This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published September 27, 2012 on Forbes.com.
DNC Chairwoman Debbie Wasserman Schultz described the Medicare reforms proposed by GOP Vice-Presidential nominee and House Budget Committee Chairman Paul Ryan (R-WI) as “literally a death trap for seniors.” White House spokesman Jay Carney told reporters that Ryan’s reforms would “change Medicare as we know it.”
But it was Obamacare that already changed Medicare as we know it, transforming it literally into a death trap for seniors. Obamacare cut Medicare by $716 billion over the next 10 years alone, mostly by slashing Medicare payments to doctors and hospitals. And that is just a down-payment on what is to come.
Ryan explained all this to last week’s AARP convention, calling it “the President’s raid on Medicare.” Ryan reported, “The first step to a stronger Medicare is to repeal Obamacare, because it represents the worst of both worlds. It weakens Medicare for today’s seniors and puts it at risk for the next generation. First, [Obamacare] funnels $716 billion out of Medicare to pay for a new entitlement we didn’t even ask for. Second, it puts 15 unelected bureaucrats in charge of Medicare’s future.”
Medicare’s Chief Actuary Rick Foster reports that by the end of this decade, Medicare will be paying less to doctors and hospitals for health care for seniors than Medicaid pays for health care for the poor. And Medicare will be falling further and further behind Medicaid each year. Ultimately, Medicare payment rates will be one-third of what will be paid by private insurance, and only half of what is paid by Medicaid.
But Medicaid does not pay enough for the poor on the program to get timely, essential health care, particularly the sickest and those most in need of the best health care. Academic studies show that the poor suffer worse health outcomes as a result, including premature death.
Under Obamacare, soon enough seniors will be lined up behind welfare mothers in trying to find doctors who will see them, and hospitals that will admit them. These cuts affect seniors already retired today, not just those years into the future.
Foster reports that even before these cuts already two-thirds of hospitals were losing money on Medicare patients. In a few short years, hospitals that serve seniors in particular will begin closing, and retirees will have increasing difficulty obtaining access to care. As Harvard University health economist Joe Newhouse explains, seniors will likely have to seek care at community health centers and safety net hospitals.
Ryan added at the AARP convention, “The President said this would actually strengthen the program. He said it would improve the program’s solvency. [But] the money wasn’t walled off to stay in Medicare. Instead, the law turned Medicare into a piggy bank for Obamacare.”
And this does not even count any further cuts that may be adopted by Obamacare’s Medicare death panel, the Independent Payment Advisory Board (IPAB). That Board will be composed of 15 unelected, appointed, Washington bureaucrats with the power to adopt still more Medicare cuts that would become effective even without the approval of Congress.
Ryan further explained, “But you know President Obama’s slogan, right? Forward. Forward into a future where seniors are denied the care they earned because a bureaucrat decided it wasn’t worth the money.” This is why the boos Ryan heard at the beginning of his speech turned into cheers by the end.
Contrary to the childish silliness of Wasserman Schulz and Carney, Ryan’s Medicare reforms, in sharp contrast, would simply extend the more modern, popular, and successful policies of Medicare Parts C and D to the old fashioned Medicare Parts A and B.
Medicare Part D is the prescription drug program. Just like Ryan’s proposed Medicare reforms, Part D provides premium support payments to seniors, which they use to purchase the private prescription drug coverage of their choice. Because of the private market competition, and incentives for seniors to choose lower cost plans, Part D costs have run 40% below projections. Compare that to Parts A and B, which by 1990 cost 10 times the original projections for that year when the program was adopted.
Medicare Part C is Medicare Advantage, under which 25% of seniors have already chosen private insurance to provide all of their Medicare coverage. Seniors believe they get a better deal through this highly popular program due to choice and competition.
Ryan would empower workers under age 55 today with the choice of a private plan competing alongside traditional Medicare when they retire in the future. All those private plans must provide at least the same benefits as Medicare today to participate. Medicare would provide these future seniors with a premium support payment they could use to pay for or offset the premium of the private health insurance they chose. That premium support payment is set by competitive bidding under rules ensuring it will be enough to pay for at least two of the competing plans providing at least the same benefits as Medicare. Or seniors even in the future could choose to stay in Medicare just like it is today.
Ryan includes extra assistance for lower income seniors empowering them with more choices, while means testing the assistance for higher income seniors like Medicare Parts B and D do today. Ryan’s Medicare would also provide higher payments to the insurers for sicker seniors. It would also assess a fine on insurers covering more low-risk seniors, and pay incentive payments to insurers covering more high-risk seniors. This would create special competition in the private market focused on serving the sickest most in need of first rate health care.
Ryan explains, “Our plan keeps the protections that have made Medicare a guaranteed promise for seniors throughout the years. It makes no changes for those in or near retirement.”
So unlike Obamacare, these reforms would involve no change for anyone retired today, or anyone anywhere near retirement. This plan was actually developed by President Clinton’s Medicare Commission, so it has bipartisan support. The legislation providing for these reforms was actually introduced in the Senate by liberal Democrat Sen. Ron Wyden of Oregon. It has been endorsed by long time liberal academic Alice Rivlin, the Godmother of the CBO, serving as its first director. Indeed, the plan was developed from an initial proposal in 1995 by two lifelong liberal scholars, Henry Aaron of the Brookings Institution, and former CBO Director Robert Reischauer.
Ryan further explained the effect of the reforms:
“Now in order to save Medicare for future generations, we propose putting 50 million seniors, not 15 unaccountable bureaucrats, in charge of their own health-care decisions. Our plan empowers future seniors to choose the coverage that works best for them from a list of plans that are required to offer at least the same level of benefits as traditional Medicare. This financial support system is designed to guarantee that seniors can always afford Medicare coverage – no exceptions. And if a senior wants to choose the traditional Medicare plan, then she will have that right. Our idea is to force insurance companies to compete against each other to better serve seniors, with more help for the poor and sick – and less help for the wealthy.”
These reforms are better for seniors than Obamacare’s Medicare most of all because they free seniors from the cuts and government health care rationing involved in Obamacare’s mangling of Medicare, by allowing them to choose private insurance paying market rates instead. Onl
y through such private insurance will seniors be able to continue to enjoy the high quality, most advanced care they have come to expect from Medicare.
Ryan concluded in his address to AARP, “You see, Medicare is going bankrupt. Everyone understands this…So the disagreement isn’t about the problem. It’s about the solution. [The President’s] top down bureaucratic cuts to Medicare just don’t work. Providers stop providing care.” Ryan’s reforms reduce future Medicare spending by no more than President Obama does through Obamacare. The difference is that the Ryan spending savings are achieved through market incentives, senior choice, and marketplace competition that has been proven to work. As Ryan added at AARP, “We’ve seen this kind of reform work in Medicare Part D – the program for prescription drugs. Choice and competition helped bring it down at 40% below cost projections.”
So the voters now have the final choice. Either turn your health care future over to an unelected, unaccountable body of 15 Washington bureaucrats as President Obama does, or retain your freedom of choice and control over your own health care in a competitive market, where patient power determines the result.
And the voters now have the final choice on Obama’s leadership, or lack thereof, as well. As Ryan argued at the AARP convention, “Time and again, this President has ducked the tough issues. He’s put his own job security over your retirement security.” Instead of addressing the entitlement crisis, President Obama has demagogued careful, rational entitlement reforms, while adding still further, unaffordable, entitlement obligations.