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Answering readers’ questions about Medicare

at 06:02 AM ET, 08/28/2012

“Senator McCain would pay for part of his [health care] plan by making drastic cuts in Medicare, $882 billion worth…It ain’t right.”

— Then Sen. Barack Obama, seen in a new ad by the Romney campaign

 

We returned from vacation to find lots of questions from readers about Medicare. The two campaigns have been engaged in a tit-for-tat war of words that, according to the latest Washington Post-ABC News poll, appears to have resulted in a draw so far. For the moment, we will not delve into the details of those ads except to note with amusement this new Romney ad that accurately quotes Obama from four years ago.

  Perhaps one reason why the Medicare fight has resulted in a draw is because both parties have played rhetorical games with the old-age health program.

Democrats in 1996 effectively attacked Republicans for proposing “cuts” in Medicare, but then after the election cut a deal with Republicans allowing some of those same reductions. In 2008, Obama claimed McCain, if he became president, would have made “drastic cuts in Medicare” to fund his health program.  Then Republicans turned the tables in 2010, attacking spending reductions implemented by Democrats to help fund the new health care law.

 Who wouldn’t be confused? Both sides profess to be concerned about the financial health of the program, but then bash each other with scary rhetoric in the very next election.

Here are some answers to key questions that have arisen in recent weeks.

Did Obama cut $700 billion from Medicare?

 The current Medicare system, in place since the mid-1960s, is essentially a government-run health-care program, with hospital and doctors’ fees paid by the government, though beneficiaries also pay premiums for some services as well as deductibles and co-insurance.

 During the primaries, Republicans used to claim that Obama funded his health care plan with $500 billion in cuts.

So how did it balloon to a $700 billion figure? There is a simple explanation. The Congressional Budget Office last month issued a new estimate based on a different — and later — 10-year time frame (2013-2022). Of course, Republicans decided to pick the biggest number possible.

  But, as we have repeatedly explained, Medicare spending is not being reduced. It still goes up year after year.

The $700 billion figure (technically, $716 billion) comes from the difference over 10 years between anticipated Medicare spending (what is known as “the baseline”) and the changes the law makes to reduce spending. Moreover, the savings mostly are wrung from health-care providers, not Medicare beneficiaries. (It is worth noting that, given past practices,  the Medicare actuary has doubted whether such cuts will ever come to pass.)

The proposed reduction in spending actually strengthens the long-term health of the Medicare program, according to Medicare trustees reports. And spending on Medicare over that 10-year period would still be $7.8 trillion.

 In fact, House Republicans adopted many of these same cuts in their own budget. (They argue they devote the savings to reforming Medicare, not funding a new entitlement.) Both parties agree that controls are needed on Medicare spending — that is the only way that the Medicare trust funds last longer — but they disagree over the best path forward. We have generally given Republicans Two Pinocchios for such claims.

 

Did Obama use Medicare savings to fund ‘Obamacare’?

 All government money is fungible, but depending on how this claim is phrased, one could certainly make this rhetorical point. In the health care bill, the anticipated savings from Medicare were used to help offset some of the anticipated costs of expanding health care for all Americans.  As we have previously examined, this sort of “double-counting” accounting has been used by both parties for decades.

 The Obama health care law also raised Medicare payroll taxes by $318 billion over the new 10-year time frame, further strengthening the program’s financial condition.

 Under the concept of the unified budget, money that is collected by the federal government for whatever purpose (such as Medicare and Social Security payroll taxes) is spent on whatever bills are coming due at that time. Social Security and Medicare will get a credit for taxes collected that are not immediately spent on Social Security, but those taxes are quickly devoted to other federal spending.

 In sum, the health care bill actually puts Medicare on a more solid financial footing. Also, the health care law improved some benefits for seniors, such as making preventive care free and closing a gap in prescription drug coverage known as the “doughnut hole” — improvements that Republicans would repeal.

 

Is Medicare going ‘bankrupt’?

 Nope. This is an old song played by both parties. There are different parts of Medicare — here’s a guide — much of which is paid from general revenues and premiums. Part A, which pays hospitals, has a “trust fund,” made up of special-issue Treasury bonds, that always seems to be on the edge of running dry. But even so, the payroll tax could pay most estimated expenditures for decades. And does anyone doubt Congress would not step in and fill any gaps?

 

Will Paul Ryan’s plan for Medicare force seniors to pay $6,400 more than they do today?

 This is an old Democratic attack line, based on old data concerning an earlier version of Ryan’s plan. (Sometimes President Obama refers to the “original” plan in his remarks.) Just last month we gave Obama Two Pinocchios for making a similar claim.  

Readers should always be wary of dire predictions far in the future. The $6,400 figure refers to analysis of a Congressional Budget Office estimate of a different and less generous version of Ryan’s plan in the year 2022; the CBO made no such estimates of the new version, saying it did “not have the capability at this time to estimate such effects for the specified path of Medicare spending” but that “beneficiaries might face higher costs.” 

The new Ryan plan, moreover, retains the option of traditional Medicare, while the old version did not.

  Our colleagues at PolitiFact reported that a study published this month by the Journal of the American Medical Association suggests the out of pocket payment for traditional Medicare would be under $800 a year if the Ryan plan had been in place in 2009. That’s obviously significantly lower than the figure in Democratic attack ads.

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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