All the noise from the last election cycle of 2010 was enough to motivate me to disconnect my cable service for good. I get so sick of the half-truths from both sides. Like the old joke, “How can you tell when a politician is lying…when you see their lips moving.” With the convention-fest going on last week and this week, I thought this was a pertinent article:
Romney and Obama: Both Wrong on Medicare by Michael D. Tanner
(Michael Tanner is a senior fellow at the Cato Institute and author of Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law.)
Let's try to put the ongoing debate over the future of Medicare into a little bit of context. Last year, Americans paid $274 billion in Medicare taxes and premiums. At the same time, the program paid out $564 billion in benefits. That amounts to a shortfall of roughly $290 billion. Looking into the future, even the most optimistic estimate by the program's trustees puts Medicare's future unfunded liabilities at more than $38.6 trillion. More realistic projections suggest the shortfall could easily top $90 trillion.
Faced with this ocean of red ink, the Obama and Romney campaigns are busy claiming that the other guy wants to cut Medicare. They, on the other hand, would never think for a moment about cutting anyone's Medicare benefits. Hello. Can anyone out there do math?
Start with Mitt Romney, who claims that President Obama "stole" $716 billion from Medicare. Yes, Romney is correct that the new health care law would reduce Medicare spending by $716 billion the next 10 years. Primarily, the president would cut payments for Medicare Advantage insurance plans, a private insurance option currently used by roughly one in five seniors, and by reducing payments to providers—that is, doctors and hospitals. The health care law also includes several pilot projects, such as Accountable Care Organizations (ACOs) and medical homes, designed to reduce the long term growth in health care costs.
It is important to point out that the president's "cuts" are cuts only in the Washington sense of a reduction in the rate of increase. Republicans have long protested when their similar proposed slowdowns in growth were demagogued as cuts by Democrats. That would seem to make Romney and Ryan's complaint a little hypocritical.
And, given that Medicare is adding some $300 billion to the deficit every year, one might expect supposed fiscal conservatives like Romney and Ryan to be more sympathetic to reducing Medicare's growth. It is also true, as Obama has pointed out, that Romney's running mate, Paul Ryan, actually incorporated that $716 billion in savings into the budget that just passed the House of Representatives. Romney and Ryan now say they would repeal all of those changes.
Obama's implication that current seniors would lose their Medicare benefits under Romney's plan is particularly dishonest.
That's not to say that President Obama has been honest about these cuts either. First, the president claims that he is not actually cutting benefits for beneficiaries. That is technically true in that most of the cuts are reductions in payments to providers. But it is ridiculous to assume that cutting payments to doctors and hospital will have no impact on seniors. In fact, Medicare's own actuaries estimate that the cuts could force as many as 15 percent of hospitals to close. Similarly, at a time when physicians are already complaining that Medicare reimburses at a rate less than actual costs, additional reimbursement cuts will force many doctors out of practice or at least cause many to stop accepting Medicare patients. Seniors may still have their full Medicare benefits. They just won't be able to find a doctor who will take them.
The president also claims that his cuts have "extended the life of the Medicare trust fund by eight years." Again, technically true. But extending the life of the Trust Fund is not the same thing as extending the life of Medicare.
Any savings that the president does achieve would indeed be routed through the Medicare Trust Fund, where they would be used to purchase special-issue Treasury bonds. As an accounting measure, having more bonds means the Trust Fund will last longer. In the meantime, however, the government is counting on the revenue from the original purchase of the bonds to pay for the cost of the new health care legislation. Thus, it is using any savings from Medicare to pay for Obamacare, while pretending it is available to pay for future Medicare benefits. As Medicare's chief actuary points out, "In practice, the improved [Medicare] financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions."
There is also reason to question whether the president's cuts will actually occur and whether they will save anywhere near as much money as claimed. The Congressional Budget Office recently pointed out that virtually none of the president's proposed Medicare reforms have saved money in practice. And, when it comes to reducing provider payments, Congress hasn't exactly been a profile in courage: Witness the annual spectacle of the "doc fix," postponing already scheduled cuts.
Meanwhile, Obama has also been attacking Romney for wanting to "end Medicare as we know it." That's about as meaningful as saying that the Carpathia ended the Titanic's voyage "as we knew it." The president's implication that current seniors would lose their Medicare benefits is particularly dishonest. Typical has been the claim by Obama campaign advisor David Axelrod that Romney would throw his 85-year-old, cancer-stricken father off Medicare.
But Romney and Ryan have been explicit that they wouldn't make changes to Medicare for anyone age 55 or older today. No one currently on Medicare would be thrown off the program, forced to pay more, or have his or her benefits cut.
Even those under age 55 would still have the option to stay in conventional Medicare if they wish. However, for those who want a different option, insurance companies would bid for the right to participate under Medicare. Plans would have to include certain minimum benefits and accept all applicants, regardless of age or current health. In the future, seniors could choose to receive a government payment equal to the second-lowest bid in his or her geographic area. If seniors choose a lower-cost plan, they could keep the difference. But if they choose to enroll in a more expensive plan, they'll have to pay the difference between what the government provides and the actual premium. This is what President Obama refers to as "turning Medicare into a voucher program."
After 2022, the Ryan budget would limit the growth of both the traditional Medicare model and the new premium support option to roughly the rate of overall economic growth, plus one percent. This happens to be pretty much the same rate of growth as projected in the future by the Obama administration.
Romney and Ryan assume that the combination of competition and consumer cost-sharing will help hold down the cost of the program. If they are wrong, it is likely that the government payment would not keep up with the rising cost of insurance premiums. This means that the insurance plans fully subsidized by the government would offer fewer benefits than Medicare currently provides. Seniors who wanted a plan that provided all the benefits offered by Medicare today would then have to contribute some of their own money over and above the government subsidy. This is the source of the president's claim that the Romney-Ryan plan would cost seniors an additional $6,600. (The $6,600 figure is a bit dubious, actually derived from an earlier version of the Ryan budget that included a tighter cap on future spending.)
But since we cannot pay the current level of benefits in the future, seniors will either have to pay more or get less no matter who wins this election. Romney and Ryan are simply being a little more explicit—and honest—about it. Or at least they were until they started to deny it.
Politicians pandering to seniors is nothing new. But this year's Medicare dishonesty is especially dangerous. With both campaigns peddling the idea that any cuts to Medicare, now or in the future, are automatically a bad thing, we run the risk of poisoning the well for any future reform of the system. And if that is the outcome of this election, America is in deep trouble, no matter who wins in November.
***I like the Cato Institute because they don’t favor Republicans or Democrats and focus on solutions.***
Concept of Insurance
Insurance has been around since ancient times and it was used as a way to protect against catastrophic loss due to unforeseen events. Ships sinking, crop damage due to freak storms or drought, etc. It was not to cover normal expenses.
Health insurance has only been around for less than 100 years and it was designed for catastrophic illness, not colds, cuts and minor injuries. A $100 deductible in the 1930’s was a month’s salary or more. By the 1980’s, $100 was less than a day’s wages for many.
Medicare was passed in the mid 1960’s and has always cost more than it was projected to cost. With the Baby Boomers just entering the work force, there were plenty of workers to support the costs of Social Security and Medicare. Now that we Boomers are reaching retirement age, there are less workers to support our medical expenses and there is no “Trust Fund” that has held all of our “donations” (read taxes) to pay for our care.
Insurance is supposed to spread the risk among the many to help protect the losses of a few. If you started a Life Insurance Company that specialized in only insuring 80-100 year olds for a $50,000 policy, how long do you think you would stay in business? You would have to charge them more than the face value of the policy just to cover administrative expenses because you have a guaranteed future expense of $50,000 for every policy you sold. Some of those payments might come in days, weeks or years from when you sold it but certainly the majority would not survive decades. That’s why life insurance at age 20 is so much cheaper than at age 70.
Medicare has taken the group most likely to be sick or have serious ailments and pooled them together under one insurance company, the US government. They removed the less likely to get sick people, those under age 65, and now they wonder why it is insolvent? It is doomed to fail by design. It has to be changed by putting the old back in with the young to spread the risk. Competition between insurance companies has to get back into the equation so that many are competing for the business instead of one or a few.
The current strategy is about slashing payments to doctors and denying procedures to patients to save money. If you are on Medicare, don’t put off having any procedures because they may be denied soon. Also, more doctors are refusing to treat Medicare patients because they actually lose money doing so. The Medicare Administration has to cut expenses somewhere. Most medical expenses are accrued in the last few weeks of a person’s life, so as our population ages that overall expense is growing as well.
I want to thank everyone who participated in our drawing by submitting your testimonial about our office whether it was Good, Great or Ugly. I had Stephanie and Alexis put all the names in a hat but every time I drew out a winner it said “Stephanie” or “Alexis” so I had a feeling something was fishy. Just kidding, that never happened but I know they both would love an iPad!
With over 100 entries to draw from, I numbered each submission as we received them. Just before I was about to put 100 numbers in a hat and draw one out, I thought I’d check to see if there was an App for the iPad that would create random numbers. Sure enough, to my amazement, there was one. (I have only been in the “iWorld” for a few months so I am constantly amazed at what is available). So the app “# generator” chose our winner: Michelle Gutru from Denver.