Image: U.S. President Barack Obama signs the healthcare insurance reform legislation
Saul Loeb  /  AFP - Getty Images, file
U.S. President Barack Obama, surrounded by lawmakers, signs the healthcare insurance reform legislation during a ceremony in the East Room of the White House in Washington, DC, March 23, 2010.
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updated 6/22/2011 4:29:39 AM ET 2011-06-22T08:29:39

President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

After initially downplaying any concern, the Obama administration said late Tuesday it would look for a fix.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility.

It might be compared to allowing middle-class people to qualify for food stamps.

'Doesn't make sense'
Medicare chief actuary Richard Foster said the situation was keeping him up at night.

"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting.

"This is a situation that got no attention at all," added Foster. "And even now, as I raise the issue with various policymakers, people are not rushing to say ... we need to do something about this."

Story: Healthcare reform: What's at stake

Administration officials said Tuesday they now see the problem.

"We are concerned that, as a matter of law, some middle-income Americans may be receiving coverage through Medicaid, which is meant to serve only the neediest Americans," said Health and Human Services spokesman Richard Sorian. "We are exploring options to address this issue."

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Administration officials and senior Democratic lawmakers initially defended the change, saying it wasn't a loophole, but the result of a well-meaning effort to simplify the rules for deciding who would get help under the new health care law. Instead of a hodgepodge, there would be one national policy.

But Sen. Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee, called the situation "unacceptable" and said he intended to look into it.

Governors complain
Governors have been clamoring for relief from Medicaid costs, complaining that federal rules drive up spending and limit state options.

The program is now one of the top issues in budget negotiations between the White House and Congress. Republicans want to roll back federal requirements that block states from limiting eligibility.

Video: Political panel discusses the Medicare problem (on this page)

Medicaid is a safety net program that serves more than 50 million vulnerable Americans, from low-income children and pregnant women to Alzheimer's patients in nursing homes.

It's designed as a federal-state partnership, with Washington paying close to 60 percent of the total cost.

Early retirees would be a new group for Medicaid. While retirees can now start collecting Social Security at age 62, they must wait another three years to get Medicare, unless they're disabled.

Story: AMA: Doctors shortchanged by insurers' mistakes

Some early retirees who worked all their lives may not want to join a program for the poor, but others might see it as a relatively painless way to satisfy the new law's requirement that most Americans carry health insurance starting in 2014. It would help tide them over until they qualify for Medicare.

The actuary's office said the early retirees eligible for Medicaid would be on top of an estimated 16 million to 20 million new people that Obama's law already brings into the program, by opening it to childless adults with incomes near the poverty level.

It's unclear how much it would cost to cover the retirees. Federal taxpayers will cover the entire initial cost of the expansion.

Republicans already see a problem.

'Fuel to the fire'
Former Utah governor Mike Leavitt said bringing early retirees in will "just add fuel to the fire," bolstering the argument from Republican governors that some of Washington's rules don't make sense.

"The fact that this is being discovered now tells you, what else is baked into this law?" said Leavitt, who served as Health and Human Services secretary under President George H.W. Bush.

"It clearly begins to reveal that the nature of the law was to put more and more people under eligibility for government insurance," he added.

Story: Kids with government insurance wait longer for some care

The Medicare actuary's office roughed out some examples to illustrate how the provision would work.

A married couple retiring at 62 in 2014 and receiving the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.

That $64,000 would put them at about four times the federal poverty level, which for a two-person household is $14,710 this year.

The Medicaid expansion in the health care law was supposed to benefit childless adults with incomes up to 133 percent of the poverty level. A fudge factor built into the law bumps that up to 138 percent.

The actuary's office acknowledged its $64,000 example would represent an unusual case, but nonetheless the hypothetical couple would still qualify for Medicaid.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: The Medicare problem

  1. Closed captioning of: The Medicare problem

    >>> everybody. now to discuss some of the biggest political stories, we bring in our power panel. alex wagner, political analyst , reporter for the huffington post , kiki mclean, and finally former new york republican congressman rick lazio .

    >>> with the obama white house , senate democrats stood firm.

    >> we're calling on republicans to take away any cuts to medicare benefits. take them off the table, now.

    >> the ryan plan to end medicare as we know it must be taken off the table.

    >> today we are here to say to the republicans we will not allow them to balance the budget on the backs of our seniors.

    >> alex , first question, is it for real? it's nice rhetoric, but do we think they'll hold the line ?

    >> it is heartening to to see them united and playing hardball. they negotiate with themselves ahead of this, and, you know, strategically speaking, the paul ryan medicare plan is the best tactic the democrats have had since obama ran for office. this is manna from heaven. and what the republicans are offering and what the democrats are offering. i think for now we have to hope for the best.

    >> apparently they're saying that medicare cuts can be on the table, but not medicare benefit cuts. what's the distinction?

    >> well, first of all, step back and understand from my point of view, as a democrat but as a leader of no labels, i believe to get on a solution we'll have to have a bipartisan solution, so everything's got to be on the table for that conversation. what i hear senate democrats saying, some in different ways than others, you won't go to the paul ryan extreme. there are people who believe the ryan plan is the most extreme and therefore not really moving toward a conversation about what can really happen. that's the difference i think. everybody's got to be on the table, but the point is if you start off from a point of hyper partisanship, that won't move the debate forward.

    >> that scares me.

    >> why?

    >> if you say we're not going to do the ryan plan, but we'll do other things. i don't want to cut medicare , especially when the republicans tell me no tax increases under no -- i'm going to take medicare off the table in a second.

    >> cenk, you want to do it as a tit for tat . what i'm suggesting is a bipartisan solution means everybody is at the table. the goal is to fix our economy, to create more jobs, get this debt ceiling raised, and make sure that we can preserve medicare , that it can work. i personally happen to believe that the ryan plan is extreme, and wasn't really meant as a legitimate offering. i believe it was put out there as a political tactic, so the point is you've got to start with everything on the table, including what you're concerned won't be on the table. it's two parts, everything has to be there.

    >> over the last ten years, the middle class got screwed and the rich got richer. but rick, are you willing to put taxes on the table and say, yeah, sure, maybe we should raise taxes?

    >> first of all, somebody will have to address medicare . when a program is growing at twice the rate of the economy it's unsustainable and those reductions will come from somewhere. let's face it. democrats already accepted a reduction in the rate of growth of over $400 billion in order to help finance the health care bill. they're already on record for having reduced -- is that good enough?

    >> pardon me?

    >> is that good enough, $400 billion?

    >> not when the program is growing at twice the rate of the economy. we're borrowing $4 billion a day, cenk.

    >> so, rick, i want to stay with you then. so you say, okay, medicare is growing too fast, we can't afford it, on the other hand you have republicans saying they want to do massive gigantic tax cuts for the rich? what happened? i thought we couldn't afford it.

    >> first of all, you have to understand the only way long term to address this huge fiscal dilemma that we have right now is through growth. the worst time to raise tax says when you have a soft fragile recovery like we have right now.

    >> that's what they say every time, every time. it's a terrible time to raise taxes. let's give more to the rich. alex ?

    >> i think we have to look at this strategically. this is playing politics. i think democrats are not in the dark. the republicans have gone far to the right. i think at least they have some ground to stand on.

    >> i want to --

    >> i want to take a moment.

    >> people like to say all the time this is some type of voucher program. the ryan plan has the subsidies flowing through medicare , and it only will be paid to license regulated insurers. it also means test the monies, so that people who are the most needy and the sickest will get a disproportionate amount of money. i know that's a great talking point, and voucher program, but it's not -- .

    >> let me just say you're right about the last part. you described exactly a voucher program. that's what it is. so that's why we call it that. kiki , go ahead.

    >> here's the issue. i'm going to praise two people. i'm going to praise eric cantor . he stepped out yesterday and praised vice president biden for the work the bipartisan team is doing trying to get us to agreement. this can't be about any one issue in isolate. this is about the whole, and we have to be able to look at it as a whole. we have to address taxes. i also think that when you look at newt gingrich and what he said, even in the republican debate last night, was that medicare can't be an either/or on the far extremes. we have to be willing to look at the options.

    >> let me tell you my problem with that.

    >> let me tell you what -- let me say this.

    >> let me address it.

    >> here's the greatest moment --

    >> look, the political spectrum has moved mattively to the right, and certainly over the last ten years. now you're saying split the difference.

    >> no, no, no. i didn't say split the difference.

    >> our tax rates are at historic lows.

    >> i didn't say --

    >> you raise a tiny bit if we cut medicare . i say no, let's bring the spectrum back to the real center.

    >> i didn't say split it down the middle. what i suggested in this, these things are connected. so they've got to be looked at in the whole. by the way, when you talk about bipartisan solutions, i just don't believe that's true. the greatest moments in america's history have been where there have been bipartisan solutions. this texan would be proud to have lyndon johnson carry all the water and gratitude for civil rights , but there was everett dishesen who went to work with him.

    >> ancient history?

    >> i don't think people who live under reform --

    >> that was before the corporate america took over, including the military contractors, which is our next question for the panel.

    >> cenk, then you don't believe there's any possibility at all, and you might at well give up. i do.

    >> no, no, i believe the real thing to do is to throw all the bums out and fix the system, because our money -- the money has corrupted our system entirely. like at evan bayh , that's a progressive? he came out of the senate and immediately grabbed the money. he grabbed the corporate money, now works for the chamber of commerce and fox news. that's ripping the middle class off, and that's what's been happening for the last 30 years. you go beyond 30 years.

    >> but you know what? your yelling and screaming doesn't solve the problems.

    >> i think it begins to solve it, and when you name call, i don't think you did anything to further the conversation in america. i don't think as a democrat you did anything to help my point of view as a progressive get us to a solution. in order to address the issues i care about, we've got to make sure hour country is economically secure, that people have a chance to feed their kids, they have a chance to take care of their parents and they have an opportunity. that window come from one side alone.

    >> we've got to move on, and that's about the defense budget . look, we spent 43% of all the defense spending in the world. when is it ever going to be enough? rick, can we touch the defense budget ? or is it simply, again, the rpgs, no way, we have to give all --

    >> i think it flees to come down more. the program of a size of our -- it's that you cannot have a two- theater war effectively, and at the same time reduce spending, but in my mind, having a strong economy, creating jobs, and not relying on foreign governments to finance our debt is as much a national security issue as buying another blising missile system. i think we can do both. sfwrangly if you look at president obama 's budget in february, not the second one, the first one, republicans are pretty competitive with the amount of financing. it's not just a republican allocation here, it's one that the administration is also signed off on.

    >> agreed. we have agreement on the panel. i'm feeling good.

    >> yes, yes, it's gil partisan.

    >> alex , hold on one quick second. another story that came out somewhat related to this, $6.6 billion lost in iraq.

    >> even if we took our troops out of afghanistan, arming and equipping the afghan arm are serious expenditures. but, look, leon panetta was clinton's chair, he's a notorious number cruncher. i think there is some bipartisan support for trimming the defense budget . he may be the man to do it.

    >> kiki , real quick? agreement again?

    >> yeah, i think there's some agreement. here's the amazing things . i think what you see on this panel is probably what you really find on capitol hill when it comes to that issue.

    >> well, i hope it's true on capitol hill , i know it's true across the country. people get there's pork in the defense budget and it goes to the contractors. i wish our congressmen would get that.

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