hires Were Not Included In April Jobs Numbers

McDonald's Hiring Day Was After April Jobs Survey Period Ended. From the Los Angeles Times: "Some serious misinformation about the government's April employment report is floating around the Internet. McDonald's Corp. is erroneously getting credit for 62,000 of the 268,000 net new private-sector jobs created last month, or 23% of the total. ... McDonald's did hire 62,000 people last month, but that was on April 19, in a one-day recruiting program nationwide. Those hires wouldn't have counted in the U.S. job tally because the government's monthly survey of employers, which is used to determine net job gains or losses, was done the previous week, said Joe LaVorgna, economist at Deutsche Bank Securities in New York." [Los Angeles Times, 5/6/11]

TD Securities: 'There Is No McDonald Effect In The Report Today." According to the Dow Jones Newswires: "Several economists are noting that much reported hiring binge by hamburger vendor McDonald's did not drive up hiring last month, which suggest the gain seen last month was indeed a real advancement. Says Eric Green of TD Securities: 'There is no McDonald effect in the report today...The publicized job hiring day was April 19th, one week after the April survey period," he adds. "We don't know how many of these hires have begun or will begin work or when,' Green said, noting 'the jobs number was not juiced by food, but it is making me hungry just talking about it.'" [Dow Jones Newswires, 5/6/11, via Morningstar]

CLAIM: Palin Claimed The U.S. Has "The Second-Highest Corporate Tax Rate In The World"

SARAH PALIN: I would cut taxes. The second-highest corporate tax rate in the world we are burdened with. No, we need to cut that to incentivize businesses to stay here on our shores, in America. And not outsource all these jobs and opportunities.

FACT: Tax Rates U.S. Corporations Actually Pay Are Much Lower

Effective Tax Rates Are Lower Than Statutory Rates. In its 2009 report on global taxation, the World Bank wrote: "The key point to recognise is that it is not simply the statutory rate of corporate income tax that is important here, but also the effective tax rate for current corporate income tax, taking into account all the additions and deductions to profit before tax that tax rules may require." [World Bank, "Paying Taxes 2009: The Global Picture," 11/10/08]

American Companies Pay Lower Effective Tax Rate Than German, Canadian, Chinese, Italian, And Other Companies. In its 2009 report on global taxation, the World Bank wrote:

Figure 2.7

As noted in Chapter 1, reducing the statutory rate of corporate income tax has been the most popular government tax reform in the period. However in most of the economies, the case study company does not pay corporate income tax at the statutory rate on its profit before tax, since the tax rules require adjustments to be made to this in order to calculate taxable profits. A common example is to substitute tax depreciation for commercial amortisation of assets.

The effective rate of current corporate income tax can be defined as the actual rate of corporate income tax paid as a percentage of profit before tax. Figure 2.7 compares this effective rate with the statutory rate of corporate income tax for the G8 and BRIC (Brazil, Russia, India and China) economies, and shows that the two are often not the same...

[World Bank, "Paying Taxes 2009: The Global Picture," 11/10/08, in-text citation removed for clarity]

CBPP: U.S. Corporations Pay Lower Taxes Than Average For Developed Economies. According to the Center for Budget and Policy Priorities: "The U.S. corporate tax burden is smaller than average for developed countries.  Corporations in 19 of the member states of the Organization for Economic Co-operation and Development paid 16.1 percent of their profits in taxes between 2000 and 2005, on average, while corporations in the United States paid 13.4 percent." [CBPP.org, 10/27/08, in-text citation removed for clarity]

2009: General Electric Earned A $1.1 Billion Tax CREDIT Despite $10.3 BILLION In Pre-Tax Income. According to Forbes: "As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest, most profitable corporations enjoy a far lower tax rate than you do--that is, if they pay taxes at all. The most egregious example is General Electric. Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion. Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%." [Forbes4/1/10, emphasis added]

CLAIM: Palin Misrepresented Moody's Warning About The Debt Ceiling And Claimed We Can Pay Down The Debt Without Raising The Limit

CHRIS WALLACE (Host): But, Governor, this week, Moody's said that they are going to lower our credit rating for our debt unless we raise the limit, the debt limit, by August 2nd, also they said they may lower our rating if we fail to come up with a serious reduction plan. So, the question is, wouldn't that be a financial disaster? [...]

SARAH PALIN: Moody's message is very powerful and that should be the warning the American public to make sure that are electing congressmen and women who hold the purse strings in this nation to quit incurring the debt. We rake in 6-to-8 billion dollars a day, our federal government, via payroll taxes and or other revenue sources. If we prioritize and took that 6-to-8 billion dollars a day and service our debt, we don't have to raise that debt ceiling.

FACT: Moody's Specified The Debt Ceiling Must Be Raised

Moody's: "Heightened Polarization Over The Debt Limit Has Increased The Odds Of A Short-Lived Default." From Moody's Investors Service:

Moody's Investors Service said today that if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the US government's rating under review for possible downgrade, due to the very small but rising risk of a short-lived default. If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating.

Although Moody's fully expected political wrangling prior to an increase in the statutory debt limit, the degree of entrenchment into conflicting positions has exceeded expectations. The heightened polarization over the debt limit has increased the odds of a short-lived default. If this situation remains unchanged in coming weeks, Moody's will place the rating under review. [Moody's Investors Service, 6/2/11, emphasis added]

FACT: Attempts To Pay Down The Debt Without Raising Ceiling Would Still Harm Economy

Just By Coming Close To Default, Congress Would Rattle Investor Confidence In Loaning To U.S. As reported by Ezra Klein of the Washington Post: "By taking the debt ceiling hostage in a bid to address the deficit, Congress could provoke the exact calamity it's seeking to prevent. What we worry about when we worry about the deficit is that the market will lose confidence in our ability to pay back our debts and begin charging more to buy Treasuries. There's no quicker way to undercut the market's confidence in the U.S. government than for it walk up to the abyss of default. The likeliest disaster here will not be caused by Congress refusing to raise the debt ceiling. And, Geithner says, Congress will raise the debt ceiling. Eventually. But there'll be a lot of partisan posturing between now and then. In 2006, then-Senator Barack Obama lodged a protest vote against an increase in the debt ceiling - a vote he's since called 'a mistake.' Our economy, however, is weaker than it was then, our deficits are more worrying and the markets are more fragile. So the normal congressional bickering could prove especially dangerous." [Washington Post4/19/11, emphasis added]

  • Zandi: High Investor Confidence In Long-Term Value Of U.S. Debt Is "Cornerstone" Of Global Economy.As reported by Ezra Klein of theWashington Post: "'The cornerstone of the global financial system is that the United States will make good on its debt payments,' says Mark Zandi, chief economist at Moody's Analytics. 'If we don't, we've just knocked out the cornerstone, and the system will collapse into turmoil. 'Throughout the financial crisis, America's great advantage was its status as the single safest investment in the world. That makes it easier for us to borrow money to ease a downturn. It makes it easier for our central bank to buy bonds to keep interest rates low. It gives us tools and flexibility that, say, Greece simply doesn't have. But all of that is based on the market's perception that our debt is, indeed, a safe investment, that we will pay it back, that we won't inflate our way out of the fiscal holes we dig, that our political system will make tough decisions when necessary." [Washington Post4/19/11, emphasis added]

Plans To Avoid Default Without Raising Debt Ceiling Sound Good But Would Undermine Economy. From the Washington Post's Ezra Klein: "In short, [Rep. Michele Bachmann's] plan is that we don't raise the debt ceiling, but we use the revenue still coming in to pay off creditors first and whatever we think most important second. That way, we 'don't violate our credit rating' and 'prioritize our spending.' Makes perfect sense. At least, it makes perfect sense unless you, like me, had spent the previous few days talking to economists, investors and economic policymakers about what could happen if we start playing games with the debt ceiling. Their answers were across-the-board apocalyptic. If the U.S. government is so incapable of solving its political problems that it can't come to an agreement on the debt ceiling, they said, that's basically the end of the United States as the world's reserve currency. We won't be considered safe enough to serve as the investment of last resort. We would lose the most important advantage our economy has in the global financial system - and we'd probably lose it forever. Skyrocketing interest rates would slow our economy and, in real terms, make it even harder to pay back our debt, which would in turn send interest rates going even higher. It's an economic death spiral we associate with third-world countries, not with the United States." [Washington Post4/20/11, emphasis added]

Even Without Default, Delay In Debt Ceiling Hike Could Harm Economic Recovery. As reported by the Fiscal Times: "The government will bump up against the $14.3 trillion annual debt ceiling sometime around mid-May. The Treasury Department has a number of accounting and borrowing strategies that can postpone running out of cash for several additional months. And that has many of the business economists who monitor events in Washington fretting that the fragile economic recovery - estimates for economic growth in the just concluded first quarter are being ratcheted down to as low as 1.5 percent - could be aborted if Republican leaders in Congress and the White House engage in three months of brinkmanship before reaching an accord." [Fiscal Times4/19/11, emphasis added]

  • Bipartisan Policy Center Analyst: Failure To Raise Debt Limit Will Cause Interest Rate Hikes That "Would Cause A Double Dip" Recession. As reported by the Fiscal Times:

A sell-off of government bonds along the lines already pursued by PIMCO, whose founder, Bill Gross, said he exited the U.S. Treasury market earlier this year, would depress bond prices and raise rates, which go up when bond prices go down. "Bond traders are a spooky bunch," said Steve Bell, a budget analyst at the Bipartisan Policy Center who spent years on Capitol Hill as well as 10 years trading bonds for the now defunct Salomon Brothers.

"If they start playing games with the debt ceiling like passing a number of short-term extensions, you'll see people exiting the market despite their desire for safety."

He estimated failure to increase the debt ceiling could raise long-term rates by 1 ½ to 2 percentage points over the next six months. "Housing is flat on its back now," Bell said. "Could you imagine what would happen if small and medium-sized businesses had to pay 2 to 3 percentage points more, or credit card debt or the rate you pay for your car went up. It seeps into every type of economic activity. It would cause a double dip." [Fiscal Times, 4/19/11, emphasis added]

CLAIM: Palin Claimed GOP Budget Proposal Will "Save" Medicare

SARAH PALIN: This will save Medicare. It will save the safety net of health care coverage that our elders in this country need. I am very frustrated with Democrats and with the media trying to spin Paul Ryan's efforts here in trying to save and shore up Medicare, because what's being spun, Chris, this misperception, this misconception that he's trying to do away with Medicare.

FACT: Republican Proposal Would Replace Medicare Program With Vouchers, Doubling Out-Of-Pocket Expenses For Future Seniors

CBO: Under The GOP Budget, "Most Elderly People Would Pay More For Their Health Care Than They Would Pay Under The Current Medicare System." According to the Congressional Budget Office: "Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system. For a typical 65-year-old with average health spending enrolled in a plan with benefits similar to those currently provided by Medicare, CBO estimated the beneficiary's spending on premiums and out-of-pocket expenditures as a share of a benchmark: what total health care spending would be if a private insurer covered the beneficiary. By 2030, the beneficiary's spending would be 68 percent of that benchmark under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario." [CBO.gov, 4/5/11]

Wall Street Journal: GOP Plan "Essentially End[s] Medicare" For Americans Under 55 Years Old. As reported by the Wall Street Journal: "The plan would essentially end Medicare, which now pays most of the health-care bills for 48 million elderly and disabled Americans, as a program that directly pays those bills. Mr. Ryan and other conservatives say this is necessary because of the program's soaring costs. Medicare cost $396.5 billion in 2010 and is projected to rise to $502.8 billion in 2016. At that pace, spending on the program would have doubled between 2002 and 2016. Mr. Ryan's proposal would apply to those currently under the age of 55, and for those Americans would convert Medicare into a 'premium support' system." [Wall Street Journal4/4/11]

Currently, Medicare Part A Pays Hospital Bills For Americans 65 And Older Who Paid Social Security Taxes For At Least 10 Years. From CNNMoney: "Medicare Part A provides coverage if you're hospitalized. This coverage is 'free' - meaning you pay no premiums - if you paid into the Social Security pool for at least 10 years [and are over age 65 or disabled]." [CNNMoney, accessed 4/24/11]

  • Medicare Also Gives Seniors The Option To Purchase Additional Coverage For Things Like Doctor Visits And Prescription Drugs. From MarketWatch: "Medicare Part A, which covers hospital stays and services, is premium-free for most people. But that's where the freebies end. Traditional Medicare involves a matrix of premiums, co-payments, coinsurance and deductibles. For instance, you'll have to meet a deductible - $1,132 for 2011 - before Part A coverage kicks in for hospital stays of up to 60 days. For beneficiaries new to Medicare this year, the average premium for Medicare Part B is $115.40 a month. But if you earn more than $85,000 if you're single, or $170,000 for a married couple filing jointly, you'll pay more. And starting this year, high earners with Part D prescription-drug plans will face a surcharge ranging from $12 to $69.10 per month, depending on income." [MarketWatch, 4/24/11 via Mail Tribune]

The GOP Budget Turns Medicare Into A Voucher System. From "The Path to Prosperity":

Save Medicare for current and future generations while making no changes for those in and near retirement. For younger workers, when they reach eligibility, Medicare will provide a Medicare payment and a list of guaranteed coverage options from which recipients can choose a plan that best suits their needs. These future Medicare beneficiaries will be able to choose a plan the same way members of Congress do. Medicare will provide additional assistance for lower-income beneficiaries and those with greater health risks. [The Path To Prosperity, 4/5/11, emphasis added]

Cato Institute Senior Fellow: Republican Plan Replaces Medicare With A Voucher System. In a New York Post op-ed about the "Path to Prosperity," Cato Institute senior fellow Michael Tanner wrote: "Those getting close to retirement will also still go into Medicare, just as they would have before. But beginning in 2022, people who are younger than 55 today will begin to transition to a new system. Instead of going into Medicare at age 65, they will receive a voucher from the US government to help them purchase private health insurance. Initially that voucher is expected to be for roughly $15,000 per recipient. Lower income seniors and those with higher health care costs because of illness will receive a bigger subsidy. Seniors can use these vouchers, combined with whatever they wish to spend of their own money, to choose an insurance plan that has a cost and mix of benefits that best meets their needs. Instead of a one size fits all system, seniors will have many more choices than they have today." [Tanner Op-Ed, 4/10/11, emphasis added, via Cato.org]

In 2022, A Typical 65-Year-Old Would Be Paying Approximately Double Compared To Current Levels. The Center on Budget and Policy Priorities prepared a graphic comparing health care spending for a typical 65-year-old under the current system to the same spending under the Republican budget:

Ryan budget doubles health care spending of 65 year old

[CBPP.org, 4/7/11]

CEPR: Ryan's Budget Would Force Seniors To Spend Much Of Their Income On Health Insurance. According to Center for Economic Policy Research co-director Dean Baker:

Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)

According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit. This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)

According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. [CEPR.org, 4/6/11, emphasis added, all parentheses original, internal citations removed for clarity]

If Medical Costs Continued To Increase Faster Than Voucher Values, "The Average Retiree Would Be More Than $50,000 In The Hole." According to an op-ed in the Huffington Post by R.J. Eskow, Senior Fellow with The Campaign For America's Future:

Even if the voucher is given full Medicare value in Year One (which we question), things start to get really bad after that. If medical costs continued to increase at 9% each year, which isn't at all impossible, and the voucher's value continued to increase at 5%, here's what would happen 10 years later using my figures:

Ryan Budget

By 2031, the cost of Medicare-equivalent coverage would be $73,000, and the voucher would be worth $18,000. By my calculation, the average retiree would be more than $50,000 in the hole. [Eskow Op-Ed, 4/6/11 via Huffington Post, emphasis original]

Republicans Claim Patients' Use Of Vouchers Will "Deny Business To Inefficient Providers," But That Won't Work With Complex Health Care Market. Former White House economist Jared Bernstein explains:

[Rep. Ryan said on Meet the Press that] 'Our plan is to give seniors the power to deny business to inefficient providers...their plan [Affordable Care Act] is to give government the power to deny care to seniors.' [...]

To get why this "market solution" can't work, you have to understand a bit about how Ryan's plan changes Medicare.  As is by now pretty widely appreciated, including by many in his own party, the plan ends guaranteed health care coverage for seniors and replaces it with a voucher for them to shop for insurance on the street.

Importantly, the value of those vouchers start well below where they need to be to enable seniors to afford coverage comparable to Medicare today (in fact, beneficiaries costs would have to double), and their value falls increasing behind coverage costs over time.

Suppose you send me to the grocery store to buy you a gallon of milk.  Milk costs $3.50 a gallon but you give me $2.  I spend the whole day "denying business to inefficient providers"-i.e., grocers who all charge more than that-and at the end of the day, bring you back a pint.

Now, instead of milk, where I've got the information I need to be a smart shopper, suppose you give me the same under-priced voucher but ask me to bring you back a plan for treating that strange pain you've been experiencing on your left side on humid days. [JaredBernsteinBlog.com, 5/22/11, emphasis added]

CLAIM: Palin Claimed GOP Budget Plan Doesn't Affect Current Seniors

SARAH PALIN: His plan, too, remember, as you point out, it doesn't affect anyone who is 55 and older today. So, that's another misconception that is out there perpetuated by the media and by Democrats, making it sound like our esteemed elders today are going to be harmed. They won't be harmed by this plan.

FACT: For Current Seniors, Republican Plan Would Reopen Medicare "Donut Hole"

"Path To Prosperity" Reopens Medicare "Doughnut Hole," Forcing Millions Of Seniors To Pay Higher Drug Costs "Immediately." From the National Journal: "[T]he GOP is doubling down on the idea that today's seniors won't be affected. That's partly true. Ryan's plan to convert Medicare into a limited insurance subsidy, the most controversial aspect of the budget, wouldn't take effect until 2022.But the proposal would also repeal last year's health care law, which means reopening a coverage gap in Medicare's prescription-drug benefit that the statute closed. The gap, commonly called the "doughnut hole," requires seniors to pay 100 percent of any prescription costs after the annual total reaches $2,840 and until it hits $4,550. Those who spend more or less have at least three-quarters of the costs covered. Under the 2010 health law, Medicare will pay 7 percent of the cost of generic drugs and 50 percent on name-brand pharmaceuticals; by 2020, the doughnut hole will be closed. If Congress were to pass Ryan's plan and repeal the law, as House Republicans want, the 3 million to 4 million seniors left in the doughnut hole each year would immediately face significant out-of-pocket costs." [National Journal6/3/11, emphasis added]

  • GOP Budget Would Strip Current Seniors Of Access To Preventive Care. According to the National Journal: "If Congress were to pass Ryan's plan and repeal the law, as House Republicans want, the 3 million to 4 million seniors left in the doughnut hole each year would immediately face significant out-of-pocket costs. They and all other Medicare beneficiaries would also lose access to a host of preventative-care benefits in the health care law, including free wellness visits to physicians, mammograms, colonoscopies, and programs to help smokers quit." [National Journal6/2/11]

FACT: GOP Plan Would Encourage Healthy Seniors To Leave Medicare, Weakening The Program For The Most Vulnerable

Once Republican Voucher Program Begins In 2022, Healthy Seniors Still On "Traditional" Medicare Would Have Incentive To Leave — Endangering The Program For Less-Healthy Beneficiaries. From the National Journal: "The policies in the House GOP budget, if enacted, would begin affecting millions of seniors almost immediately by increasing their costs for prescription drugs and probably long-term care. Further, Medicare costs could rise over time if healthier seniors choose to abandon the traditional benefit program. [...] The plan to grandfather traditional Medicare for those older than 55 could also have negative consequences for current seniors: In 2022, when the limited-subsidy program would be introduced, seniors who qualified for traditional Medicare would be allowed to switch to the new program. If healthier or younger beneficiaries make the change to lower their out-of-pocket costs, those still participating in Medicare would be part of an insurance pool that is less healthy and more expensive. To cover those higher per-person costs, Medicare might well be forced to either raise premiums or limit reimbursements to health care providers-which could prompt many to stop taking Medicare patients." [National Journal6/3/11]

Centrist Think Tank: Despite Republican Claims, "Current Beneficiaries Are Not Protected In The Ryan Budget." According to a report from Third Way by David B. Kendall, Senior Fellow for Health and Fiscal Policy and Ryan McConaghy, Director of the Economic Program:

Despite promises to the contrary, current beneficiaries are not protected in the Ryan budget.Under the Republican proposal, traditional Medicare would quickly become second-class medicine. It would "wither on the vine," as then-House Speaker Newt Gingrich described a similar GOP effort in 1995.

The traditional Medicare plan, which covers three-fourths of today's beneficiaries, relies on its huge size to keep costs down. Doctors and hospitals are not required to participate in it, but they have little choice if they wish to treat any seniors, who are the nation's biggest health care consumers.

Fewer doctors would participate in the traditional Medicare plan if there were an alternative. The traditional plan pays physicians about 20% less than private health insurance plans. Today, that is essentially a discount for the large volume of Medicare patients. Under the Ryan budget, it would become a reason for doctors to leave the traditional plan.

By 2030, only 55% of Medicare beneficiaries would still be eligible for traditional Medicare according CBO. Actual enrollment would be less than half of Medicare beneficiaries because many seniors would continue to enroll in private health care coverage under Medicare Advantage. By 2040, traditional Medicare would have only about 20% of Medicare beneficiaries. [ThirdWay.org, 4/14/11, internal citations removed for clarity, emphasis added]

FACT: GOP Plan's Cuts To Medicaid Would Affect Seniors Immediately

Nine Million Seniors Receive Medicaid As Well As Medicare. From the National Journal: "Some 9 million seniors qualify for both Medicare and Medicaid benefits, and about two-thirds of all nursing-home residents are covered by Medicaid." [National Journal6/3/11]

GOP Budget Cuts $744 Billion From Medicaid Over The Next Decade. From the National Journal: "Perhaps more jolting, the Republican budget would cut spending on Medicaid-health care for the poor-much of which goes to long-term care for the elderly. [...] The GOP budget proposes cutting some $744 billion from Medicaid over 10 years by turning the system into block grants that limit federal contributions and give states more choice in structuring benefits. No one knows exactly which Medicaid services states would choose to cut back, but senior citizens account for a disproportionate share of Medicaid outlays and would almost certainly bear some of the burden." [National Journal, 6/3/11, emphasis added]

Click here to read much more about the Medicaid block grants in the GOP budget.

CLAIM: Palin And Gov. Barbour Claimed There Are No Plans To Save Medicare Other Than Ryan's

SARAH PALIN: Now, what's going to do away with Medicare is if we keep going down the road that we're on. But Obama evidently wants us to go down because we will have a bankrupt Medicare system. [...] We have to remember, too, that Paul Ryan's plan -- and I support it because I don't see anything better, more sensible, more fiscally sound out there. [Fox News Sunday, 6/5/11]

GOV. HALEY BARBOUR: Unfortunately, while Barack Obama said in 2009 that the government will not be able to afford Medicare in the future, health care costs were unsustainable. Today, he wants to do nothing about Medicare. He told the Republicans when they met with him at the White House, "I will not have a plan." [Face the Nation, 6/5/11]

FACT: The Democratic Plan For Medicare Aims To Reduce Spending By Making The Program More Efficient

In Debt-Reduction Speech, Pres. Obama Called For Reforms That Cut Medicare And Medicaid Spending By Building On Reforms From Health Care Law. From President Obama's speech at George Washington University on April 13:

The third step in our approach is to further reduce health care spending in our budget.  Now, here, the difference with the House Republican plan could not be clearer.  Their plan essentially lowers the government's health care bills by asking seniors and poor families to pay them instead.  Our approach lowers the government's health care bills by reducing the cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion.  My approach would build on these reforms.  We will reduce wasteful subsidies and erroneous payments.  We will cut spending on prescription drugs by using Medicare's purchasing power to drive greater efficiency and speed generic brands of medicine onto the market.  We will work with governors of both parties to demand more efficiency and accountability from Medicaid.

We will change the way we pay for health care -- not by the procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results.  And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.  

Now, we believe the reforms we've proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional $1 trillion in the decade after that.  But if we're wrong, and Medicare costs rise faster than we expect, then this approach will give the independent commission the authority to make additional savings by further improving Medicare.  [President Obama Remarks, 4/13/11, emphasis added]

Brookings Senior Fellow: President's Plan "Better Than Either The Status Quo Or Ryancare." From Brookings Institution Senior Fellow in Economic Studies Isabel V. Sawhill: "The important point is that we need to improve the efficiency of the system. Almost everyone agrees that we are getting poor value for our health dollar. Medicare's open-ended fee-for-service system does not solve the problem; it exacerbates it. Premium support is one way to put a lid on unsustainable growth rates. The President's proposal is another way to accomplish the same objective. He would not only limit the growth of Medicare but give greater authority to an independent board to change the way in which the delivery system is organized and health care costs are reimbursed. His plan is far from perfect but, in my view, better than either the status quo or Ryancare." [Brookings Institution, 5/31/11]

House Democratic Leader Nancy Pelosi: "We Have A Plan. It's Called Medicare." As reported by Greg Sargent of the Washington Post: "'It is a flag we've planted that we will protect and defend. We have a plan. It's called Medicare.' That's from Nancy Pelosi, who called me from Wisconsin, where she's holding events today defending Medicare in Paul Ryan's back yard. [...] Asked to clarify what she meant, and to detail what sort of changes she'd be open to, Pelosi insisted that any claims she could support cuts in the program are wrong. 'No benefits cuts,' she said flatly. Pelosi added that Dems have already put on the table the type of reform they should continue advocating for: The Affordable Care Act. 'We gave the blueprint for how we strengthen Medicare in the Affordable Care Act,' Pelosi said, a plan which is still 'ripening' and 'which does not reduce benefits. It lowers costs to taxpayers, the deficit, and beneficiaries.' She said the only type of Medicare cuts she's open to are extracting savings via bureaucratic and pharmecutical reforms that don't touch benefits." [Washington Post, 5/19/11, emphasis added, italics original]

Face the Nation

CLAIM: Barbour Suggested The Obama Administration Has Helped Wall Street At The Expense Of Main Street

GOV. HALEY BARBOUR: Frankly, while this administration has been great for Wall Street, Main Street has never really gotten out of the last recession. It's very hard to tell the difference for small business, even though the New York banks have done great.

FACT: Democrats Passed Wall Street Reform To Protect Consumers — Over Republican Objections

Dodd-Frank Reform Bill Ended The Bailout Culture By Creating An "Orderly Liquidation Authority" To Dismantle Failed Financial Entities. According to Section 204 of the Dodd-Frank Wall Street Reform and Consumer Protection Act:

Dodd-Frank Bill

[Dodd-Frank Wall Street Reform And Consumer Protection Act via GPO.gov, accessed 1/12/11]

  • Dodd-Frank Bill's "Orderly Liquidation Authority" Uses Funds From Banks, Not From Taxpayers. As reported by Ezra Klein of theWashington Post: "Here's how the liquidation fund works: A year after the bill is signed, the secretary of the Treasury begins taxing banks based on the risk they pose to the financial system. This tax must raise $50 billion and last for at least five years but no more than 10 years. So first, that's where the fund comes from: a tax on too-big-to-fail banks, which has the added bonus of giving a slight advantage to smaller banks that won't be laboring under this tax." [Washington Post,4/20/10, emphasis added;Note: Klein's piece references "Section 210, subsection (n)" of the bill; in the final law signed by President Obama, this language can be found in Section 210, subsection (o).]

House Passed Wall Street Reform Without Any Republican Votes. According to the Huffington Post:

In a close vote, the House of Representatives Friday afternoon passed a financial reform bill intended to re-regulate Wall Street and increase protections for Main Street.

The bill, passed in a 223-202 vote, calls for the creation of a new federal agency dedicated to protecting consumers that would police consumer credit products like mortgages and credit cards. It also establishes new rules for the trading of derivatives and increases the transparency of the credit-rating process -- two previously under-regulated parts of the economy that played a large role in last year's economic collapse.

Not a single Republican voted for the bill. Twenty-seven Democrats broke with the rest of their party to vote against it. [Huffington Post, 6/17/10]

Only Three Senate Republicans Voted For Wall Street Reform. According to AOL News:

Senate Democrats today muscled through a far-reaching overhaul of Wall Street rules and oversight that sent the government's most ambitious effort to prevent future financial crises to the White House for President Barack Obama's signature.

Capping more than a year of legislative fights, fierce lobbying from the financial industries and a skein of congressional probes into the global economic crisis that steadily drummed up popular support for reform, the 60-39 vote saw three Republicans break ranks with their party to join all but one Democrat in support of a measure sure to play a role in midterm elections this fall. [AOL News, 6/15/10]

CLAIM: Barbour Suggested President Obama Is Responsible For Higher Gas Prices

GOV. HALEY BARBOUR: This administration's policies clearly have been to drive up the cost of energy, so Americans would use less of it. ... When-- when Barack Obama became president, gasoline was about a dollar eighty a gallon. And now it's up to four dollars a gallon. Why should we be surprised when his secretary of energy said in 2008, Steven Chu, what we really need in the United States is to get the price of gas up to where it in Europe.

FACT: Gas Prices Are Jumping Up Around The World Due To The Widespread Unrest In The Middle East

"Oil Prices, Already Climbing As The World Economy Grew, Soared When Unrest Hit The Mideast And North Africa." As reported by the Kansas City Star: "Oil prices, already climbing as the world economy grew, soared when unrest hit the Mideast and North Africa. [...] The federal Energy Information Administration said Monday that Libyan oil production was down as much as 90 percent. The country contributes about 2 percent of the world's oil supply and little to the United States. But the agency said that the longer Libyan supplies were disrupted, the more it could affect the United States. Countries scrambling for replacement barrels could make for tighter supplies. The fear of more supply disruptions by itself has been enough to cause oil prices to soar, especially because of worry that the unrest could spread to Saudi Arabia. It has most of the world's surplus oil production capacity and provides the United States with 10 percent of its oil. 'We'll have a risk premium for the next six months to a year because of what's going on in the Mideast,' said James Williams, an analyst for WTRG Economics." [Kansas City Star3/7/11, emphasis added]

FACT: Before Middle East Unrest This Winter, Gas Prices Had Returned From Recession-Fueled Lows To More Normal Levels

At End Of 2008, Gas Prices Fell To Their Lowest Point Since February 2004. According to data from the Department of Energy, the average price of gas in the U.S. fell from just over $4.00 per gallon in July 2008 to $1.59 per gallon on December 29, 2008. The national average per-gallon price of gas had not been as low as $1.59 since February 2, 2004, the data show. [EIA.DOE.gov, accessed 3/13/11]

Recession Drove Rapid Decline In Gas Prices. As reported by CNNMoney.com in 2008: "If there's one bright spot in a bad economy, it's that gasoline prices have fallen, and they're expected to drop even further. As the global economy falters, demand for oil has dropped. And since the price of oil makes up about half of the cost of a gallon of gas, analysts see more relief ahead at the pump. ... The national average price for a gallon of regular, unleaded gasoline fell 2.4 cents to $3.480 from $3.504, according to a daily survey released Tuesday by AAA. That's down 18% from an all-time high of $4.114 a gallon hit on July 17." [CNNMoney.com, 10/7/08]

Gas Prices Have Risen During Obama's Term, But Only From Recession-Fueled Lows Back To Normal. Two graphs of gas prices over time show that while prices appear to shoot upward if one looks only at 2008-2011 numbers, the longer view confirms that prior to political upheaval in the Middle East, prices had in fact returned to normal after falling dramatically during the recession:

Gas Prices 2008-Present

Weekly gas prices

[EIA.DOE.gov, accessed 3/13/11]

Gas Prices 2000-Present

weekly gas prices

[Data from EIA.DOE.gov, accessed 3/13/11]

CLAIM: Barbour Claimed Health Care Reform Discourages Job Creation

GOV. HALEY BARBOUR: Obamacare makes it harder to hire people. How do you hire people, Bob, if you don't know what your obligations and costs are going to be for health care?

FACT: The GOP Claim That Health Care Reform Hurts Job Creation Is False 

PolitiFact Rated Claim That Health Care Reform Kills Jobs "False." From PolitiFact.com's fact check of House Majority Leader Eric Cantor's claim that the health care law is "job killing":

Republicans have used the "job-killing" claim hundreds of times -- so often that they used the phrase in the name of the bill. It implies that job losses will be one of the most significant effects of the law. But they have flimsy evidence to back it up.

The phrase suggests a massive decline in employment, but the data doesn't support that. The Republican evidence is extrapolated from a report that was talking about a reduction in the labor supply rather than the loss of jobs, or based on measures that weren't included in the final health care law. We rate the statement False. [PolitiFact.com, 1/19/11]

McClatchy: "Saying That The Law Is A Job Killer Doesn't Necessarily Make It One." According to McClatchy:

Republicans have titled their effort to overturn the law the "Repealing the Job-Killing Health Care Law Act," and that's their favorite talking point against it. The House of Representatives will start debate on repeal Tuesday and probably vote Wednesday.

Saying that the law is a job killer doesn't necessarily make it one, however, and independent experts say that such a conclusion is at least premature, if not unfounded.

"The claim has no justification," said Micah Weinberg, a senior research fellow at the centrist New America Foundation's Health Policy Program. [McClatchy, 1/17/11]

Health Care Reform Will Create Up To 4 Million American Jobs In The Next Decade. According to the Center for American Progress, "Relative to baseline employment forecasts from the Employment Projections Program at the U.S. Department of Labor, we estimate that moderate medical savings from health care modernization as envisioned under the legislation now before Congress would lead to an average of 250,000 additional jobs created annually. Under the larger assumption about savings due to health care reform, 400,000 new jobs a year would be created on average." [Center for American Progress, New Jobs Through Better Health CareJanuary 2010]

CLAIM: Barbour Claimed The GOP Plan Is "Very Similar" To Federal Employees' Health Plan

GOV. HALEY BARBOUR: Now Paul Ryan has put forward an idea, pretty good idea if you ask me. I was a government employee once. And what Ryan is proposing is very similar to federal government employees' health insurance plan.

FACT: While Federal Employees' Health Benefits Increase To Meet Rising Health Care Costs, Republican Medicare Scheme Would Not Be Flexible

Value Of Federal Benefits Adjusts According To Health Care Market But Ryan Plan For Medicare Uses Fixed Voucher Amounts. From Wonk Room: "It's the same rhetoric that Democrats used to sell the health care exchanges that are part of the Affordable Care Act, but in Ryan's case the comparison doesn't hold up. Ryan is constraining the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government's contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula 'is known as the 'Fair Share' formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.' The difference is that Ryan's proposal provides seniors with a set amount of money that, in order to reach the kind of savings he's advertising, would have to depreciates every successive year - even as health care costs increase." [Wonk Room, 4/5/11, emphasis added]

PolitiFact: There Are More Differences Than Similarities Between Medicare Proposal And Federal Health Care Benefit. According to a PolitiFact analysis of a similar claim from Rep. Mike Pence (R-IN):

Now let's look at how whether proposal looks like what members of Congress can buy.

  • How the planislike what members of Congress get.We contacted Pence's office to ask about how the Ryan proposal is like what members of Congress get, and they pointed us to the fact that Medicare plans from private insurers will be required to comply with a benefits standard set by the U.S. Office of Personnel Management, as do plans that cover members of Congress.

We should also note that seniors would be able to compare different plans and select from different insurance options, as members of Congress do. The government would pay part of premiums, as it does for members of Congress.

  • How the plan is not like what members of Congress get.First, the plans would be created specifically for Medicare beneficiaries on newly created Medicare health insurance exchanges. (Exchanges are virtual marketplaces where people can shop for insurance.)

Second, as Van Hollen pointed out, members of Congress are protected somewhat when health insurance companies raise their rates, through a formula he mentioned known as "Fair Share." Generally speaking, the government pays for 75 percent of the average of the health insurance plans it offers. If the overall plans increase in price, the government still pays 75 percent.

Federal support for premiums in Ryan's plan, though, would not keep pace with medical inflation. Premium support instead would be pegged to the consumer price index, which historically lags health care costs.

Our final point on how the plans differ may seem obvious to some, but we feel it's important to mention: Members of Congress receive employer-based insurance. By definition, that means they receive a salary to help pay for their insurance. The base pay for members of Congress is currently $174,000.

Medicare beneficiaries, on the other hand, tend to make a lot less money, because most of them are retired. The median income for Medicare beneficiaries was $20,644 in 2010. And only 5 percent had incomes exceeding $82,695, according to an analysis by the Kaiser Family Foundation. [PolitiFact.com, 4/13/11, emphasis original]