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Obama Negotiates Cuts to Medicare as the Program Reaches Its 48th Anniversary

Last week marked the 48th anniversary of the enactment of Medicare.

President Obama speaks at an Amazon distribution center in Chattanooga, Tennessee, on July 30, 2013.

President Obama announced a new “grand bargain” for middle-class job creation last week while speaking to an audience at an Amazon facility in Tennessee. His plan would cut corporate tax rates and create a business tax that would fund investment on infrastructure projects and education. But will the president agree to cut Medicare in a deal with Republicans?

Congressional Republicans responded to President Obama in their own address, which heavily criticized the Affordable Care Act (ACA) for stymieing businesses from hiring and suppressing work hours.

Last week marked the 48th anniversary of the enactment of Medicare, and as a new round of spending talks are expected this fall amid a looming October 1 deadline on raising the federal borrowing limit, congressional Democrats and Republicans are already negotiating which programs will go on the chopping block.

But as the ACA struggles to be born, are the projected savings on Medicare costs enough to ensure the program’s survival in the long term? Gerald Friedman, an economics professor at the University of Massachusetts, Amherst, remains skeptical of anything that stops short of a single-payer system.

His recent study shows that upgrading and expanding Medicare to cover people of all ages would save more than a half-trillion its first year, which would be enough to pay for health benefits for nearly all U.S. residents at a lower cost.

According to Friedman, the ACA barely impacts the administrative costs of health care in the United States. “In five to 10 years, after it’s clear that the Affordable Care Act is not controlling costs and not covering everybody, there will be a bit of a crunch in the United States and Medicare will be part of that, because without something like a single-payer system, Medicare will not be able to control costs and will be a true budget buster,” he said.

Health care costs are projected to rise at 6 percent per year indefinitely as the economy continues to grow at a rate of 3 percent per year only, according to Friedman. He speculates that as the cost of health care swallows the economy, either a single-payer system will be enacted or there will be dramatic cuts to health care benefits for average Americans.

In the meantime, one of the few ways Medicare could achieve substantial cost-savings would be to allow the program to negotiate drug prices. “It’s very hard to see major cost-savings for Medicare within the existing health care system because Medicare can’t do things to achieve the types of administrative savings I’ve been talking about because it’s just one of many, many insurers,” he said.

Friedman doesn’t see any basis for a “grand bargain” between Democrats and Republicans when it comes to Medicare, and neither does Clark Newhall, executive director of Health Justice. Newhall is organizing to stop Obama from negotiating cuts to Medicare as part of his grand bargain with Republicans.

“The grand bargain that President Obama is trying to create is built on the back of poor people, uninsured people, elderly people and people who can’t afford private insurance,” he told Truthout. “The attempt to gut Medicare, or turn it into a bailout for insurance companies, is one of the worst cases of Obama hypocrisy I’ve ever seen,” he said.

Like Friedman, Newhall supports the passage of the Expanded and Improved Medicare for All Act, H.R. 676, introduced by Rep. John Conyers (D-Michigan), and co-sponsored by 45 other lawmakers. The bill would eliminate the role of health insurance companies almost entirely and would look similar to the original Medicare program that was passed in 1965.

“We’re heading toward a crack-up on health care, and the outcome will depend of how much of a social movement is built up around defending health care for all Americans. If we don’t have a mass movement, and we let the insurance company executives and Wall Street run things, then we’ll solve the health care problem by cutting health care for Americans,” Friedman said.

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