McCain's Medicare Cuts Would Mean Hidden Tax Increases for Millions of Americans

Think Progress. Posted October 13, 2008.

Sen. John McCain (R-AZ) recently admitted he would cut $1.3 trillion from Medicare and Medicaid over the next ten years to finance his health care plan. McCain's proposed cuts echo former House Speaker Newt Gingrich's 1995 effort to cut $270 billion, or 14 percent, from projected Medicare spending over seven years and force millions of elderly recipients into managed health care programs or HMOs. As Gingrich admitted, "We don't want to get rid of it [traditional Medicare] in round one because we don't think it's politically smart." "But we believe that it's going to wither on the vine because we think [seniors] are going to leave it voluntarily," he added. Despite McCain's career-long support for limiting Medicare benefits and eligibility, the campaign, is denying that its financing mechanism would undermine benefits. Appearing on CNN, McCain senior policy adviser Douglas Holtz-Eakin implied that "McCain would save money in the federal health programs" by focusing on preventive care and weeding out $1.3 trillion worth of inefficiency and fraud. Nonetheless, a Center for American Progress Action Fund (CAPAF) analysis of the senator's proposed cuts finds that McCain but also undermine Medicare and Medicaid benefits and eligibility and would force those with private insurance plans to pay more for health coverage out of pocket.

CUTS IN MEDICARE: To achieve his goal of cutting Medicare by 13 percent over 10 years, McCain will have to limit growth in enrollment and medical price inflation to 4.5 percent annually. To maintain the current operations of the existing Medicare program, however, a growth rate of at least 7.1 percent is needed over the next 10 years to cover the 2.7 percent average annual growth in enrollment and a projected rate of medical price inflation of 4.4 percent. Absent another change in his plan, McCain would have to reduce Medicare eligibility, reduce benefits, and/or increase cost-sharing. Either approach would jeopardize the benefits of existing beneficiaries and severely limit the program from accepting new enrollees.

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