“This IPAB board can ration care and deny certain Medicare treatments so Washington can fund more wasteful spending. ...Medicare will be bankrupt in nine years.”
— Musician Pat Boone, in a television ad sponsored by the 60 Plus Association
A number of readers asked us to examine the latest claims about Medicare, made this week by both GOP presidential contender Mitt Romney and a conservative advocacy group called the 60 Plus Association.
Actually, there is little new in either the 60 Plus Association’s $3.5 million ad campaign, featuring the venerable Pat Boone, or the “Five Questions for President Obama on Medicare” issued by the Romney campaign. We feel we have dealt with similar claims in the past, but apparently that has not deterred such attacks.
The Romney statement is amusing because it constantly repeats the phrase “ending Medicare as we know it”—which in turn has been a Democratic attack line against a House GOP plan for Medicare. (Democrats used to simply say “end Medicare” or “kill Medicare” until The Fact Checker and other fact checking organizations called them on it.)
Indeed, both parties are absolutely shameless about Medicare. (For instance, the Democratic National Committee attacked Romney on Medicare this week.) Both claim that other party would kill/destroy/ruin/whatever Medicare; neither side has much of a leg to stand on.
Someone must be falling for this stuff, however, or else it would not keep getting repeated.
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 coinsurance.
One part of Medicare— the trust fund for inpatient hospital, home health, skilled nursing facility, psychiatric hospital, and hospice care services — will be exhausted in 2024, five years earlier than estimated the year before, according to the latest Medicare Trustees report. (Boone says nine years, or 2020, apparently referring to a more dire estimate by the Congressional Budget Office.)
Many politicians — and the Romney campaign statement — translate this financing issue into “bankrupt,” even though the trustees report never uses that term. (Indeed, the Medicare Part A trust fund has been going “bankrupt” almost from the moment it was created.) Other aspects of Medicare, such as the part that covers physician and outpatient hospital services, are in much better shape, because of automatic financing mechanism.
Let’s look at two key claims that are both in the Romney letter and the 60 Plus television ad.
“This IPAB board can ration care and deny certain Medicare treatments”
— 60 Plus Ad
“Why Is President Obama Ending Medicare As We Know It By Creating An Unaccountable Board To Ration Care For Today’s Seniors?”
— Romney statement
We’ve written about this before, but let’s try to explain it again.
Beginning in 2014, the 15-member Independent Payment Advisory Board, or IPAB, (made up of experts subject to Senate confirmation) is designed to help reduce the rate of growth in Medicare spending if it exceeds a certain target rate. The board would make recommendations to reduce costs.
Then, beginning in 2018, if the targets are not met, the board will submit a plan to the White House and Congress to achieve the necessary cuts. Congress could pass a different set of cuts or reject the IPAB recommendations with a three-fifths vote in the Senate.
In effect, the IPAB appears designed to mimic the Defense Base Realignment and Closure Commission, which was designed in the late 1980s by then Rep. Dick Armey (R-Tex.) with the backing of the Reagan administration. That commission was empowered to make politically difficult decisions of closing military bases, thus limiting the influence of lobbyists and in effect letting Congress off the hook of making the tough decisions themselves.
The health-care law, by the way, explicitly says that the recommendations cannot lead to rationing of health care. (See page 428 of the law.) Of course, “rationing” is in the eye of beholder. (One common complaint is that rationing is not defined.) The law also limits recommendations that would change benefits, modify eligibility or increase Medicare beneficiary cost-sharing, such as deductibles, coinsurance and co-payments.
On the surface, the IPAB appears aimed at doing the same thing as the House Republican Medicare plan — reducing the runaway costs of Medicare, except on a faster track. (The GOP plan would not kick in until 2021, just a few years before the Medicare hospital fund begins to run dry.)
The dispute really centers on a philosophical divide between the parties. Democrats would rely on independent experts (such as doctors and consumer advocates) to recommend the cuts; Republicans would rely on the insurance marketplace to control costs. We can’t fact check deeply held philosophical beliefs, except to note that such differences sometimes loom larger than they really are and prevent people from acknowledging obvious similarities.
The fact is that choices must be made if lawmakers want to control costs in traditional Medicare. The IPAB is one tool to achieve that goal. Even with the potentially vague language on rationing in the law, the IPAB members would need to be confirmed by the Senate, and Congress would have the opportunity to reject the recommendations.
“President Obama’s health care law cuts $500 billion from Medicare.”
— 60 Plus ad
“Why Is President Obama Ending Medicare As We Know It By Funding Obamacare Through $500 Billion In Medicare Cuts For Today’s Seniors?”
— Romney campaign statement
This is another oldie but goodie.
Under Obama’s health-care law, Medicare spending continues to go up year after year.
The health-care law tries to identify ways to save money, and so the $500 billion figure 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. (The Kaiser Family Foundation, on slide 15 of this tutorial on the law’s impact of Medicare, has a chart of the year-by-year savings.)
Moreover, the savings actually are wrung from health-care providers, not Medicare beneficiaries.
These spending reductions presumably would be a good thing, since virtually everyone agrees that Medicare spending is out of control. In the House Republican budget, lawmakers repealed the Obama health-care law but retained all but $10 billion of the nearly $500 billion in Medicare savings. This suggests the actual policies enacted to achieve these spending reductions were not that objectionable to GOP lawmakers.
The Obama health-care law also raised Medicare payroll taxes by $113 billion over 10 years, further strengthening the program’s financial condition, according to the Congressional Budget Office. Since about half of the $500 billion stems from reduced outlays for Medicare hospitalization expenses, the payroll taxes and those reductions would add about $358 billion to Medicare trust fund balances.
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 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. In reality, the money is all fungible, but Romney is on relatively solid ground when he says that Obama is partially funding the health-care law through reductions in Medicare spending. But it is misleading to suggest that Medicare has been weakened by this accounting manuver.
The health-care law, as mentioned, actually puts Medicare on a more solid financial footing. The health-care law, moreover, 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 the House Republican bill for Medicare actually would repeal.
The Pinocchio Test
We could go on but you get the picture. When a politician or a political ad starts saying their opponents want to “end Medicare,” or even “Medicare as we know it,” simply turn off the sound.
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