The Romney-Ryan Plan for Medicare: What It Means for Seniors

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Mary Altaffer / AP

Republican vice-presidential candidate Paul Ryan gestures at a PowerPoint presentation while speaking during a campaign event at Youngstown State University in Ohio on Oct. 13, 2012

The nonpartisan Kaiser Family Foundation (KFF) has come out with a new report showing that an overhaul of Medicare, of the sort the Romney-Ryan campaign favors, might increase costs for seniors.

The Obama campaign wasted no time in seizing on the report as proof that the GOP candidate’s “irresponsible” plan to turn Medicare into a voucher system would have “devastating consequences” for seniors. A spokeswoman for the Romney campaign fired back a statement saying the plan would include “no increase in out-of-pocket costs from today’s Medicare.” The Romney camp also cited a disclaimer in the report that said it should not be taken as an analysis of any particular proposal, including the Romney-Ryan plan for how to reform Medicare.

So what to believe?

First, it’s worth noting that KFF and the authors of the report are top notch when it comes to analyzing health care policy in a nonpartisan way. Beyond that, here’s what you need to know.

For the Romney campaign to imply that the KFF analysis isn’t based on Medicare-reform ideas put forth by the GOP ticket isn’t honest. One basis for the report is Paul Ryan’s 2013 federal budget proposal and the plan to reform Medicare that Ryan put out with Democratic Senator Ron Wyden. Romney has endorsed this approach, and here’s how it works: seniors would receive premium support — vouchers to buy private health insurance — from the federal government based on the cost of Medicare in their particular community or the second lowest private health insurance plan available that is actuarially equivalent to Medicare, whichever is cheaper. Seniors who choose to sign up for one of these options would pay the same premiums for Medicare they pay now. Seniors who choose more expensive plans, including traditional Medicare in some markets, would pay higher premiums.

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According to KFF, 59% of seniors would have to pay higher premiums in order to receive the same Medicare plans they now enjoy, with the average premium increase coming in at $107 per month. Seniors living in areas with particularly expensive health care, like Miami, might have to pay much higher premiums to get the coverage they have today. Medicare would remain an option for seniors, as Romney and Ryan often say, but in order to choose this option, some seniors would have to pay more.

The problem with this analysis is that it ignores the whole point of the Romney-Ryan approach, which is to encourage seniors to choose health insurance that’s cheaper and which, they say, would be just as good and more widely available thanks to more competition. KFF includes charts on how many seniors would pay more if some switched to lower-cost options, but it doesn’t analyze how much cheaper overall options might be with more competition in the marketplace.

And the caveats in the KFF report don’t end at the disclaimer cited by the Romney campaign. The analysis is based on a scenario in which a premium-support plan for Medicare was fully implemented for all Medicare beneficiaries in 2010, which Romney never called for. (He favors no changes for people who are 55 and older right now.) The report doesn’t consider a whole host of factors that could affect how a premium-support model might change health care costs for seniors. It doesn’t analyze how the pool of seniors in traditional Medicare might change if private plans scoop up the youngest and healthiest seniors. The study also only looks at premiums and doesn’t factor in co-pays and other out-of-pocket spending that could affect how costs could change for seniors.

Here’s the bottom line: Medicare, which covers about 50 million people, has huge leverage to negotiate prices. It also has lower administrative costs than private insurance companies. The downside of Medicare is that its costs are unlimited. Three-quarters of seniors currently have traditional Medicare, which pays providers fees for each service it provides. This spending can be somewhat unpredictable and is tied to health care costs that are increasing at unsustainable rates. Unless overall U.S. health care costs grow at a much slower rate, there’s no way for the government to spend substantially less on the existing Medicare program without asking seniors to shoulder more of the burden. President Obama knows this, which is why the Affordable Care Act includes a trigger for a board to suggest cuts to providers if Medicare spending exceeds certain targets.

Ryan knows it too. That’s why he has said that Medicare is in trouble precisely because Medicare beneficiaries are too disconnected from the costs of their care. “When we pay directly for something and we know how much it costs, we have a strong incentive to demand the best value. In health care, we don’t,” he has said. It may be that asking seniors to become more involved in paying for their health care will cause them to demand cheaper prices. But if they can’t or don’t, the government might spend less on Medicare, but the costs won’t just evaporate. Seniors could find themselves on the hook for more of their health care costs under a premium-support model.

92 comments
Carly_EngageAmerica
Carly_EngageAmerica

Congress and the

American people will have to make a choice. Medicare’s current course is

disastrous, for seniors and taxpayers alike. There are finite resources

available to reverse the current course, but the faster that policymakers act,

the less difficult the task will be.

Talendria
Talendria

This article seems to offer a balanced analysis, but it's not very reassuring no matter how you look at it.  My parents are already suffering from the ACA implementation.  Their supplemental health insurance has been cancelled.  If they want to buy a different supplemental plan (which they do), they'll have to pay more.  Potentially a lot more since my mother is a breast cancer survivor and my dad has high cholesterol.  It sounds like neither candidate is offering assurances about the level of coverage, the cost of coverage, or the financial solvency of their plan.  So it seems like we the voters can only base our choice on whether we trust the government or private industry to manage our health care and budget more carefully.  It seems to me that with an issue as important as this one, both candidates could've taken the trouble to write case studies showing exactly how their plan would impact people at different income levels and with various health histories.  Fixed income means if the numbers don't add up, you starve.

kms123
kms123

I think if Romney won the election next month both Medicare and Social Security would be dismantled as per the GOP agenda. That scares seniors like me who are still working (and contributing to both programs) but would need these programs when they decide to retire.

WilliamBarnes
WilliamBarnes

This COULD be the beginning of the "near" future, if films cansometimes be visionary foresights to our future. Did any of you watch "Logan's Run", where citizens get terminally vaporized an the age of 30, or maybe even Soylent Green, where, though we get to live a bit longer, get legally euthanisized "murdered", ground, processed and turned into "high protein plankton". Well, for almost all of us. Naturally, if Romney wins, and this "kill off the old people"philosophy gets hold, HE AND HIS CRONIES WILL NOT BE ON THE MENU. I HATE REPUBLICANS FOR THE WAR MONGERING SELFISH LIARS THEY ARE. LONG LIVE DEMOCRACY! LONG LIVE DEMOCRATS! DOWN WITH REPUBLICANS AND THEIR "TURN EVERYTHING INTO MONEY AS FAST AS YOU CAN AND HIDE THE MONEY - WAY OF LIFE". 

WilliamBarnes
WilliamBarnes

I forgot: kill off the POOR old people, not the rich ones with all their money in offshore fiscal paradises.

Stuart Zechman
Stuart Zechman

As far as I can tell from reading these proposals (including the old and new Progressive Policy Institute and Brookings papers), your description is substantially accurate.

radsenior
radsenior

TEA-Republican's stinking voucher program will sink Social Security and Medicare, period. all the maneuvering is just smoke and mirrors!

Brandt Hardin
Brandt Hardin

Republicans would have us believe Obamacare is bad for America.  Is there any doubt that a Romney administration would favor the rich and increase the income gap in our country while leaving millions of our citizens uninsured and unprotected?  Mitt is a pariah in Mormon Clothing and will stop at nothing to expand an empire of greed for the rich in this country.  Can his sacred Mormon underwear gain him enough donations to buy this election?  See for yourself as Mitt dons his tighty-whities sent from the Good Lord Himself at http://dregstudiosart.blogspot...