Medicare is quickly turning into a big issue for the 2012 elections. Democrats are charging that the Republicans are trying to “end Medicare as we know it.” For their part, Republicans are accusing Democrats of bankrupting the plan and using “death panels” of bureaucrats to ration costs. As always, the truth lies somewhere in the middle.
John Cogan laid out the problem in the Wall St. Journal when he described how future retired couples will soon be receiving a million dollars in government benefits. Cogan estimates that couples will receive $550,000 in Social Security benefits and $450,000 in medical benefits through Medicare. Even though they have been paying into both programs throughout their working lives, there is no money in the trust fund for either program because the government has always used current contributions to fund current benefits. This is known as “pay-as-you-go.”
Medicare primarily covers people over 65 or who have disabilities and, in Georgia, nine percent of the population is covered by Medicare according to the Kaiser Family Foundation. In 2012 health care, including Medicare and Medicaid, makes up twenty percent of Georgia’s budget according to the Georgia Budget and Policy Institute. The only budget sector larger than health care is education.
As the population ages, there will be fewer younger workers paying the million dollar benefits of the retirees even as Medicare’s costs increase due to more seniors receiving benefits as Baby Boomers retire. This is clearly an unsustainable situation. As Cogan notes, it is made worse by the fact that Medicare recipients are paying a smaller share of their medical costs than in the past.
This week, the Medicare trustees predicted that Medicare would be insolvent by 2024. That is considerably sooner than last year’s estimate of 2029, but better than the 2017 predicted a few years earlier. The 2010 report notes that the Affordable Care Act (“Obamacare”) reduced Medicare payment updates. In other words, the government is not going to adjust its payments to market rates. Medicare reimbursement rates are already so low and the paperwork so time consuming that many doctors no longer accept Medicare patients. This problem will be exacerbated in the future since the ACA cuts Medicare payment rates by 30% from its already low levels according to Medicare’s chief actuary. Eventually Medicare’s reimbursement rate will be one-third of what private insurance pays and only half of what Medicaid pays.
The ACA also expands the roles of both Medicare and Medicaid, the sister program to Medicare that covers the poor. Medicaid is being opened to thousands of new enrollees while Medicare beneficiaries are being given expanded coverage, including the elimination of cost-sharing for preventive services and the so-called “doughnut hole.” Providing more coverage to thousands of new beneficiaries will clearly exert an upward pressure on the costs of the Medicare and Medicaid programs which together with the Children’s Health Insurance Program already account for 21% of the federal budget according to the Center on Budget and Policy Priorities.
While the Democrats accuse Republicans of cutting Medicare, the Wall St. Journal reports that the Democrats have already made heavy cuts to the program. In addition to slowing payment updates, the ACA cut $4.95 trillion from Medicare over twenty years. There are additional cuts to the Medicare Advantage plan that allows seniors to choose a private health plan rather than the traditional government Medicare plan. The cuts in Medicare provided the basis for the Congressional Budget Office to claim that the new health care entitlement was revenue-neutral. Federal money was simply moved from one budget item to another to give the illusion of providing coverage at no cost.
The ACA also contains a provision that creates an Independent Payment Advisory Board for Medicare. Again the Wall St. Journal explains that the board’s role is to keep Medicare’s costs below a certain level. The only real tool the board currently has to do this is to enact price controls and pay less for care than the than it already does under Medicare’s below-market-rate reimbursement levels. The Journal article notes, “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.” Thus the stage is set for the IPAB to become a real-life “death panel.”
For their part, the Republicans preserved President Obama’s Medicare cuts when they drafted their 2012 federal budget. The Republicans use the cuts to extend the life of Medicare, however, rather than funding the ACA’s insurance subsidies. Paul Lindsay of the National Republican Congressional Committee said, "The fact is that Democrats robbed Medicare in order to pay for their massive government health care takeover which is a huge contrast to the House Republican plan to take that savings and use it to strengthen that program for today's seniors."
To be continued in "The truth about Medicare part B: The Republican plan"
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