August 22, 2012
To judge the level of mendacity in the campaign debate over Medicare reform, perhaps the best place to start is the recommendations offered by the Bowles-Simpson deficit commission in December 2010. Their proposal came five months after passage of the Affordable Care Act, a.k.a. Obamacare, and a few weeks after the mid-term elections when Republicans took control of the House of Representatives.
The deficit reduction plan, which won bipartisan though not unanimous support, did not see a need for a sweeping overhaul of the nation’s senior citizen health care program. Rather, it sought to build on the limits on Medicare spending growth contained in Obamacare – the $716 billion in “cuts” (actually reductions in projected spending increases) that are now being attacked in nationwide campaign ads by former Massachusetts Governor Mitt Romney. “We recommend requiring both the President and Congress to make recommendations whenever average cost growth has exceeded GDP (gross domestic product) plus one percent over the prior five years,” the report said.
Rep. Paul Ryan, R-Wis., a member of the commission and now the vice presidential pick on the Romney ticket, did not vote for that plan. He said limiting Medicare growth to GDP + 1% didn’t go far enough.
Instead, in April of last year he issued his own Medicare privatization plan as part of his “Path to Prosperity,” which passed the House with near unanimous support from Republicans and nary a Democratic vote. The premium support or voucher program would have in 2022 required all new Medicare beneficiaries to purchase plans from the insurance industry – up from the current 25 percent of beneficiaries who are now in Medicare Advantage plans. It would cut costs by limiting growth in the government’s contribution to seniors’ premiums to the consumer price index, i.e., zero growth in inflation-adjusted dollars.
Over time, that plan would dramatically shrink the government’s contribution to Medicare as a share of GDP and force seniors to pick up on average 61 percent of the cost of their health care, according to an analysis by the Congressional Budget Office. Estimates from the Center for Budget and Policy Priorities, which were based on that CBO report, claimed it would cost the average senior $6,400 a year, a number featured in President Obama’s campaign ads.
Neither camp sat still after their initial forays into Medicare reform, even though you wouldn’t know it from the campaign ads. President Obama last September issued his own deficit reduction plan, which upped the ante on limiting the annual growth in government Medicare spending to GDP + 0.5%. Curiously, the offer was condemned by deficit hawks as not going far enough even though its cuts exceeded Bowles-Simpson and were condemned by every provider group.
Ryan, meanwhile, has issued two more iterations of his Medicare premium support plan. The first, offered last December with Democratic Sen. Ron Wyden of Oregon, completely backtracked from his initial radical proposal. While it still called for Medicare vouchers, it allowed the government support for the program to grow at GDP + 1% -- just like Obamacare. It also called for the private plans to be sold through state-based insurance exchanges, even though Ryan would eliminate those exchanges for people of working age without employer-provided insurance.
Then, in April of this year, Ryan flip-flopped again. He offered his third Medicare plan in the House-passed budget. This time, it limited growth in the government’s share of the Medicare premium to GDP + 0.5% -- the same as Obama’s latest offer. He also assumed the $716 billion in cuts from Obamacare and included another round of cuts whose magnitude CBO couldn’t analyze based on information provided by Ryan and his staff.
However, CBO did estimate that Medicare’s share of the economy under the latest Ryan budget would grow from 3 ¼ percent now to 4 ¼ percent in 2030. Ryan’s budget only achieved major health care savings by nearly halving the federal contribution to Medicaid and children’s health insurance.
Of course, Ryan isn’t running for president. Romney is, and he hasn’t exactly been forthcoming on his plans for Medicare. He has endorsed the premium support concept and said he would restore all the Obamacare cuts – the $716 billion being attacked in his ads.
So let’s sum up the state of the political debate. The Romney-Ryan ticket is verbally attacking Medicare cuts while supporting an voucher plan without specifics whose primary purpose is to cut the government’s contribution to paying for seniors’ Medicare.
What’s the rationale for overhauling the system? Proponents of premium support claim competition between insurance company plans that require seniors to pick up more of their own costs will succeed in forcing down health care costs, even though previous efforts by the insurance industry – notably the managed care revolution of the 1990s (HMOs) – failed.
Proponents say the more recent experience with Medicare Advantage shows it can work. They point to a recent Viewpoint in the Journal of the American Medical Association by three Harvard professors – including David Cutler, who advised the Obama administration during the health care reform debate – that showed the second lowest-cost plans in the Medicare Advantage program (the second lowest-cost plan was the benchmark for premium support used on the Ryan-Wyden plan) bid on average 9 percent below traditional fee-for-service Medicare.
However, the Viewpoint was actually fairly skeptical about the reasons for the lower “bids” in Medicare Advantage, largely because final payments take the bids and adjust the payments for the relative health of enrollees in the plans. Medicare costs for Medicare Advantage enrollees were actually 14 percent higher on average than costs for traditional Medicare beneficiaries.
“They may enroll healthier patients relative to the risk-adjusted payment,” they wrote. Also, “their negotiated prices may not fully reflect the costs of indirect medical education or payments for disadvantaged hospitals, which traditional Medicare explicitly pays.”
In other words, private insurance plans may have cherry picked healthier seniors and they didn’t have to pay for the additional costs of providing care to the uninsured, who are currently being subsidized through Medicare. “Premium support, based on competitive bidding, may offer a fiscal solution if ACA reforms fail, but at the cost of making Medicare beneficiaries responsible for solving Medicare’s fiscal crisis,” the Viewpoint concluded.
The Obama administration, meanwhile, is offering additional cuts in provider payments. Yet the president isn’t talking about that on the campaign trail. Few politicians in his party want him to mention the subject during an election year when they are busily bashing Romney-Ryan for its Medicare plan.
Yet a recent article in the New England Journal of Medicine – signed by virtually every health care thought leader in the Democratic Party including former administration insider Ezekiel Emanuel, Center for American Progress chief Neera Tanden, former Centers for Medicare and Medicaid Services head Donald Berwick, former Senator Tom Daschle and former Office of Management and Budget chief Peter Orszag – outlined a comprehensive program for how to achieve the lower level of spending.
It included a global budget for overall spending; accelerating the movement toward bundled payments and other alternatives to fee-for-service medicine; competitive bidding on all commodities; offering tiered health insurance policies in the new exchanges; full pricing transparency and simplified payments systems for all payers and providers.
So let’s stack up the reality against the campaign rhetoric. Romney has wrapped himself in the flag of fiscal austerity while opposing all cuts in Medicare. He supports a version of Ryan’s Medicare privatization plan without specifying which one or how much less the government will contribute, which he wouldn’t call “cuts.”
Obama is also against cuts in Medicare, which he defines as the type proposed by the Romney-Ryan privatization plan. Meanwhile, he is moving on implementing the cuts, er, reductions in projected future cost increases, in the ACA while his brain trust outlines plans for even greater cuts.
The conventional wisdom in Washington and among political reporters on the campaign trail is that Romney and Ryan are the serious budget cutters while Obama’s ideas, already written into law and scored by CBO, are “mostly fluff” as one columnist put it this week. No wonder most Americans hate politics. Between the ads and the newspaper commentary, they have no idea what is going on.