“He [Romney] plans to turn Medicare into a voucher program. Now, understand how that works. If the voucher isn’t worth what it takes to buy health insurance in the private marketplace, you’re out of luck. You’ve got to make up the difference. You’re on your own. So one independent, nonpartisan study found that under a similar plan, seniors would have to pay nearly $6,400 more for Medicare than they do today. Where are you going to get that from? Where are you going to get it from — $6,400?”
— President Obama, remarks in West Palm Beach, Fla., July 19, 2012
On a campaign trip to Florida last week, President Obama — no surprise! — brought up the subject of Medicare.
This is a highly emotional and difficult subject to understand. There’s a reason why we suggested last year that readers would be best advised to mute the sound if any ad concerning Medicare aired — for either party.
Let’s look more deeply at the president’s remarks.
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.
Romney, following the lead of House Budget Committee Chairman Paul Ryan (R-Wis.), would convert Medicare to a “premium support” plan, in which private plans would compete with the government plan and the federal government would pay a predetermined contribution.
Obama derides this notion as a “voucher,” though the concept of “premium support” was originally developed by Democratic-leaning analysts (who have distanced themselves from the GOP version).
After sustained criticism of his plan last year by Democrats, Ryan worked closely with Sen. Ron Wyden (D-Ore.) to alter it for this year’s budget blueprint. Two key changes were: (1) Traditional Medicare is retained as an option (previously only people over 55 could stay in the traditional plan); and (2) Medicare spending after 2023 would be permitted to grow slightly faster than the nation’s economy (+0.5 percent), the same growth rate as Obama’s budget. (The old plan capped growth at the rate of inflation.)
The premium support payment would be based on the cost of the second least-expensive private plan or traditional Medicare, whichever is lower. Any difference in costs would need to be made up by the beneficiary. But, Ryan aides say, Medicare benefits of at least one plan would be covered by the premium-support payment. If costs rise above the spending cap, then Congress would be required to act, similar to the Independent Payment Advisory Board (IPAB) — much criticized by conservatives — that was created in Obama’s health-care law.
(For readers interested in more information, Health Affairs has published an excellent — and neutral — article describing how this idea would work. For a critique, you can read this article. And here is support for the idea.)
It is important to note that this is not exactly Romney’s plan, though his Web site says “Congressman Paul Ryan and Senator Ron Wyden introduced a bipartisan proposal that almost precisely mirrors Mitt’s ideas.” So Ryan-Wyden is a fairly close substitute.
One would think that Obama, in referring to a “similar plan,” would be relying on estimates concerning the new version of Ryan’s plan. But the figure of $6,400 actually comes from a year-old analysis of a Congressional Budget Office estimate of the different — and less generous — 2011 Ryan plan. The CBO analysis showed that over time, beneficiaries would have to pay a greater share of Medicare costs.
But the CBO did not do a similar analysis of the 2012 plan, saying simply that “beneficiaries might face higher costs” but that the CBO did “not have the capability at this time to estimate such effects for the specified [Ryan-Wyden] path of Medicare spending.” It did show that Medicare spending would be lower than under current spending scenarios — which many experts say are unsustainable for the federal budget.
The Obama campaign justifies using the out-of-date figure because Romney had indicated support for the original Ryan plan during the GOP primaries and because not enough is known about how Romney’s plan would work. But Romney also said: “His plan is not the plan I’ll put forward; I have my own plan.... I’ll be putting that out before I debate President Obama.”
The Pinocchio Test
We are not going to take a position on the core philosophical dispute — whether “you would be out of luck” with one plan or other. (Republicans would argue the current system would leave folks out of luck.) We earlier failed to reach a verdict when faced with such starkly different claims about the Ryan plan and Obama’s health-care law.
We simply repeat the warning we made before: Readers should remember when they hear gloom and doom predictions about either Obama’s health law or Republican alternatives for Medicare that no law is perfect, and adjustments are often made if problems emerge.
The policy differences on Medicare are substantial, but that still does not justify using out-of-date figures from last year’s plan — especially because the plan has been updated and made more generous to deal with some of the original criticisms made by Democrats.
The president should avoid claiming such specifics unless he can cite new data to make his case.
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