Quick Thought on Misconceptions Regarding the Romney Medicare Proposal

by Reihan Salam

Recently, I noticed the following characterization of Mitt Romney’s Medicare proposal:

The first is Romney’s: huge defense spending increases and lower tax revenues than the Bush regime, accompanied by turning Medicare into a voluntary voucher scheme, where you will henceforth be guaranteed only the healthcare your voucher affords.

Robert Pear of the New York Times offered a notably different characterization:

Another crucial question is how the federal contribution to private plans would be calculated, updated and increased from year to year. If the government starts with the current level of Medicare spending and increases it to keep pace with the Consumer Price Index or the size of the economy, it would cover a smaller and smaller share of medical costs, which have historically grown faster than those benchmarks.

Under his proposal, Mr. Romney says, the government contribution would be based on competitive bidding. An insurer’s bid would reflect its estimate of the cost of providing a standard package of benefits to a typical beneficiary. Mr. Romney says tax increases are “off the table” as a way to deal with Medicare’s financial problems. He would gradually increase the eligibility age for Medicare, now 65, by one month a year. In the long run, he says, the eligibility age should rise with life expectancy. [Emphasis added]

Pear could have written this a bit more clearly, but the government contribution is based on the cost of providing a standard package of benefits to a typical beneficiary, as determined through a competitive bidding process. Adjustments would be made based on age and health status. 

So what exactly does it mean to say that beneficiaries “will henceforth be guaranteed only the healthcare your voucher affords”? In this case, it means that the amount of the government contribution will be explicitly pegged to amount of healthcare one receives under the standard Medicare package that exists today. Yuval Levin has described the logic of this approach at length, and we’ve discussed it in this space as well. 

One huge problem, however, is that the Romney campaign hasn’t been sufficiently proactive in clarifying misconceptions about the former Massachusetts governor’s Medicare proposal, as evidenced by a Google search. To be sure, there Romney proposal isn’t as detailed as an actual legislative proposal would have to be. But we do have a good sense of its broad outline.