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The Medicare feud explained: both sides would cut but GOP more

August 16, 2012|By James Rainey
  • Republican vice presidential candidate Rep. Paul Ryan (R-Wisc.) speaks at a campaign event at Walsh University in North Canton, Ohio.
Republican vice presidential candidate Rep. Paul Ryan (R-Wisc.) speaks… (Jeff Swensen / Getty Images )

Americans who don’t count themselves confused by the current debate over Medicare must be in the minority. Mitt Romney and Republican running mate Rep. Paul D. Ryan accused President Obama of hurting seniors by cutting $716 billion from the federal health program. The president retorts that the Republicans would "end Medicare as we know it."

The truth is that both sides have plans that dramatically change the nearly half-century-old program. Seniors and seniors-to-be, as well as the disabled, are understandably anxious. Medicare has been widely popular because American working people appreciated its simplicity: They paid payroll deductions in and one day took out benefits that remained fairly predictable.

One of the best explanations of the differences between the two approaches that are now the subject of such furious debate has been offered by Trudy Lieberman, a veteran healthcare journalist who currently works for the Columbia Journalism Review. Lieberman’s most recent essay provides a long view of Medicare reform. She shows that both the Democrats’ “Obamacare” and the Republican plan embodied in Ryan’s “path to prosperity” budget would likely reduce benefits and increase costs for seniors — with the Ryan proposal of “premium supports” (more commonly known as vouchers) would more dramatically alter the status quo.

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One measure of just how dramatically the Ryan plan would change things, Lieberman reminds us, is that the Congressional Budget Office found that the Ryan proposal “would cut healthcare spending as a percentage of GDP from about 12% projected under current law to about 6% in 2030.” By Lieberman’s assessment, that would be “huge.” And the Ryan plan effectively has become the Republican plan. After some initial hedging, presumptive Republican nominee Romney called his running mate’s plan “close to identical” to his own.

The Ryan proposal would leave the Medicare entitlement in place for those already 55 and older. For those who reach retirement age later it would offer the alternative of vouchers — a fixed amount of money annually that beneficiaries could use to buy health insurance in the private market. Reporter Lieberman notes that if the vouchers didn’t cover all the medical care that seniors want, they would pay the difference out-of-pocket. Some Medicare experts believe the vouchers wouldn’t keep up with the rate of inflation. The Congressional Budget Office found that under the Ryan plan, “most elderly people who would be entitled to premium support payments would pay more for their healthcare than they would pay under the current Medicare system.”

What about the Republican ticket’s claim that those already receiving Medicare benefits would not see any change? With the adoption of a voucher program, experts said, this is far from clear. The reason is that younger, healthier and wealthier individuals would be expected to opt out of the traditional Medicare pool. This would put tremendous pressure on the already struggling Medicare trust fund by leaving mostly the sickest, costliest patients behind. The outcome would likely be higher Medicare premiums for those who remained in the plan, Lieberman reported.

The journalist sees another challenge that would be presented if Medicare were to be divided into two parts.  “We have broken this bond that has been a part of Medicare since 1965,“ Lieberman said in an interview. “People have known they would pay in and also receive benefits out. That would go away.”

The proposed Republican changes cannot be compared to some benign status quo. Obama’s Affordable Care Act also embraces the notion that seniors should pay more. The law requires that, beginning in 2015, so-called Medigap policies (known as plans F and C) that seniors buy to get additional services leave some out-of-pocket costs to be paid by every beneficiary. Seniors should pay part of their medical bills directly, the theory goes, to push them to be more attentive about controlling their healthcare expenses. They would, the medically insensitive expression goes, have more “skin” in the game.

Other increased charges are coming down the road, under the Obama health law. The act already requires an additional premium for seniors at the upper 5% of the income spectrum for things like doctor’s office visits and lab tests, Lieberman explained. And both political parties have expressed support for eventually increasing the percentage of seniors who pay those higher Medicare premiums.

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