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Sunday, August 19, 2012

Why "Mediscare" May Not Work This Time

Why "Mediscare" May Not Work This Time

The other day I was watching former Vermont Gov. Howard Dean on CNBC do his best to bash the Medicare reform plan authored by Paul Ryan and endorsed, with a key change, by presumptive Republican nominee Mitt Romney.

Dean botched it and the other panelists called him on it. He simply didn’t know the details.

You can almost smell the panic. Dean and many Democrats try to dismiss the Romney-Ryan plan as a “voucher,” suggesting it would send checks to seniors with a note saying, “This is for your health insurance. Good luck.”

Well, no. Today’s seniors wouldn’t be affected at all. The plan wouldn’t be implemented for 10 years. And the money wouldn’t go to individuals. It would go to providers (see below).

Last week President Barack Obama joined other Democrats in recycling the “end Medicare as we know it” line, which the left-leaning PolitiFact site labeled the “2011 lie of the year.” The original version of Ryan’s idea would have offered only private-sector policies, but the latest iteration includes traditional Medicare as one of the choices. How would that “end Medicare”?

As Yuval Levin wrote at National Review, it is only now dawning on Democrats that it is Obama — not Romney — who would cut Medicare for current seniors. The Congressional Budget Office recently estimated that Obamacare will yank $716 billion from Medicare’s planned spending over the next 10 years.

Under Romney, Medicare wouldn’t change at all during that time. Ryan’s version, adopted by the House, called for the same amount of Medicare savings as Obama, but without endorsing specific cuts — such as Obama’s planned $260 billion reduction in payments to hospitals built into the 2013-2022 budget baseline.

Medicare actuary Richard Foster has estimated that those reductions will cause one in six U.S. hospitals to become unprofitable. Democrats say they’re committed to saving Medicare, but what good is this “entitlement” if more doctors and hospitals close their doors to new Medicare patients?

Here’s how the Romney-Ryan plan would work.

Seniors would receive “premium support” they could use to purchase insurance, or choose Medicare. The money would flow to government-approved providers. Each policy choice would have to cover the full range of Medicare services.

How much would each person get in premium support? It would be based on annual competitive bidding by participating insurance companies, with the amount based on the cost of the second-least-expensive plan. Seniors who choose the cheapest plan would get a cash rebate. Those who choose the pricier plans would pay more out of pocket. Sick and low-income people would receive more support. Wealthier recipients would get less.

Suddenly, you would have something new in health care — systemwide pressure to offer more cost-effective deals. Insurance companies, eager to offer the most competitive plan under premium support, would push providers to reorganize, become more efficient and combine services. This competitive element would offer a way around Medicare’s innovation-killing, fee-for-service model that pays lousy hospitals the same as good ones.

Historically, politicians proposing entitlement reform lose in the face of hysterical attacks from the programs’ defenders. Two things are different this year. The Obama administration, not Romney, approved cuts in Medicare’s growth for today’s seniors. That means the usual “Mediscare” campaign will have diminished credibility.

And a long-running movie has been playing in Europe, showing what happens when countries refuse to get their fiscal houses in order. There’s a good chance Americans don’t want to be in that movie.

To reach E. Thomas McClanahan, call 816-234-4480 or send email to

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