The Medicare Scramble — 20 August 2012

Within hours of the announcement that Mitt Romney had picked Paul Ryan to be his running mate, I heard CNN offer an introductory profile.  The “most trusted name in news” described him as an “extreme conservative,” whose proposals included a plan to “end Medicare as we know it.”  Not “reform” Medicare, not “place it on a sound footing”, but “end.”  If I needed any evidence that the GOP had more than just the Democratic Party to contend with, this was it.

Democratic heavyweights cackled privately that Romney had just given them an open field of attack, and some Republican strategists worried the same.  Ryan’s no-apologies House budget was like a high hanging curve ball for those who would argue that he favored Draconian spending cuts, not least to Medicare.   Instead of being a referendum on President Obama’s dismal economic record, the election looked to become an argument over entitlements, which Republicans always lose.

But a funny thing happened on the way to the Democratic victory party.  Ryan, who more than anybody else in Washington, understands the convoluted workings of our budgetary process, has been able to make a positive case for reform – and in the process has been able to turn a natural Democratic advantage into something close to a liability.  Romney’s campaign, which up to this point had been groping for a Big Idea around which to coalesce, finally had it.

Naturally, both sides have their own descriptions for the other’s plans.  At the end of the day, the debate comes down to this: who do you trust more, the government or the market?

The Romney team says that President Obama “cuts” $716 billion from Medicare to fund Obamacare.  This is in fact true, and the President’s team acknowledges it – in fact, they say those cuts “strengthen” Medicare, because it will force providers to eliminate fraud and waste.  Instead, it will cause hospitals and doctors to cut back their services to seniors: the Physicians’ Foundation predicts that 50% of doctors will limit their Medicare  provision, the government itself predicts that 15% of hospitals will lose money on their Medicare practice.

As a secondary cost control, the Affordable Care Act creates the Independent Payment Advisory Board, which is a panel of experts charged with making changes to payment tables if the cost of health care rises faster than inflation + 1% (as it most assuredly will). These recommendations can only be reversed by a supermajority in Congress, meaning that this board will be almost unaccountable – and yet will have tremendous power to determine payment values across the medical sector.

Only a liberal would claim that the best way to hold down costs is for the government to say in effect, “I will pay no more than X.”  If that’s your position, then the provider will give you “X” worth of services.  The losers will be the Medicare seniors.

The Romney-Ryan plan, on the other hand, is based on existing experience, and is grounded in several bipartisan initiatives over the last fifteen years, starting with the Clinton administration’s Medicare Reform Commission.  It solicits bids each year for prescribed services, and will provide  premium support equal to the second-lowest bid – this leaves seniors with choices to pay more if they wish, or even pay less and keep the difference.  Or, they can choose traditional Medicare.

President Obama likes to say that this plan will cost seniors $6,400 more than they pay now, but this is outmoded on two counts: first, it reflects CBO estimates of the original Ryan budget plan, which is not on the table now – the Romney plan has notable differences.  Secondly, the CBO acknowledges that it can’t score the possible effects of economic incentives for insurance companies to keep their premiums low to attract business, which is the whole point of the plan.

And there is historical proof that this works: President Bush’s 2003 prescription drug benefit was structured as a premium support package, and the CBO now says that the ten year cost – despite a greater participation by seniors – will be 43% less than projected in 2004.

Other evidence comes from Medicare Advantage, the alternative to Medicare in which the government pays insurance companies directly to provide coverage.  President Obama wants to gut this program because of what he calls “needless subsidies” to insurance companies.  In fact, the second-lowest Medicare Advantage premium is 9% cheaper than the equivalent cost of Medicare, suggesting the savings possible in the Romney-Ryan approach.

Politically, the interesting thing about this debate is that, far from painting the Republicans into a corner defending an unpopular position, it does quite the reverse.  In a kind of campaign jiu-jitsu, Team Romney is able to position itself as the ones who will save Medicare from Obama’s looting, while at the same time swivel the spotlight onto Obamacare, which continues to be unpopular with the general public.

Indeed, the Republicans’ argument is strong on several levels.  Their plan protects traditional Medicare for all citizens over 55, while introducing reforms only for those younger.  By contrast, the Obamacare reductions hits today’s seniors as soon as they go into effect.  The Republicans are the ones protecting seniors’ Medicare.  In addition, the fact that the seniors of the future can still choose traditional Medicare also allows Republicans to claim the mantle of defenders of the program.

At the same time, it shows the Republicans as responsible, forward-looking reformers, determined to maintain the solvency of a popular program that every observer agrees is soon to be bankrupt.  The contrast with the Obama approach, which has no long-term plan to reform Medicare or put it on a sustainable path, illuminates the larger message – Obama is spent; he has no new ideas for our most pressing problems.

Will this work politically?  There is evidence of that as well.  Marco Rubio won in senior-heavy Florida in 2010 explicitly endorsing the kind of reforms in the Ryan budget.  Additionally, in a special Congressional election last September in Nevada, Medicare was a salient issue; Republican Mark Amodei, supporting the reform approach, won in a landslide.

Meanwhile, President Obama maintains a position that seems increasingly tired and petty – Mitt Romney wants to make seniors pay more so he can give tax breaks to millionaires and billionaires.  The difference in where the vision is focused could not be greater.




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