McCain Will Cut Medicare and Medicaid to Fund Health Plan

Created: October 06, 2008 11:55 | Last updated: July 31, 2020 00:00

While the McCain campaign’s attacks on Sen. Barack Obama’s connection to former Weatherman William Ayers will likely dominate today’s news cycle, the Wall Street Journal is out with a story this morning with far larger implications for millions of Americans.

According to the newspaper:

John McCain would pay for his health plan with major reductions to Medicare and Medicaid, a top aide said, in a move that independent analysts estimate could result in cuts of $1.3 trillion over 10 years to the government programs.

The Republican presidential nominee has said little about the proposed cuts, but they are needed to keep his health-care plan “budget neutral,” as he has promised. The McCain campaign hasn’t given a specific figure for the cuts, but didn’t dispute the analysts’ estimate.

In the months since Sen. McCain introduced his health plan, statements made by his campaign have implied that the new tax credits he is proposing to help Americans buy health insurance would be paid for with other tax increases.

But Douglas Holtz-Eakin, Sen. McCain’s senior policy adviser, said Sunday that the campaign has always planned to fund the tax credits, in part, with savings from Medicare and Medicaid. Those government health-care programs serve seniors, poor families and the disabled. Medicare spending for the fiscal year ended Sept. 30 is estimated at $457.5 billion.

Mr. Holtz-Eakin said the Medicare and Medicaid changes would improve the programs and eliminate fraud, but he didn’t detail where the cuts would come from. “It’s about giving them the benefit package that has been promised to them by law at lower cost,” he said.

An analysis(PDF) by the non-partisan Tax Policy Center, the report cited in the Journal, found that the McCain health plan would “would dramatically change how many Americans obtain health insurance coverage, make coverage less accessible for those with health problems, have a high budget cost but have little effect on the number uninsured.”

On top of the $457.5 billion in federal spending for Medicare in fiscal year 2008, the federal government contributed $206.9 billion(PDF) in grants to the states for Medicaid. That totals $664.4 billion for the two programs.

If McCain plans to cut an average of $130 billion annually for the next 10 years to pay for his health care plan, that’s a spending reduction of nearly 20 percent. (The Tax Policy Center did not appear to factor in the effects of massive cuts to the federal programs on health insurance coverage.)

Surely, there are ways to make the programs more efficient. But a cut that large would seem likely to affect those currently covered by the programs. If this is the case, the McCain campaign should be more open in discussing what its real intentions are — and what the ramifications would be for the elderly and low-income Americans who depend on Medicare and Medicaid for their health care.