The GOP’s Medicare confusion

November 29, 2012

The austerity crisis talks have hit a peculiar impasse. The problem isn't, as most analysts expected, taxes, where Republicans seem increasingly resigned to new revenue. It's Medicare. And the particular Medicare problem isn't that Democrats are refusing the GOP's proposed Medicare cuts. It's that Republicans are refusing to name their Medicare cuts.

Politico quotes a "top Democratic official" who paints the picture simply: "Rob Nabors [the White House negotiator], has been saying: ‘This is what we want on revenues on the down payment. What’s your guys’ ask on the entitlement side?’ And they keep looking back at us and saying: ‘We want you to come up with that and pitch us.’ That’s not going to happen.”

That's partly politics. If nothing else, Republicans are respectful of Medicare's political potency. Recall that a core Republican message in both the 2010 and 2012 elections was that Democrats, through Obamacare, were cutting Medicare too much. Republicans, already concerned about their brand, don't want to rebrand themselves as the party of Medicare cuts.

But it's partly policy, too. The fact is that short of converting the program to a premium support system — a non-starter after they lost the 2012 election — Republicans simply don't know what they want to do on Medicare. 

Scour the various outlets for Democratic policy ideas and you'll find plenty of proposed Medicare cuts. President Obama's 2013 budget, for instance, includes hundreds of billions in Medicare cuts (see pages 33-37), and caps the program's long-term growth at GDP+0.5 percent. More recently, the Center for American Progress released a 46-page proposal for cutting Medicare by almost $400 billion.

Republicans, meanwhile, have focused their energy on a long-term effort to convert Medicare to a premium-support model. Paul Ryan's 2013 budget kept the Affordable Care Act's Medicare cuts for the next 10 years and proposed to convert the program to a premium-support model in the future. Mitt Romney's platform proposed reversing Obamacare's Medicare cuts and offered a vague framework for converting the program to a premium-support model in the future. 

If you dig deep into the Republican think tank world, you can find a few proposals that focus on the near-term. The most serious plan I found came tucking inside the American Enterprise Institute's contribution to the Peterson Foundation's 2011 Fiscal Summit: In addition to moving toward premium support, they propose simplifying and enlarging the deductible, instituting a 20 percent co-insurance rate, introducing a "premium surcharge" for seniors who use supplemental insurance, and giving physicians more discretion in setting their prices. But there's little unanimity around these proposals, and no leading Republican politician has endorsed them, perhaps because doing so would be tantamount to suicide.

That's left Republicans in a peculiar negotiating position: They know they want "Medicare reform" — indeed, they frequently identify Medicare reform as the key to their support for a deal — but aside from premium support, they don't quite know what they mean by it, and they're afraid to find out. 

The solution they've come up with, such as it is, is to insist that the Obama administration needs to be the one to propose Medicare cuts. “We accepted this meeting with the expectation that the White House team will bring a specific plan for real spending cuts — because spending cuts that Washington Democrats will accept is what is missing from the balanced approach that the president says he wants,” Boehner spokesman Michael Steel said in regard to the most recent round of talks.

Democrats find this flatly ridiculous: Given that the Obama administration would happily raise taxes without cutting Medicare but that Republicans will only raise taxes if we cut Medicare, it falls on the Republicans to name their price. But behind their negotiating posture is a troubling policy reality: They don't know what that price is. 

The likely deal here — which some smart Republicans are talking about — will be a Medicare "down payment" that gets us past the fiscal cliff and then a target for the Medicare savings that negotiators need to reach over the next six months. But there's no guarantee that the state of the politics or the policy thinking on Medicare will be very different six months from now than it is today. Republican policy types need to start thinking about what they want to do to Medicare, and quick.

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Neil Irwin | November 29, 2012