Fact Checking The Sunday Shows - September 18, 2011

September 19, 2011 9:32 am ET

This week's Sunday political talk shows saw a litany of standard GOP untruths. On CNN, Sen. Lindsey Graham (R-SC) repeated the favorite false Republican talking point of late: that businesses aren't hiring because of "uncertainty." He was joined in his lie by Rep. Paul Ryan (R-WI) and presidential candidate Herman Cain, both of whom appeared on Fox News Sunday. Both Cain and Ryan also revived an old piece of misinformation — that raising taxes on top earners would disproportionately harm small businesses — which was echoed by Senate Minority Leader Mitch McConnell (R-KY). For his part, Graham misrepresented the public's opinion on taxing the wealthy, and absurdly claimed that "everything" — including unemployment — is worse because of President Obama's policies. Ryan dredged up some old lies about the House-passed GOP budget's effects on Medicare, which it would essentially destroy, and then falsely claimed that the Affordable Care Act's Independent Payment Advisory Board puts bureaucrats in charge of "rationing."

CLAIM: Sen. Graham, Rep. Ryan And Herman Cain Claimed Businesses Aren't Hiring Because Of Uncertainty

SEN. LINDSEY GRAHAM: But here's where we're at as a nation. We have 11 percent unemployment in South Carolina. And here's what I hear when it comes to hiring people. People are frozen right now. They're not going to hire. You may build a bridge in South Carolina or deepen the Port of Charleston, that would help our economy in the short term. 

But if you want to have a wave of hiring in this country, you've got to provide certainty. People don't know what their tax bill will be because in 2013 the Bush tax cuts expire. The Obama health care costs are a nightmare for job growth because it adds a tremendous amount per employee to future hires. [State of the Union, 9/18/11]

REP. PAUL RYAN: The other thing, in the tax side is permanent tax increases on job creators doesn't work to grow the economy. It's actually fueling the uncertainty that is hurting job growth right now. [Fox News Sunday, 9/18/11]

HERMAN CAIN: But my point is the business sector, this president continues to come up with ideas that's going to punish the business sector, that's going to slow down the business sector, and as Representative Ryan mentioned it's going to create more uncertainty for the business sector.

We don't even know what the tax rate structure is going to be in the beginning of the 2013 and that's less than a year-and-a-half away. Uncertainty is killing this economy, Chris. [Fox News Sunday, 9/18/11]

FACT: Businesses Blame Weak Demand — Not Government Policies — For Weak Hiring

WSJ: "The Main Reason" For Hiring Reluctance Is "Scant Demand, Rather Than Uncertainty Over Government Policies." According to the Wall Street Journal:

The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

"There is no demand," said Paul Ashworth of Capital Economics. "Businesses aren't confident enough, and the longer this goes on the harder it is to convince them that they should be."

In the survey, conducted July 8-13 and released Monday, 53 economists-not all of whom answer every question-were asked the main reason employers aren't hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing. [Wall Street Journal7/18/11, emphasis added]

Washington Post: Executives Can't Draw Specific Link Between Government Actions And Hiring Decisions. According to the Washington Post: "Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run. But when [manufacturing CEO Jason] Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers. None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring." [Washington Post8/21/10, emphasis added]

Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:

The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:

Washington Post graph

As you can see, sales - that is to say, demand for their products - dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.

Washington Post graph

So, if anything, businesses have been too optimistic over the past few years. [Washington Post7/22/10]

CLAIM: Sen. McConnell, Rep. Ryan And Herman Cain Distorted The Number Of Small Businesses That Would Be Affected By Raising Taxes On Top Earners

SEN. MITCH MCCONNELL: But we don't want to stagnate this economy by raising taxes.  It won't just hit individuals, David.  You know, there are over 700,000 of our most successful small businesses pay taxes as individuals, not as corporations.  That represents 50 percent of small business income and 25 percent of the American workforce.  We've got a 9.1 percent unemployment rate.  Does anybody think that's a good idea other than the president? [Meet the Press, 9/18/11]

REP. PAUL RYAN: And don't forget the fact that most small businesses file taxes as individuals. So, when you are raising these top tax rates, you're raising taxes on these job creators where more than half of Americans get their jobs from in this country. [Fox News Sunday, 9/18/11]

HERMAN CAIN: What the president doesn't understand, a lot of people don't understand, is when he throws around numbers like everybody making over $250,000 is going to impose another tax, he is punishing small business, because with a subchapter S corporation, if you eke out a profit, you have to run it through personal income tax and you could be penalized if you make too much money. [Fox News Sunday, 9/18/11]

FACT: Only A Tiny Fraction Of Small Businesses Fall Into The Top Tax Brackets

CAP: "Exceedingly Few Small Businesses" Fall Into Top Tax Brackets. From the Center for American Progress: "Exceedingly few small businesses will be affected if the Bush tax rates for the rich expire, and those that are will be making enough money to be paying in the top two income tax brackets. At the end of the day, just 12 percent of the revenue raised by allowing those tax breaks to expire will be paid by business people with employees, according to the Congressional Research Service." [Center for American Progress, 11/15/10]

Only 3 Percent Of People In Top Brackets Have Any Business Income At All. From the Center for American Progress: "But according to the Joint Committee on Taxation, just 3 percent of people with any business income at all-from an enterprise large or small-face either of the top two income tax brackets, which are the ones in question. Conservatives eventually conceded this point, but pivoted to the literal number of 'small businesses' that they claim will be affected if the tax cuts for the rich expire." [Center for American Progress, 11/15/10]

FactCheck.org: "Only 2 Percent" Of Those Reporting Business Income Would Face Higher Taxes With Increase On Top Earners. According to FactCheck.org: "[O]nly 27 percent of all upper-income tax filers report business income that accounts for more than half of their wages. It's likely that a small-business owner would make most of his or her income from the small business... In the end, it's unclear exactly what percentage of these top earners are truly small businesses. What is clear, however, is that we're not talking about all that many small businesses in the first place. The vast majority of individuals who report business income or losses are not making upwards of $200,000 a year. In fact, only 2 percent of all those reporting business income in 2009 will earn enough to fall in the top two brackets. As we explained back when Obama's tax plan was attacked on the campaign trail, the overwhelming majority of these mom-and-pop shops we hear about would not see their taxes go up under Obama's proposal." [FactCheck.org, 3/6/09, emphasis added]

FACT: The Republican Definition Of "Small Businesses" Includes Multi-Billion-Dollar Corporations

Republican Definition Includes Athletes, Authors, And Other Non-Employer Tax Filers. According to Businessweek:

"McConnell's 50-percent-of-income figure is based on a July 12 finding by the Joint Committee on Taxation, a House-Senate panel that analyzes tax issues, that half of about $1 trillion of business income in 2011 will be reported on some 750,000 personal tax returns filed by people who pay the top marginal rates. He calls those small businesses. Yet the report says the data 'do not imply that all of the income is from entities that might be considered 'small.'' Almost 20,000 of those businesses, for example, had receipts of more than $50 million, it says.  

Besides Obama, McConnell's 50 percent figure includes authors, actors, athletes, and others who employ few if any workers, as well as hedge fund firms and major law partnerships most people wouldn't consider small. 'We are being over-inclusive in our use of small business income,' says Edward D. Kleinbard, a former staff director of the Joint Committee on Taxation who is now a University of Southern California law professor." [BusinessWeek9/23/10, emphasis added]

Bloomberg: GOP Definition Of Small Business Includes "George Soros, Most Movie Stars And Obama Himself." According to Bloomberg:

Senate Republican leader Mitch McConnell says President Barack Obama wants to subject half of all small-business income to a tax increase, a move that he says would strike a blow at the U.S. job-creation engine.

McConnell's numbers only add up if you consider people like billionaire investor George Soros, most movie stars and Obama himself small-business owners, tax experts say.

That's because the lawmaker is basing his figure on a broad definition of the term that experts say includes authors, actors and athletes who employ few if any workers. It also encompasses businesses that many people wouldn't consider small, such as Soros's hedge-fund firm and major law partnerships. [Bloomberg, 9/20/10]

Republicans Define All "Pass-Through" Entities As Small Businesses. As reported by the Washington Post, "Republicans continually define pass-through entities of all sizes as small businesses..." [Washington Post9/17/10]

Tax Policy Center's Marron: Policymakers Should "Take Care Not To Equate Pass-Throughs With Small Business." From the Washington Post:

Some of these "pass-through" companies are rather large, with revenues of more than $50 million, but they represent just a small proportion of such companies. According to calculations by Donald Marron, director of the Urban-Brookings Tax Policy Center, in 2008 such companies accounted for less than one-tenth of one percent of all returns filed - but they had 40 percent of revenues and 30 percent of all profits.

"Large businesses thus account for a large share of the economic activity pass-through entities undertake," Marron recently told Congress.  "Policymakers should therefore take care not to equate pass-throughs with small business." [Washington Post, 4/15/11]

By Defining All "Pass-Through" Entities As "Small Businesses," Republicans Are Counting A Wall Street Firm Worth $54 Billion As "Small." As reported by the Washington Post:

The thing is, some of those businesses are not particularly small. In fact, they're quite large.

Among the firms Republicans want to protect from new taxes, according to research by House Democrats: The management team at Wall Street buyout firm Kohlberg, Kravis and Roberts (KKR), which recently reported more than $54 billion in assets managed by 14 offices around the world. Auditing firm PricewaterhouseCoopers, a household name with operations in more than 150 countries. And the Tribune Corp., which owns the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.

KKR, PricewaterhouseCoopers and the Tribune, it turns out, are organized as "pass-through" entities - companies that typically avoid corporate taxes by reporting profits on the individual tax returns of their owners, managers or shareholders. [Washington Post9/17/10, emphasis added]

Bush Economist: Businesses Republicans Define As "Small" Are Actually "Very Large." According to the Washington Post: "Alan Viard, an economist in the Bush White House who is now at the American Enterprise Institute, agreed that many firms represented in the top tax brackets are hardly small. Economically, that doesn't matter, he said: Obama would still be raising taxes on a significant source of jobs and economic activity. Politically, however, it's a very different matter to raise taxes on a Wall Street hedge fund than it is to tax your neighborhood dry cleaner. Which is why Republicans continually define pass-through entities of all sizes as small businesses, a position Viard called a 'fallacy.' 'How can it be that 3 percent of owners are accounting for 50 percent of small business income? Those firms they're owning can't be all that small,' Viard said. 'And that's true. They're very large.'" [Washington Post9/17/10, emphasis added]

Meet the Press

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CLAIM: Sen. McConnell Suggested Means Testing Social Security Is Necessary To Preserve The Program

 SEN. MITCH MCCONNELL: Well, look, you know, if Warren Buffett would like to give up some of his benefits, we'd be happy to talk about it.  I mean, I, I think that means adjusting benefits is one of the ways that we're going to have to solve at least the Social Security and Medicare problems long term for the next generations. 

FACT: Social Security Is Solvent For 25 Years Without Changes, And Requires Only Minor Adjustments To Close The Long-Term Shortfall

Social Security Trustees: Trust Fund Sufficient To Pay Full Benefits Through 2036, 78 Percent Of Benefits Thereafter. According to the Social Security Board of Trustees: "The projected point at which the combined Trust Funds will be exhausted comes in 2037 - the same as the estimate in last year's report. At that time, there will be sufficient tax revenue coming in to pay about 78 percent of benefits." [SSA.gov, 8/5/10]

  • CBPP: "Those Who Fear That Social Security Won't Be Around" For Today's Workforce "Misunderstand" Trustees' Report. According to the Center on Budget and Policy Priorities: "Even after 2037, Social Security could pay more than three-fourths of scheduled benefits using its annual tax income. Those who fear that Social Security won't be around when today's young workers retire misunderstand the trustees' projections. The program's shortfall is relatively modest, amounting to 0.7 percent of Gross Domestic Product (GDP) over the next 75 years (and 1.4 percent of GDP in 2084). A mix of tax increases and benefit modifications - carefully crafted to shield recipients of limited means, potentially make benefits more adequate for the neediest beneficiaries, and give ample notice to all participants - could put the program on a sound footing indefinitely." [CBPP.org, 8/13/10]

The Post-2037 Funding Shortfall Is Predicted To Be Less Than 1 Percent Of GDP. According to the Economic Policy Institute: "Social Security spending as a share of the economy is projected to decline after the Baby Boomer retirement, leveling off at around 6% of GDP; this is a little more than 1 percentage point above current revenues as a share of GDP. The Social Security actuaries have projected that an increase in revenues equal to just 0.6% of GDP will be sufficient to cover promised benefits over the 75-year planning period because of the savings built up in the trust fund." [EPI.org, 8/6/10, citations removed for clarity]

State of the Union

CLAIM: Sen. Graham Suggests "Most Americans Are Frustrated" By Over-Taxation Of The Wealthy

SEN. LINDSEY GRAHAM: I think most Americans are frustrated with the tax code where 1 percent of taxpayers pay 40 percent of the taxes, the top 10 percent pay 70 percent, and 47 percent of Americans don't pay any federal income taxes. 

FACT: Americans Consistently Support Raising Taxes On The Wealthy

McClatchy-Marist: 68 Percent Support Increasing Taxes On Income Over $250,000. According to an August 9 McClatchy-Marist poll: "Nearly seven in ten adults nationally -- 68% -- support increasing taxes on income over $250,000.  29% oppose such an action, and 3% are unsure. [McClatchy-Marist, 8/9/11]

Gallup Poll: 66 Percent Support Raising Taxes On Upper-Income Americans. According to an August 10 Gallup poll, 66 percent of national adults support "increasing income taxes for upper-income Americans" as a way to reduce federal debt. [Gallup, 8/10/11]

CNN Poll: 62 Percent Agree Taxes On The Wealthy "Should Be Kept High." According to an August 10 CNN poll, 62 percent of Americans agree that  "taxes on wealthy people should be kept high so the government can use their money for programs to help lower-income people." Additionally, 63 percent say a deficit reduction proposal from the bipartisan congressional committee should include "increases in taxes on businesses and higher-income Americans." [CNN, 8/10/11]

CLAIM: Sen. Graham Claimed "Everything Is Worse" Because Of President Obama's Policies

SEN. LINDSEY GRAHAM: The reason people have little confidence in President Obama's policies, they're just not working. Everything is worse, 2 million people unemployed after he took office. Gas prices are 100 percent higher. Home values are down. Debt is up by 35 percent. 

FACT: Under President Obama's Policies, The Employment Picture Began To Turn Around From Bush-Era Losses

Washington Post Fact Checker: Saying Obama "Made It Worse" Is "Stretching It." According to the Washington Post fact checker's assessment of the following statement by former Gov. Mitt Romney (R-MA):

"When he took office, the economy was in recession, and he made it worse, and he made it last longer." 

With the unemployment rate ticking up in May , to 9.1 percent, the economy is definitely a weak spot for Obama. But Romney is stretching it here when he suggests that Obama has made the recession "worse...and made it last longer."

Part of the problem is that the National Bureau of Economic Research, the nonpartisan research organization that identifies recessions, last year declared that the recession ended in June 2009 - two years ago. So, with NBER saying the economy is now out of a recession, it is difficult to see how Romney can claim that Obama made it worse.

A Romney campaign official, who declined to be identified, argued that the nation now has what he called a "recessionary economy." He said that Obama made the situation worse by pushing through a stimulus bill that did not have enough tax relief. (About one-quarter of the $800 billion stimulus bill was immediate tax relief.) [Washington Post6/6/11, emphasis original]

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:

From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]

PolitiFact: "True" That "Most Job Losses" Happened Before Obama Policies Took Effect. According to PolitiFact's analysis of President Obama's statement that "most of the jobs that we lost were lost before the economic policies we put in place had any effect": "Looking at BLS data on seasonally adjusted non-farm employment from December 2007, when the recession officially began, to January 2009, the month before the stimulus was enacted (a 25-month period), the jobs number declined by 4.4 million. ... When [Obama] refers to his economic policies, we presume he is referring to his main economic stimulus, the American Recovery and Reinvestment Act. It passed in February 2009, but it took several months before the impact of its spending was felt in the economy. Job loss didn't stop, but Obama is right that it slowed down. In the 19 months from February 2009 through September 2010, the month of the most recent preliminary data, the overall job decline in the private and public sectors was 2.6 million. And the number of jobs lost per month has declined from around 700,000 a month at the beginning of the administration to months in which there were small net gains. ... 'I watched the president on Stewart's show last night, and I thought his basic point about the timing of the employment losses was correct and ought to be noncontroversial,' Gary Burtless, a labor markets expert at the centrist-to-liberal Brookings Institution said in an e-mail." [PolitiFact.com, 10/27/10, emphasis added]

FACT: Once It Took Effect, Recovery Act Spending Helped Turn The Job Market Around

Since Summer 2009, The Private Sector Has Added Jobs While The Public Sector Has Shrunk. Political Correction prepared a chart based on Bureau of Labor Statistics data showing cumulative job gains and losses in the public and private sectors since summer 2009 (click to enlarge):

private-sector jobs

[BLS.gov, accessed 8/14/11; BLS.gov, accessed 8/14/11]

Since June 2009, The Private Sector Has Gained Over One Million Net Jobs. According to Bureau of Labor Statistics data, there were 107,936,000 private-sector jobs in June 2009. As of August 2011, the most recent report available, the data show that total is up to 109,170,000 - a net gain of 1,234,000 jobs in the private sector. [BLS.gov, accessed 9/18/11]

CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:

On that basis, CBO estimates that ARRA's policies had the following effects in the fourth quarter of calendar year 2010:

  • They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.1 percent and 3.5 percent,
  • Lowered the unemployment rate by between 0.7 percentage points and 1.9 percentage points,
  • Increased the number of people employed by between 1.3 million and 3.5 million, and
  • Increased the number of full-time-equivalent jobs by 1.8 million to 5.0 million compared with what would have occurred otherwise, as shown in Table 1. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO, February 2011]

FACT: Gas Prices Were Artificially Low At The End Of 2008 Because Of The Recession, Making Higher Prices An "Inevitable" Component Of Recovery

GOP Economist Holtz-Eakin: "As Economies Recovered, It Was Inevitable That [Gas] Prices Were Going To Rise." In an interview with CNN, Republican economist Douglas Holtz-Eakin said: "Lesson number one is we have oil at $140 a barrel in 2008. And it went down not because we somehow discovered a lot more oil. No, it went down because we went into a massive global recession. As economies recovered, it was inevitable that prices were going to rise. And this was utterly foreseeable." [State of the Union3/27/11]

Recession Drove Rapid Decline In Gas Prices. As reported by CNNMoney 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, 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 2009-2011 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 2009-Present

gas prices

[EIA.DOE.gov, accessed 9/4/11]

Fox News Sunday

CLAIM: Rep. Ryan Lies About His Plan To Dismantle Medicare

REP. PAUL RYAN: We believe the best way to fix them is not to jeopardize the access to these benefits for current seniors. Our bill says leave them alone, don't disrupt their services and then have a new reform program for younger generations that gives them more choice, more competition, it's not vouchers. They choose among competing plans, just like they do in Medicare Advantage or the Part D benefit.

And what we do is we have a strengthened program that works like the one we have in Congress, so that it's actually something that's solvent. We actually make Medicare solvent and we don't do it by restricting access to drugs -- restricting to seniors care, like doctors and hospitals.

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]

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:

Health care spending

[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:

medical costs

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]

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]

...And 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: The GOP Medicare Plan Isn't Like What Members Of Congress Get

Value Of Federal Employees' 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 plan is like 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]

CLAIM: Rep. Ryan Claimed IPAB Will Put Bureaucrats In Charge Of Rationing Medicare

REP. PAUL RYAN: The problem is, what the president has said he's going to do, and what this new law does, is it puts 15 bureaucrats in charge of rationing prices to Medicare for current seniors. And that jeopardizes their care and also doesn't save the system.

So, what we've seen from the president so far -- more price controls and rationing. No plans to save it from bankruptcy.

FACT: IPAB Is Prohibited From Rationing Care

IPAB Cannot Ration Care, Increase Taxes, Change Benefits Or Eligibility, Or Increase Premiums And Cost-Sharing Requirements. According to the Kaiser Family Foundation: "The Board is prohibited from submitting proposals that would ration care, increase taxes, change Medicare benefits or eligibility, increase beneficiary premiums and cost-sharing requirements, or reduce low-income subsidies under Part D. Prior to 2019, the Board is also prohibited from recommending changes in payments to providers and suppliers that are scheduled to receive a reduction in their payment updates in excess of a reduction due to productivity adjustments, as specified in the health reform law." [Kaiser Family Foundation, May 2010]  

FactCheck.org: "It's Wrong To Say That The Advisory Board Will Ration Care." FactCheck.org addressed Rep. Paul Ryan's (R-WI) claim that IPAB rations care:

Ryan twice warns of Obama's plan to "ration" health care for the elderly. He also says, "The greatest threat to the health security of America's seniors is the President's plan to deeply and systematically ration Medicare."

Ryan spokesman Conor Sweeney told us in an e-mail that the claim of rationing refers to funding for the Independent Payment Advisory Board created by the federal health care law.But it's wrong to say that the advisory board will ration care or that it will be run by bureaucrats, as we wrote when Sarah Palin made a similar claim.

The Patient Protection and Affordable Care Act says the advisory board "shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums." Also, the board isn't made up of Washington bureaucrats. The 15 voting members will be appointed by the president in consultation with congressional leaders; they must include doctors and other health care professionals, economists and health care finance experts, and representatives of consumers and seniors, as the American Medical Association explains. There will also be three non-voting members: the Health and Human Services secretary, and the administrators of the Centers for Medicare and Medicaid Services and the Health Resources and Services Administration. [FactCheck.org, 5/6/11, emphasis added]

For more on the Independent Payment Advisory Board, click HERE.

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