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The Reckoning: GRAPHIC The Reckoning: GRAPHIC

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The Reckoning: GRAPHIC





The Affordable Care Act retains the entitlement structure of Medicare but tinkers with the ways the program pays doctors, hospitals, and other providers. Altogether, the law cuts $500 billion over 10 years by reducing future payment adjustments; establishing a series of pilot programs meant to encourage lower-cost, higher-quality care; empowering an independent board to keep spending under control if costs rise too quickly; and cutting subsidies to private insurers that offer plans in the alternative Medicare Advantage program. Obama has repeatedly criticized the Republican-backed premium-support system as an effort to “end Medicare as we know it.” The administration’s hope is that new payment models and quality incentives will save money and avoid the need to cut benefits or raise premiums. The president also proposed some modest cuts and premium hikes in subsequent budget proposals. Medicare’s chief actuary has said that the law’s assumptions about cuts in payment formulas are unrealistic.

Obama’s health care law is set to dramatically increase the size of the federal-state Medicaid program in 2014, expanding eligibility nationwide to all individuals and families earning up to 133 percent of the federal poverty limit, or about $29,000 for a family of four. That addition of 16 million people will require major changes in state programs, many of which currently cover only disabled adults, poor children, and pregnant women. Under current law, the federal government foots the total bill for the expansion for two years; after that, some costs shift to the states. The program pays such low rates in most states that doctors frequently limit the number of Medicaid patients they will see. Critics question whether all the new beneficiaries will have adequate access to care. 

The president has been vague about his plans for Social Security but has said he will not cut benefits for current retirees or “slash” them for future beneficiaries. He has also indicated that he would look for more revenue by asking higher-income workers to pay more, although he has not provided details of how that might work. 


Obama defends the Supplemental Nutrition Assistance Program and criticizes proposals to cut subsidies or convert the program into a block grant for states. During his presidency, the number of Americans relying on food stamps has ballooned as incomes have fallen because of the economic downturn. 



Bucking long-established trends, per capita Medicare spending growth has slowed in recent years. But the baby boomers are coming. Medicare’s trustees say that health care reform adds eight more years to the viability of the program; the hospital fund, however, will still be insolvent in 2024.


The economic downturn has dramatically increased the number of Americans eligible for income-based entitlement programs, such as food stamps and Medicaid; this has driven up the price tags for those programs and prompted Newt Gingrich to call Obama the “food-stamp president.”

The 2010 health care law increased spending for fraud investigations, and the Obama administration says it has earned a big return on that investment. In 2011, the administration recovered a record $4.1 billion to the Medicare trust fund through fraud investigations.



Nancy-Ann DeParle: She was the director of the White House Office of Health Reform while the health care law was being formulated and has since been promoted to deputy chief of staff for policy. The onetime Clinton administration official has run Medicare and Medicaid, and once worked at the Office of Management and Budget.

David Cutler: The Harvard University health economist helped model cost-saving policies in the health care law. He now advises the campaign on entitlement policy.

Donald Berwick: The former administrator of the Centers for Medicare and Medicaid Services influenced Obama’s thinking about the links between improved health care quality and reduced costs.

Neera Tanden: She led the domestic-policy shop on Obama’s 2008 campaign. Now the CEO of the Center for American Progress, a progressive think tank, Tanden continues to advise the president and advocate for his positions.

This article appears in the June 23, 2012 edition of National Journal Magazine.

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