Why Paul Ryan's Medicare Is So Much Better Than Obama's


ACRU Staff


May 2, 2011

This column by ACRU General Counsel and Policy Director for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published April 28, 2011 on Forbes.com.

At his Facebook town hall campaign stop in Palo Alto, California on April 20, President Barack Obama lambasted the 2012 budget proposal of House Budget Committee Chairman Paul Ryan, which ultimately leads to a balanced budget without tax increases. Obama said regarding the Ryan budget plan, “No I don’t think it is particularly courageous. Because…nothing is easier than solving a problem on the backs of people who are poor or people who are powerless or don’t have a lobbyist or don’t have clout.”

But that is restrained compared to new Democrat National Committee Chairwoman Debbie Wasserman Schultz, who said regarding the Medicare reforms in Ryan’s budget plan, “No longer would Medicare be a guarantee of health insurance coverage. Instead Medicare would become little more than a discount card. This plan would literally be a death trap for seniors.”

Of course it was President Obama, Debbie Wasserman Schultz, and Congressional Democrats who already set the death trap for seniors in forcing through Obamacare last year. Ryan’s Medicare reforms would be so much better for seniors than Medicare under Obamacare, and President Obama’s further schemes for the program.

The 2010 Financial Statement of the United States Government, published by the Treasury Department last December, discloses repeatedly in several tables of data that the total of future cuts in payments to doctors and hospitals under Medicare as provided in current law due to Obamacare and President Obama’s Medicare reimbursement policies is $15 trillion!

Indeed, the Treasury report effectively touts the draconian Medicare cuts due to Obamacare, stating, “The 2010 projection is lower than the 2009 projection in every year of the projection period almost entirely as a result of the Affordable Care Act (ACA), which is projected to significantly lower Medicare spending and raise receipts.” These Medicare cuts were the foundation for CBO finding that Obamacare would actually reduce the deficit, despite adopting or expanding three entitlement programs.

That $15 trillion is such a big number that it is hard to understand what it means. But the government’s own actuaries and accountants have been explaining that as well.

Medicare’s Chief Actuary reports that even before these cuts already two-thirds of hospitals were losing money on Medicare patients. With $15 trillion in future cuts, health providers will either have to withdraw from serving Medicare patients, or eventually go into bankruptcy.

The unworkable, draconian effect of these Medicare cuts is why the U.S. Government Accountability Office issued a disclaimer of opinion on the Statement of Social Insurance component of the federal government’s 2010 Financial Statement, saying, “Unless providers could reduce their cost per service correspondingly, through productivity improvements, or other steps, they would eventually become unwilling or unable to treat Medicare beneficiaries.”

Unlike Ryan’s careful Medicare reforms, these draconian, unworkable, Obamacare cuts to Medicare apply to seniors already retired today. Ryan exempts from any change all seniors retired today and everyone over age 55. On these grounds alone, Ryan’s Medicare is better for today’s seniors than Medicare under Obamacare.

For future, new retirees starting in 2022, under Ryan’s reforms seniors will enjoy the freedom to choose private health insurance coverage from among a menu of guaranteed, government approved and regulated plans. Each senior would enjoy control over $15,000 from Medicare for the year to start, to devote to the private health insurance of their choice.

That amount would also grow each year under an index of price growth. Yes, more well off seniors may pay more over time for their coverage than under the current system. That is where the cost savings come from. But it is not a matter over which reasonable people can differ that taxpayers cannot afford the current Medicare system, with its unfunded liabilities rapidly growing towards $100 trillion.

In addition, the Ryan plan would provide more funding each year for lower income seniors to protect them from rising costs. More would be paid as well for those who were sicker so that plans could finance their more expensive care. So President Obama is quite wrong when he says that Ryan would balance the budget on the backs of the poor, and is abusing the debate rather than participating in it.

Consequently, under Ryan’s reforms, for future retirees after 2022, all of Medicare would be like the popular Medicare Advantage program, under which one fourth of seniors have already chosen a private insurer for superior Medicare coverage. It would be the same as well as the health insurance system that federal employees enjoy, where workers each choose among a menu of private health insurance alternatives. For Schultz to call this “little more than a discount card” is also unreasoned and abusive.

Ryan’s brilliant plan also harnesses the competition and innovation of the free market to provide better coverage for seniors at lower cost. Private insurers will compete to find ways to reduce costs for seniors, and innovate with different benefits to better serve and attract customers. Seniors would be free to choose Health Savings Accounts for their coverage, which would maximize patient power and control over their own health care, with powerful market incentives to control and reduce costs.

In the Medicare Part D prescription drug program, precisely these market mechanisms were proven to reduce health costs 40% below projections, while Medicare Advantage shows how market competition leads to better benefits for seniors in the real world. These are the reasons why Betsy McCaughey wrote in the April 20 Investors Business Daily, “The shame is that Ryan’s proposal for guaranteed premium support wouldn’t start until 2022.”

So President Obama was again quite wrong when he told the Facebook town hall audience regarding Ryan and the Republicans, “So they don’t really want to make the health care system more efficient and cheaper. What they want to do is push the costs of health care inflation on you.” Ryan’s Medicare reforms involve the only proven cost control mechanisms, other than the government rationing and outright denial of care to the critically ill involved in Obamacare.

Indeed, in his national deficit speech on April 13, President Obama called for even more of that for seniors on Medicare. He proposed in addition to his Obamacare Medicare cuts to “slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.” That will involve an additional $500 billion in Medicare cuts for today’s seniors by 2023, “and an additional one trillion dollars in the decade after that,” in Obama’s own words.

But President Obama still wasn’t done thrashing health care for America’s seniors. If those cuts were not enough to reduce the deficit sufficiently, Obama proposed to give even more power to the unelected, unaccountable, Washington bureaucrats on his Commission to cut Medicare further, by undemocratic automatic sequester that bypasses Congress entirely. Rich Lowry explained this Obama Medicare Commission in the April 19 New York Post, saying, “They would have more power over Medicare than the average member of Congress, whose only credential – embarrassingly enough – is being a duly-elected representative of the people under the Constitution
of the United States.”

Obama’s idea that seniors would be better off with a faraway Washington bureaucracy, outside of democratic control, “looking at all the evidence” and deciding what health care would work best for them, rather than their own doctors and hospitals that seniors themselves have chosen, is dangerously misguided. As the Wall Street Journal editorialized on April 20, “As a practical matter, the more likely outcome is the political rationing of care for the elderly, as now occurs in Britain, or else the board will drive prices so low that many doctors and hospitals drop out of Medicare.”

Seniors would do far better each choosing their own health insurers themselves in a competitive marketplace, which is the system that has generated the highest standard of living in the world in America for all goods and services. As the Journal further explained, “Messrs. Ryan and Obama agree that Medicare spending must decline, and significantly. The difference is that Mr. Ryan would let seniors decide which private Medicare-financed insurance policies to buy based on their own needs, while Mr. Obama wants Americans to accept the commands of 15 political appointees who will never stand for election.”

Even President Obama was forced to admit before the Facebook audience that the Ryan Medicare plan “will control costs, except if you get sick and the policy that you bought doesn’t cover what you’ve got….If you’re somebody who’s older and has a pre-existing condition, insurance companies won’t take you.” But that’s not how the private insurance companies under Medicare Advantage work. Nor is that true of the private Medigap plans, whose sellers include AARP, central players in Obama’s own political machine.

None of this should actually be a surprise. Because Ryan’s reforms of Medicaid would be better for the poor than Medicaid under Obamacare as well, despite Obama’s unthinking rhetoric about balancing the budget on the backs of the poor, just as the 1996 Republican led welfare reforms benefited both the poor and taxpayers.



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