The Politics of Medicare: Distortion and Flip-Flopping

I thought this election was supposed to be about the economy and jobs, but lately the headlines have mostly been about Medicare. And, surprise, the candidates and their surrogates are playing fast and loose with the facts and neither is talking about the real issues or solutions. Cynics that we’ve all become, you are probably saying, what did you expect? I guess I didn’t expect the level of distortion and flip-flopping that seems to be going on in this campaign.

Gov. Mitt Romney and his running mate, Paul Ryan, both of whom are purportedly budget hawks, are going around criticizing the $716 billion savings from Medicare built into the Affordable Care Act (ACA). They have implied to their audiences that this will affect the benefits seniors currently receive. In fact, virtually all of the proposed savings come from reductions in payments to providers, mostly hospital providers. The hospital lobby agreed to these reductions as a tradeoff for reduction of the number of uninsured resulting from other provisions of the ACA. The NY Times is reporting that if the reductions were removed, seniors would have increased out of pocket expense (estimated at $342 per year on average over the next decade) because their co-insurance is tied to the amount that Medicare pays. Of course, in typical campaign style, none of this is explained to audiences and few will read the coverage in theTimes. Although vice presidential candidate Ryan had previously embraced the $716 billion in savings in his deficit reduction plan, he and Gov. Romney are referring to President Obama as having “robbed” the money from Medicare. It appears that, if elected, the Romney Administration will restore the $716 billion in reimbursements to hospitals and worry about the deficit later.

Mr. Ryan’s long-term solution to Medicare Program costs is what he calls a “Premium Support System,” which Mr. Romney has embraced. Under his original proposal, the Ryan Plan would contribute a fixed amount, adjusted for age and health status to each Medicare beneficiary, to purchase private health insurance. This system would not apply to people who are currently 55 or older. You have to ask why, if it’s such a good deal for seniors, it would not begin sooner?

President Obama’s campaign is attacking the Romney camp for destroying Medicare as we know it. Clearly, if the Premium Support Program goes through, that is a fair characterization.

Is it possible that the amount of premium support would not be sufficient to purchase the benefits now available under the current Medicare program? According to Congressional Budget Office estimates, the Ryan Plan would spend $2,300 per year less on each new Medicare enrollee in 2030 and $8,000 less in 2050, both expressed in today’s dollars. Presumably, seniors will still need a lot of the care they now receive, so they will have to pay for it themselves out of what are likely to be decreasing retirement accounts, given all the changes being made in pension plans for those under 55.

President Obama’s campaign is attacking the Romney camp for destroying Medicare as we know it. Clearly, if the Premium Support Program goes through, that is a fair characterization. The beauty of Medicare is that everyone, regardless of income, is entitled to the same set of benefits. The cost of administering the program is relatively low and the benefits are portable if seniors relocate, unlike private coverage. On the other hand, the President has not been entirely honest with the public about the long-term sustainability of Medicare, given the need to eventually address the federal deficit. The President and his advisors are well aware of the need for fundamental changes in the system of reimbursement and delivery of healthcare to bend the cost curve. This will require some fundamental changes in the Medicare Program, probably a combination of increasing the age of eligibility going forward, but more importantly, forcing changes in the delivery system. The Obama Administration has supported measures, such as the piloting of Accountable Care Organizations, which are designed to incentivize providers to give more efficient care by sharing in the savings relative to the baseline fee-for-service costs. However, these are pilots that last for three years and no one knows what happens when the pilot ends. The ACA calls for the establishment of a panel to evaluate the effectiveness of new therapies, but its findings are not binding because of the “death panel” scare raised by critics.

Obviously, neither party has a clear, well thought-out plan to reform Medicare and the underlying healthcare delivery system.

Medicare is a very successful program and an example of government’s ability to address the needs of a population segment in a thorough and relatively cost-effective manner. In some ways, it is the victim of its own success. Not only has it provided insurance coverage to seniors, but it has financed a significant portion of the medical education system in this country. However, the structure of the program has led to significant excesses. We need political leaders who champion continued access to care, but propose comprehensive solutions to the spiraling cost issue, not just rhetoric.

I welcome your comments. —Lou Giancola