The entitlement changes that could help the deficit and debt, and why the GOP are silent on them.

With the fiscal cliff looming, a new report suggested that John Boehner would like to slow Social Security spending, as part of a grand compromise, by using chained-CPI-U to slow down benefits growth.  I've mentioned this numerous times: If you cut $1 from Social Security, you don't save $1 from the deficit and debt.  This is a non-starter, period.

Yes, Social Security solvency is an issue, but it has no relationship to the issue of federal debt and deficit spending.  Sometimes people will refer to the term, "intragovernmental transfers", as proof that government spending on Social Security contributes to the deficit by moving money around as in a card game; they either do not understand what they are citing, or they are trying to obfuscate what that means.  Intragovernmental transfers indicate that the Social Security Trust Fund is investing money into special, non-marketable US bonds, as required by law.  By doing so, there is less publicly available US debt in the global markets.

If you're going to try to cut the deficit and the accumulation of debt, wouldn't you want to look at programs that contribute directly to both the deficit and debt?  I know I would look there first, if I was serious about cutting the debt and deficits.

Well, it is true that within Medicare, parts of it are directly funded by Congress, and do directly contribute to the federal deficit and debt.  But you have to be careful what you do with Medicare, or else you end up having little or no effect on the federal debt and deficit.  Let me explain.

KFF's 2012 report on Medicare

Within Medicare, there is the Supplementary Medical Insurance (SMI) Trust Fund, which funds Medicare Parts B and D.  Both Part B and D are about 75% funded from the federal government's coffers.  If you make changes to Medicare, this is the area where you'd want to focus on, because by acts of Congress, this percentage is more or less set into law.

Part B, is the medical insurance portion of Medicare.  Part D is the drug benefit created by Republicans in 2003 under the MMA.  Part C is the private health care insurance plan, otherwise referred to as Medicare Advantage.  For 2012, Part C is nearly equally funded by Part A and Part B.

So how do we effectively reduce federal spending that would reduce annual deficits and limit Medicare's federal debt contributions?

• We allow Medicare to negotiate drug prices at group rates, which would, without any pain on the part of retirees, save the federal government money on Part D.
• We tell seniors that, if they wish to enroll in private health care plans under Part C, they have to pony up the difference between public Medicare coverage; you still have a choice, but if you choose to use the private plans, you have to be willing to pay the difference.  Since public Medicare has lower administrative costs, it is only fair that people who wish to use private plans, must foot the difference, or force those private insurers to become more efficient.

I would consider these to be the least painful means of cutting federal spending in Medicare.  But those are the very things Republicans have been highly resistant to, or at least have failed to address in their broad outlines for deep Medicare cuts.  In fact, as we saw during the 2012 presidential campaign, many Republicans would like to expand Medicare Advantage, which would tend to increase federal spending and deficits.

Start with these small steps that directly impact federal spending, right?  Or unless your real agenda is to destroy entitlement programs.

Sources:
1. Kaiser Family Foundation review of Medicare funding.
2. University of Maryland study on Medicare Part B for the Congressional Research Service.
3. 2012 Board of Trustees report.

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Update: Forgot to add the KFF chart on Medicare funding.