Unraveling Medicare debate

Mitt Romney’s selection of U.S. Rep. Paul Ryan, R-Wis., as running mate brought the future of Medicare to the forefront of political debate.
Medicare has problems, but they are not major. The per-capita cost of the program is dropping. Administrative costs are well below that of most insurance companies. The ageing of the Baby Boomer population is its main threat, but even that is less dramatic than it might be because the program does not cover nursing home stays.
While it is true that President Barack Obama’s plan would cut Medicare costs by $716 billion, the claim is misleading. The projected reduction in Medicare costs do not come from a drop in benefits. In fact, his plan expands benefits by covering preventive services and filling the prescription drug donut hole.
The Affordable Care Act reduces projected Medicare payments to some insurance companies and health care providers, in part by focusing on health-care quality rather than procedures. The law also creates a Medicare cost control board.
Thus, the Obama plan finds savings without reducing benefits to Medicare recipients.
Both Romney and Ryan promise they will seek repeal of the Affordable Care Act, including the provisions designed to control Medicare costs.
Despite ending these cost controls, Ryan’s plan incorporates the law’s $716 billion in Medicare cuts. Romney has distanced himself from this part of the Ryan plan.
The GOP plan to reduce Medicare costs would transform the program from a defined-benefit plan to a defined-contribution plan. Instead of assuring people specified medical benefits when they reach 65, the program would provide them with vouchers they could use to purchase private insurance.
The Romney-Ryan plan is analogous to a change many employers are making away from pensions for their employees. Employers prefer 401(k) defined-contribution retirement plans because the risk of poor-performing investments is carried by the employee, not the employer.
Taxpayers are potential winners under the Romney-Ryan plan, because they are shifting financial risk to retirees. Insurance companies also are winners, as they gain a huge market.
The losers in the plan are Medicare recipients, who would bear the risk that medical costs rise faster than the value of the vouchers. In that scenario, seniors would either have to pay for health care out of their pocket or do without.
Both the Obama and Romney plans reduce Medicare costs. Obama’s plan does so without cutting benefits. Romney’s plan places those benefits at risk.

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2 Comments

Filed under Election 2012, Health care

2 responses to “Unraveling Medicare debate

  1. What SPIN could Republicans put on this blog post?

  2. Lee McCain

    I have a number of issues with this editorial. First the idea that one’s benefits stay the same but providers are reimbursements are cut. Every year the number of physicians taking medicare is dropping. A survey performed by Department of HHS revealed in Texas the number of doctors opting out may be as high as 50%; the American Academy of Family Physicians reports the number is 73% of their physicians taking Medicare in 2010. For Medicaid, the problem across the nation is significantly worse. You may not see your benefits change but will that matter if you have no coverage? Recently I had a Medicare patient complain she no longer sees her physician but a nurse practitioner. I suspect this will be the new norm once the ACA “benefits” take full effect. In fact it is near impossible to find a physician taking new Medicare or Medicaid patients in Decatur or Huntsville. I foresee a day in the not so distant future where whole hospital systems stop taking Medicare or Medicaid. Second, it annoys me to no end when bureaucrats think “quality assurance measures” will cut costs and improve patient care. Time and time again when these implementations are utilized doctors (and hospitals to a degree) will start “cherry picking” patients. If a patient is overweight or smokes or has diabetes, a physician may not accept that person due to the higher risk of complication and thus lowering the physicians “quality” score. JCAHO is already the government standard for quality assurance and in my opinion is a disaster. JCAHO rules and regulations have much inanity and read like tax code open to too much interpretation costing hospitals an inordinate amount of money to stay compliant. Lastly I will disagree with your assertion that the problems facing Medicare are “minor”. I think almost everyone is in agreement that Medicare will become insolvent over time; the argument is really WHEN that will occur. Medicare cannot continue its current course with ACA implementation and hope to remain anything similar to what it is today. So is the Romney plan better? I can only think of Tenn Care as an example of a quasi government/ private insurance venture similar to what the Romney/ Ryan plan is proposing and we all know how much of a boondoggling fiasco that was. While certainly flawed I believe the US should pursue a German or Dutch system of healthcare. Both of these models seem to work conceptually like our current system and thus more palatable to most Americans.

    Lee

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