Obama, GOP Budgets Spend Same Amount on Medicare
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Obama, GOP Budgets Spend Same Amount on Medicare

iStockphoto/The Fiscal Times

Here’s a dirty little secret about the dueling budgets from President Obama and House Republicans: They spend almost exactly the same amount on Medicare over the next 10 years.

This might seem crazy for those who’ve seen ads of granny in a wheelchair getting pushed off a cliff – an attack on the GOP plan to transition Medicare into a voucher-style program for Americans younger than 55. It might also surprise older Americans who supported Obama’s re-election with the understanding that Medicare would go untouched.

What it does reveal is how political bombast tends to distort what the numbers actually say. The two budgets’ numbers are roughly equal over 10 years, but their dispute is about what happens all the way out to 2024 – after the period covered in their respective plans.

House Budget Committee Chairman Paul Ryan, R-Wis., quickly dismissed the plan announced Wednesday by Obama in the White House Rose Garden. “I’m very disappointed with the president’s budget today – it’s basically a status quo budget,” Ryan told reporters on a conference call.

The president made no mention of the similarities on Medicare, but highlighted that his plan does not change the health insurance program for senior citizens as the Republican blueprint would eventually do.

“If we want to keep Medicare working as well as it has – if we want to preserve the ironclad guarantee that Medicare represents, then we’re going to have to make some changes, but they don’t have to be drastic ones,” Obama said on Wednesday. “And instead of making drastic ones later, what we should be doing is making some management ones now.”

Medicare is a dominant driver of government expenditures – and a key cause of the projected deficits as more baby boomers reach retirement age. Under the current budget baseline, Medicare will grow from $592 billion this year to $1.08 trillion in 2023.

Obama’s budget plan would curb that growth by reducing subsidies for better-off Medicare recipients and limiting payments to prescription drug companies.

It estimates that Medicare would cost taxpayers $867 billion in 2023, a savings of $141 billion in that year alone. The White House projects that the price tag of the program over 10 years would be $6.67 trillion. These reductions are controversial with some progressive Democratic lawmakers and groups.

The House Republican budget forecasts that its budget would spend $6.65 trillion over 10 years, just $12 billion less than the White House, a difference of less than two-tenths of a percentage point. In 2023, the GOP projects that Medicare’s tab would be $864 billion, nearly identical to what the White House submitted.

The House Republicans would continue the 2-percent sequestration cuts to Medicare, whereas the Obama administration would remove the multi-year spending caps.

Just like the White House, Republicans also want to means-test Medicare benefits, so that the public dime doesn’t cover the medical bills of wealthier individuals. “It’s the one thing here that we all have common ground on,” Ryan said.

But the basic reason Medicare spending is basically the same over 10 years is that the GOP overhaul of the program does not truly start until 2024, a year after the standard 10-year budget window closes.

This is when Medicare would become what GOP lawmakers call “premium support,” or essentially a payment to help cover the price of insurance for older Americans. It’s when Americans who are currently younger than 55 would start to qualify for Medicare benefits, joining a program that, in practice, would operate differently for those who were already enrolled.

Republicans claim that consumer choice would help to control costs, while their plan would keep the deficit from spiraling out of control over the next several decades.

Democrats note that the market does little to reduce medical expenses, since it’s an opaque industry and patients in need of treatment cannot, in theory, shop around for hospital emergency rooms. Their belief is that the leverage of the government’s buying power can ultimately make health care more efficient.

This is at the core of the broader disagreement between the two parties: Can the government reduce health care costs or the market?

Obama on Wednesday offered a budget with similar numbers as the Republicans, but with a different philosophy. “We’ll reduce our government’s Medicare bills by finding new ways to reduce the cost of health care – not by shifting the cost to seniors or the poor or families with disabilities,” the president said.