“I’ve also put forward a detailed plan that would reform and strengthen Medicare and Medicaid.”
— President Obama, remarks to newspaper editors, April 3, 2012
“I’d be willing to consider the President’s plan, but he doesn’t have one. That’s right: In over three years, he has failed to enact or even propose a serious plan to solve our entitlement crisis.”
— Former Massachusetts governor Mitt Romney, remarks to newspaper editors, April 4, 2012
Welcome to the 2012 election campaign, now that it’s clear who the contestants will be. But with speeches like these, will it be possible to have a serious debate?
We recognize that politicians seek to define differences — and Obama and Romney spent most of their time attacking the other side — but we found the disconnect between the two speeches somewhat jarring. Let’s try to explain what these two men are saying.
Entitlements are such programs as Social Security and Medicare, and their costs will soar as the Baby Boom generation heads into retirement. On the surface, Romney’s attack appeared contradictory, because a few moments after attacking the president for not having a plan for solving the entitlement crisis, he faulted Obama’s proposals for reining in spending on Medicare as part of his health care law.
The Romney campaign argues that former Massachusetts governor thinks he can simultaneously make both of these points because Obama’s Medicare savings are being used to help fund yet another potential entitlement: near-universal health care for Americans.
Eric Fehrenstrom, a senior advisor to Romney, pointed to various statements by Obama to argue that “Obama himself has acknowledged at this point that ‘Obamacare’ was not actually a Medicare reform, and that the system still requires reform.”
Still, Obama is betting that his health care law will help restrain the growth in health care spending over time, thus easing the budgetary pressure of Medicare and Medicaid. But a plausible case could be made that the proposed Medicare cuts will never occur or cause serious problems for providers — that is what the Medicare chief actuary has warned — and thus the budgetary savings will not materialize. In fact, without anticipated savings, costs could skyrocket, as often happens with new entitlements.
At the moment, however, the White House can point to the fact that the net result of the Medicare changes have been credited with extending the Medicare trust fund by 12 years. Indeed, after the health care law was passed, the 2010 Medicare Trustees report reduced the Medicare deficit as a percentage of taxable payroll, citing “principally ...the far-reaching effects of the Affordable Care Act.”
(Incidentally, Romney is wrong to claim that Obama “is the only president to ever cut $500 billion from Medicare.” As we have written repeatedly, this is a reduction in projected spending, not an actual cut; spending actually goes up year after year. Obama actually expanded some benefits. Other presidents have also signed into law reductions in payments — or cuts in benefits.)
The president’s budget also includes proposals for some $63 billion in health savings through 2021. (See health provisions in Table S-9.) Whether that is serious, of course, is in the eye of the beholder. Obama also came close to a deal with House Speaker John Boehner (R.-Ohio) that reportedly would have included significant entitlement reforms, but whether it was Obama or Boehner who flinched at the last minute is still a subject of debate.
There is an important reason why politicians often choose to be vague about the details of entitlement reform plans — a detailed plan is too much of a target for opponents.
Let’s turn now to some of Obama’s complaints about the Medicare overhaul advanced by House Republicans, specifically Rep. Paul Ryan (R-Wisc.), the chairman of the Budget Committee.
The Ryan plan, as recently revised, would allow seniors to remain in traditional Medicare. (The version last year let only Americans above the age of 55 stay in traditional Medicare.) Currently, Medicare is a fee-for-service program, meaning the bills are paid by the government, but Ryan would convert it in to a “premium support” plan, in which private plans would compete with the government plan and federal government would pay a predetermined contribution, which would grow slightly faster than the nation’s economy.
(For readers interested in more information, Health Affairs recently published an excellent--and neutral--article describing how this idea would work.)
In his speech to newspaper editors, Obama said: "If Medicare is more expensive than that private plan, they’ll have to pay more if they want to enroll in traditional Medicare. If health care costs rise faster than the amount of the voucher — as, by the way, they’ve been doing for decades — that’s too bad."
Ryan, in a Facebook posting, pushed back against this claim, saying that if Medicare spending grows faster than the formula, “Congress would be required to intervene and could implement policies that change provider reimbursements, program overhead and means-tested premiums.” He noted that the growth rate is the same rate as Obama’s Independent Payment Advisory Board, a 15-member panel that is supposed to achieve savings in Medicare, though Congress can overrule the decisions.
Who’s right? Well, for two days we’ve gone back and forth between administration officials, Ryan’s staff and various experts and it remains highly open to interpretation. Part of the problem is that Ryan’s plan, such as it is, is contained in a nonbinding budget resolution, which only sets broad targets and themes. No actual legislation has been crafted, which allows the White House to sketch as dire a picture as possible.
An administration official, for instance, supplied us a transcript from a congressional hearing as back-up for Obama’s statement, noting that a Ryan aide said the premium payment would be capped; Ryan’s staff said the aide’s comments had been misinterpreted. More neutral experts said the comments were unclear.
There is also the difference between theory and the real world.
Joseph Antos, a health policy expert who worked at the Congressional Budget Office, believes the growth rate target is “purely a budgetary gimmick” designed to “generate a good score by CBO.”
Antos also thinks that, even if the Ryan plan were implemented, enough people will remain in traditional Medicare that Congress could achieve budget savings in various ways — though Obama administration officials disagree. He argues that just as Congress has repeatedly deferred Medicare cuts to providers established in the 1997 Balanced Budget Act, “it’s ludicrous to think that Congress would not take action to override such a cut [in premium support payments] in any world.”
Readers should remember that when they hear such gloom and doom predictions about either Obama’s health law or Republican alternatives for Medicare. No law is perfect, and adjustments are often made if problems emerge. Already, changes have been made in the Obama law in the two years since it was signed into law.
The Pinocchio Test
We try hard not to fact check opinions, and to some extent that’s what we are left with here. (We have already given Romney grief for his comments about “cuts” to Medicare.)
Romney said that Obama never submitted a “serious plan to solve our entitlement crisis.” Obama has certainly enacted a far-reaching plan that the president thinks will help ease budget pressures — the health care law. But Republicans utterly reject it and say it will make the budget problems even worse. Obama’s proposal to Boehner remains the subject of rumor and speculation, but it has not been officially unveiled.
We have the same issue with Obama’s accusation about the Ryan Medicare plan. This is the White House’s opinion, rejected as incorrect by House Republicans. The Ryan plan would require a leap of faith, just as Obama’s health law does. We need to see more hard data before we can hang our hat on a Pinocchio or a Geppetto.
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