Romney-Ryan Medicare plan vs. Obama Medicare plan: Who's telling the truth?

They both are and they both aren’t.

I’ve never seen a week in health care policy like last week. The media reports have to be in the thousands, all trying to make sense of the furious debate between Obama and Romney over Medicare.

As someone who has studied this issue for more than 20 years, it has also been more than exasperating for me to watch each side trade claims and for the press to try to make sense of it.

This blog post is quite long because the subject matter is complicated. If you want to cut to the chase, see my conclusion and summary at the end of this post.

Allow me to list a few of the questions people are asking and give you my take on it.

Will current seniors suffer under the Romney-Ryan Medicare plan?


Let me start by saying something that will likely surprise you. If I could be king for a day, I would prohibit anyone over the age of 60 from voting in this election. This election is really about the future and the big decisions on the table are about the long-term government spending and entitlement issues that should be made by younger voters who will have to pay for them and will benefit or suffer from them.

Those in their 60s and older are almost surely going to cruise to the end with the benefits they now have.

Whether its Obama’s Medicare plan, based heavily on the Medicare cost control board imbedded in his health reform bill (which doesn’t begin to impact hospital costs until 2020), or the Romney/Ryan Medicare premium support plan (that has no effect on anyone now over the age of 55), today’s seniors' benefits are insulated from this issue.

Medicare is already evolving. Both Democrats and Republicans want to see changes in the way Medicare pays doctors and hospitals (more for value and less for the volume of services) and that could impact the way providers treat people in the coming years. But in this sense, both sides present seniors with a similar future.

If you are over age 70, there is virtually no chance there will be any significant changes to Medicare benefits in your lifetime. Even if you are over 60, the chances that there will be any major structural changes to Medicare benefits as long as you are around are quite small. As bad off as Medicare is, both Republicans and Democrats have shown no inclination to fool with existing benefits for people now retired or close to retirement—this is about the future of Medicare for people now in their 20s, 30s, 40s, and 50s.

It is ironic that it is today’s seniors, who vote in larger numbers than the people in their 20s and 30s, that seem to be driving this as an election-year issue out of fear of what will happen to their benefits!

I found it fascinating to see a poll recently that said younger people are more supportive of the Romney/Ryan plan than today’s seniors! Apparently, the younger voters don’t think they are going to get anything like their father’s Medicare plan anyway (which is correct) and are happy to hear that Romney and Ryan have a plan to preserve something for them.

While of course I can't tell seniors not to vote, I would ask them to vote with only the best interests of their children and grandchildren in mind.

Can Medicare, as we know it be preserved for the next generation?

Absolutely not.

Whether we should preserve it for current seniors or not, it seems certain we will. Again, Obama’s cost board doesn’t start doing the heavy lifting until 2020. Romney and Ryan’s Medicare plan wouldn’t begin for ten years and only for those retiring at that time.

I will tell you that Romney and Ryan have taken the more courageous political stand—they say Medicare can’t be preserved and big fixes have to happen. Now, that doesn’t necessarily mean they have the right policy answer only that they are willing to face the problem.

Obama and the Democrats, by saying Romney-Ryan “would end Medicare as we know it,” have taken the safer and more conventional political route by not fiddling with the “third rail” of American politics that are the entitlement programs.

But Obama and the Democrats are being misleading when they say they can preserve Medicare “as we know it.” Yes, Democrats could preserve the traditional structure of Medicare—a defined benefit entitlement guarantee built around a universal pool everyone, rich and poor, is in. But to do that, they need to tell us just what benefit cuts, structural changes, and/or tax increases they are willing to implement. There is no way the current Medicare plan can be sustained without huge changes.

Obama and the Democrats are being disingenuous by trying to use the Romney-Ryan plan to scare voters without facing this tough issue in a direct way themselves.

The Republicans have been harping since the 2010 elections on the $700 billion cuts in Medicare that Obama and the Democrats used to help pay for the Affordable Care Act but doesn’t Ryan have the same Medicare cuts in his budget plan?


Obama and the Democrats did cut $500 billion between 2010 and 2019 from what Medicare would have paid during that time when they passed the new health law in 2010 (those same cuts now add up to $700 billion between 2013 and 2022). It is important to note that these are not absolute cuts from the program but rather the slowing of Medicare growth. Before the cuts, Medicare was predicted to grow at an annual rate of 6.8% a year—after the cuts it is projected to grow at an annual rate of 5.6% during the same period.

So, while $700 billion is a lot of money, the Medicare cuts only amount to a very minor reduction in what providers get paid over the ten-year period—it does not directly reduce senior benefits or increase premiums. In fact, doctors--who face the risk of big cuts separate from the new health law--had no cuts. Hospitals agreed to modest cuts in exchange for seeing more patients with insurance. Medicare Advantage plans will see reductions in the payments they were getting that were already in excess of what Medicare pays itself for the same patients.

The Obama Medicare cuts were never going to materially hurt Medicare, as we know it.

Democrats also played games by double counting those cuts when they were allowed, under arcane federal budget rules, to both reduce the price tag for the new health law and extend the solvency of the Medicare program.

And, it is true that Ryan did assume those same cuts would continue over the life of his latest budget fix—which passed the House on a party-line vote. That is hypocritical of Republicans who blasted these same cuts in the 2010 elections. But Ryan supporters also argue that while he would continue those cuts, he would only count them once. Because he would repeal the Affordable Care Act, those cuts in future spending would be used solely to extend the life of the Medicare trust fund.

Ryan makes a credible point regarding how he would use the money. But, if Obama is hurting Medicare by reducing Medicare’s 10-year growth rate from 6.8% per year to 5.6% per year, then so is Ryan.

It is also important to remember that Ryan’s big premium support Medicare reforms would not begin for ten years. So these Medicare spending reductions, between now and then, have nothing to do with his “premium support” proposals.

Romney has now said that if he is elected he will reverse these Medicare cuts. OK, but he is going to have to find another $700 billion in federal spending cuts to replace them if he is going to hit the deficit reduction targets and Medicare trust fund goals in the House budget bill.

Both sides are making the same cuts and have really been playing games with this one.

Republicans are using the success of the Medicare Prescription Drug Plan as evidence that the market can control health care costs. Is this evidence on their side?

Not in any kind of clear cut way.

It is true that the Medicare drug plan costs are coming in way below what the Congressional Budget Office (CBO) said they would be in when the new benefit was created in 2003.

However, all drug costs (employer plans, Medicaid, traditional Medicare) have been coming in much lower that were expected. At the time the Medicare drug plan passed, prescription drug costs were exploding. Since then a number of factors, such as far greater use of generic drugs and fewer new expensive drugs in the pipeline, have dramatically reduced drug spending and the Medicare drug plan has benefited.

Medicare Part D costs are also coming in lower than expected because enrollment has been less than originally expected.

So, the evidence is very mixed and a lot more complicated making it a questionable piece of evidence in this debate.

Romney and Ryan say their plan will include the traditional Medicare plan as one of the options. But critics say there is a good chance Medicare will end up with the sickest seniors, while rich people are able to buy the private plans, thereby destroying the Medicare program everyone has enjoyed. Is this true?

Probably not.

The Romney/Ryan Medicare plan promises to continue the level of Medicare premium support seniors have today for the purchase of the second lowest cost plan in your market—be it private or traditional Medicare. All plans would have to provide at least the Medicare benefits you get today and the only cost to you would be what we know now as the Part B Premium. If a senior buys the lowest cost plan, there would actually be a cash refund for the difference. If a senior buys a plan costing more then the second lowest cost plan, the difference would be paid for out of the senior’s pocket.

Under the more detailed Wyden-Ryan Medicare plan with its better consumer protections, if a health plan gets a disproportionate number of the sick people, it gets more money to offset its costs—a device know as risk adjustment—that protects Medicare or any other plan. So, it is not clear to me how, if the traditional Medicare plan got sicker people, it would make it more expensive for consumers after these inter-plan adjustments.

Continued on next page.