The problem with Romney’s Medicare chart: It’s not true

August 24, 2012

I pine for Ross Perot’s campaign. Not the candidate himself, though he had his charms. But the charts and graphs.

He was, to my knowledge, the only serious (though the word can be debated) candidate to use charts and graphs in a U.S. presidential campaign. His success might have seeded the use of bar graphs and “Y” axes in subsequent races. Yet again and again, I’ve been disappointed.

Until Aug. 16, when Republican candidate Mitt Romney opened a rare news conference by breaking out a whiteboard and uttering five of my favorite words: “I’ve prepared a small chart.”


Evan Vucci/AP

The subject was the differences between Romney’s Medicare plan and President Obama’s. Instead of a graph, Romney’s chart featured a 2x2 matrix — basically, a box with four squares that’s heavily used in MBA courses and, interestingly, in political messaging seminars — that he said would “bring as much clarity as possible.” I followed his talk carefully. But, ashamed as I am to admit it, I remain confused.

The first column of boxes was devoted to Obama’s plan. One box tallied its effects on seniors over the next decade. It said: “$716b cut,” “4mm lose” and “15% X.” The next tallied up its effect on the next generation. This time, there was only one word: “Bankrupt.”

On the right was the column of Romney’s boxes. The “seniors” box had just two words: “No change.” The “next gen” box beneath it had just one word: “solvent.”

Let’s unpack that. The “$716b cut” refers to the Medicare cuts in the Affordable Care Act. The bulk of those cuts come in two areas. First, private insurance plans in the Medicare Advantage program have been getting paid about 20 percent more than traditional Medicare. Those overpayments are ratcheted back. Second, in negotiations with the White House, hospitals agreed to take a cut in reimbursements with the understanding that they’ll make more money from the 30 million previously uninsured people who will have insurance as a result of the law. The cuts to insurers and hospitals were sufficiently obvious that Paul Ryan included them in his budget.

The “4mm” refers to an estimate that 4 million seniors might lose coverage under the Medicare Advantage program due to the cuts (though they would remain eligible for traditional Medicare). The “15% X” refers to an estimate that 15 percent of hospitals and nursing homes might stop accepting new Medicare patients if their reimbursements don’t rise and Medicare does not become more efficient.

“No change” is clear enough. But in case you were confused, Romney emphasized that there will be “no changes, no adjustments, no savings” to Medicare for the next decade. So Romney plans to keep paying Medicare Advantage plans about 20 percent more than traditional Medicare, and he intends to give hospitals payments that they have already agreed to give up.

Romney’s description of what happens to the next generation of retirees deserves to be quoted in full: “The Medicare trustees have notified the president that the plan will go bankrupt, Medicare Part A, in the next 12 years,” he says. “Under the plan I have proposed, it is solvent.”

That’s ... it. Those are the only details he provides. He literally tosses his marker away after saying those words.

But the words aren’t true.

The plan Romney has proposed works like this: Seniors will get a voucher they can apply either to traditional Medicare or to a menu of private insurance options. Typically, such plans tie the value of the voucher to the cost of one of the least expensive plans. Romney doesn't specify how his voucher will work. “Mitt continues to work on refining the details of his plan,” his Web site states.

There is reason to believe that competitive bidding could save some money in Medicare. There are also reasons, ably laid out by Bloomberg View’s Peter Orszag, to believe it will disappoint. But there’s no reason to believe it could, on its own, make Medicare solvent.

I asked the Romney campaign whether Romney was relying on a study or independent analysis when he said his plan would make Medicare solvent. He wasn't. Romney was simply referring to the existence of his plan, such as it is.

Romney’s running mate, Paul Ryan, could tell him that’s not going to be enough to convince the budget scorekeepers that his plan ensures Medicare’s future. Ryan has sent a number of similar plans to the Congressional Budget Office. Because there’s no evidence that vouchers will solve Medicare’s problems, Ryan has always had to include some sort of blunt spending cap. His 2011 plan said that the generosity of the vouchers couldn't grow any faster than the rate of inflation, meaning seniors would pay an increasing share of their health- care costs out of pocket. The Congressional Budget Office estimated the cost shift from government to seniors would be in excess of $6,000.

That looked bad, so in his latest budget, Ryan simply says that Medicare can’t grow any faster than the rate of economic growth plus 0.5 percent (which is faster than the rate of inflation), and if his plan fails to hold costs that low, Congress has to do something about it, though what that something should be is left vague.

Interestingly, Obama’s most recent Medicare proposals, which attempt to restructure Medicare to pay for health outcomes rather than for the volume of medical care, ties the program to the same GDP plus 0.5 percent spending cap as Ryan’s; it is similarly vague in what is to be done if that limit is breached. That’s because, just as with the Ryan and Romney plans, there’s no real evidence that Obama’s plan will work, so the CBO refuses to say it will.

Romney, running for president as a fiscally tough candidate who won’t duck hard issues but will also never, ever, ever cut Medicare, has not followed Ryan and Obama’s lead and imposed a spending cap. So we have no real idea what spending path he’s outlined for the program, much less how he would achieve it if his vague voucher plan doesn’t realize the savings he claims, which it won’t.

You could take one of two views on this. You could say that Ryan’s and Obama’s plans put Medicare on a sustainable fiscal path, while Romney’s doesn’t, because that’s pretty much what the CBO will say, and they’re the folks who judge these things. Or you could say that none of the plans really make Medicare solvent — that they’re all just theory and prayer. What you can’t say is that Romney has released a plan that makes Medicare solvent.

I guess I know why he didn't use a graph.

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