Romney vs Obama on Medicare. Neither is telling you the truth.

Who is going to save Medicare? Who is going to save Medicare without any adverse impact on current or future beneficiaries? Answer, no one! Oh, Medicare will be preserved, but from the point of current expectations it will be painful.The Obama approach is pie in the sky. It is based on changes (cutting provider payments) that have never been followed through with enactment (and with serious consequences if they were). Look at his pre-election statement below and then look at extract from the 2012 Medicare Trustees Report, especially the second paragraph below. What do you think is the probability that 165 provisions affecting Medicare within Obamcare will be implemented, work as planned and be sustained? The answer is zero. To think you can put Medicare on a path to fiscal solvency by cutting payments to providers and insurers is naive at best (especially when you are increasing the benefits). To think you can do that without an adverse impact on everyone not on Medicare is foolish and irresponsible.

Then we have the Romney non-plan. In essence his plan converts Medicare to a defined contribution approach. You get a set amount of money, you pick your coverage and you take the risk. The only way the government can save money is to limit the increase in its fixed payment to less than the actual increase in costs. It assumes that good old competition will slow the rate of increase.  “Competition among plans to provide high quality service while charging low premiums will hold costs down while also improving the quality of coverage enjoyed by seniors.”

Here’s a thought, today there is plenty of competition among insurers in the private sector and in Medicare Advantage plans; why hasn’t all this competition held back costs? Answer, insurers don’t have the ability to increase the quality of care or affect its cost beyond their ability to negotiate provider fees. Does anyone seriously think that if all this was possible it would not be used by a savvy insurance company to grab more of the market, i.e. charge low premiums?

To accomplish the basic goal of sustaining Medicare one of two things must happen. Somebody is paid less or somebody pays more. This can be accomplished in many ways, but to think it can be accomplished without direct impact on beneficiaries is no more than political chicanery.

Something has to change and sticking our collective heads in the sand won’t help us and neither will the ridiculous pandering by politicians seeking your vote more than real solutions and unconcerned with telling you the truth.

Here is what Obama said in 2008:

“As president, I will reduce costs in the Medicare program by enacting reforms to lower the price of prescription drugs, ending the subsidies for private insurers in the Medicare Advantage program and focusing resources on prevention and effective chronic disease management.”

Here is what the 2012 Medicare Trustees Report says:

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, is another, and even larger, source of policy-related uncertainty. This legislation, referred to collectively as the “Affordable Care Act” or ACA, contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving certain benefits, combating fraud and abuse, and initiating a major program of research and development to identify alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce its costs to Medicare. The Board assumes that the various cost-reduction measures—the most important of which are the reductions in the payment rate updates for most categories of Medicare providers by the growth in economy- wide multifactor productivity—will occur as the Affordable Care Act requires.

The Trustees believe that this outcome, while plausible, will depend on the achievement of unprecedented improvements in health care provider productivity. If the health sector could not transition to more efficient models of care delivery and achieve productivity increases commensurate with economy-wide productivity, and if the provider reimbursement rates paid by commercial insurers continued to follow the same negotiated process used to date, then the availability and quality of health care received by Medicare beneficiaries relative to that received by those with private health insurance would fall over time, generating pressure to modify Medicare’s payment rates.

Given these uncertainties, future Medicare costs could be substantially larger than shown in the Trustees’ current-law projection. Figure I.1 illustrates how Medicare’s costs would increase from the Trustees’ current-law projections under two alternative scenarios.

Here is what the Romney website says:

President Obama has had three years in office, during which time he has attacked every serious proposal to preserve and strengthen America’s entitlement programs while enacting cuts to Medicare and putting in place a bureaucratic board that one day may ration the care available through the program. Mitt Romney has laid out the approach he would take to modernizing America’s entitlement programs, guaranteeing their continued vitality for future generations. Mitt’s proposals would not affect today’s seniors or those nearing retirement, and they would not raise taxes. But he proposes that tomorrow’s Medicare should give beneficiaries a generous defined contribution, or “premium support,” and allow them to choose between private plans and traditional Medicare.

Mitt’s plan honors commitments to current seniors while giving the next generation an improved program that offers the freedom to choose what their coverage under Medicare should look like. Instead of paying providers directly for medical services, the government’s role will be to help future seniors pay for an insurance option that provides coverage at least as good as today’s Medicare, and to offer traditional Medicare as one of the insurance options that seniors can choose. With insurers competing against each other to provide the best value to customers, efficiency and quality will improve and costs will decline. Seniors will be allowed to keep the savings from less expensive options or choose to pay more for costlier plans.

Key Elements of Mitt’s Plan

Nothing changes for current seniors or those nearing retirement

Medicare is reformed as a premium support system, meaning that existing spending is repackaged as a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan
All insurance plans must offer coverage at least comparable to what Medicare provides today
If seniors choose more expensive plans, they will have to pay the difference between the support amount and the premium price; if they choose less expensive plans, they can use any leftover support to pay other medical expenses like co-pays and deductibles

“Traditional” fee-for-service Medicare will be offered by the government as an insurance plan, meaning that seniors can purchase that form of coverage if they prefer it; however, if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged by the government will have to be higher and seniors will have to pay the difference to enroll in the traditional Medicare option

Lower income seniors will receive more generous support to ensure that they can afford coverage; wealthier seniors will receive less support

Competition among plans to provide high quality service while charging low premiums will hold costs down while also improving the quality of coverage enjoyed by seniors

Frequently Asked Questions About Mitt’s Plan

What are the immediate effects of this plan?

This plan has no effect on current seniors or those nearing retirement. It will go into effect for younger Americans when they reach retirement in the future.

How is this different from the Ryan Plan?

Shortly after Mitt presented the proposal described here, Congressman Paul Ryan and Senator Ron Wyden introduced a bipartisan proposal that almost precisely mirrors Mitt’s ideas. Unsurprisingly, the Obama administration immediately rejected the proposal. Mitt has applauded the Ryan-Wyden effort and looks forward to working as president with leaders from both sides of the aisle to implement meaningful reforms that will preserve Medicare for future generations.

How high will the premium support be? How quickly will it grow?

Mitt continues to work on refining the details of his plan, and he is exploring different options for ensuring that future seniors receive the premium support they need while also ensuring that competitive pressures encourage providers to improve quality and control cost. His goal is for Medicare to offer every senior affordable options that provide coverage and service at least as good as what today’s seniors receive. Lower income seniors in the future will receive the most generous benefits to ensure that they are able to get care every bit as good as that provided in the current Medicare program.

How will the plan impact total Medicare spending?

The total impact on spending will depend on a number of factors, including the rate of premium support increase and the effect of competitive pressure on providers. By replacing the inefficiency of the current system with a competitive, market-oriented system in which every provider – including the government – wants to find the most efficient way to provide high quality care, the plan puts the future of Medicare on a sound footing to meet the needs of future generations.

How will traditional Medicare remain an option?

Traditional Medicare will compete against private plans. It will be operated by the government and funded by premiums, co-insurance, and deductibles that are set at the level necessary to cover its costs. The attractiveness of this option to future seniors will depend on how its efficiency and quality compares to that offered by other providers in the marketplace. Future seniors will benefit from the innovation and competition among options.

How will seniors be affected by the costs of different options?

Future seniors will be able to enjoy the savings from selecting less expensive plans, or choose to pay more for costlier options. When the insurance premium costs less than the support provided, the balance will be available in an HSA-like account to pay for other out-of-pocket health expenses.

Related articles

• Does Obamacare cut Medicare spending? (quinnscommentary.com)
• How Obamacare Is Benefiting Americans (quinnscommentary.com)
• Think more choices in health care plans is always better? Think again. (quinnscommentary.com)