The Medicare Distortions
The president and his defenders know the truth won’t work, so dishonesty it is.

Rep. Paul Ryan (R., Wis.) discusses Medicare and the federal budget in 2011.


James C. Capretta

In the last three weeks, President Obama and his apologists have been incredulous that the Romney-Ryan campaign would have the audacity to attack them over Medicare. How dare they? That’s what we do, not them!

As my colleague Yuval Levin has already explained, these Democrats don’t seem to realize that Obamacare changed everything. The new health-care law cut Medicare by $716 billion over a decade to partially finance the cost of expanding entitlement benefits for other Americans. Put simply, Medicare was squeezed to grease the way for the president’s main first-term ambition — enactment of a government takeover of American health care. That’s a fact, and it’s one that doesn’t sit well with many voters, especially seniors. Romney and Ryan are helpfully reminding the electorate about this matter, as they should.

Those coming to the president’s aid in this debate — and the usual suspects have certainly stepped up to the plate, including Paul Krugman, Peter Orszag, Laura D’Andrea Tyson, and most recently former president Bill Clinton — have offered up a number of different arguments on the president’s behalf, some based on defending his record, and others aimed at changing the subject to the supposed defects of the Romney-Ryan Medicare reform plan. All of these arguments have been thoroughly rebutted elsewhere (see especially Grace-Marie Turner debunking Clinton’s claims and Senator Jim DeMint and his staff at the Joint Economic Committee doing likewise). But because the Democratic propaganda machine is now in high gear, and will remain so all the way to November 6, it is important to confront these arguments often to prevent them from becoming conventional wisdom.

Defenders of the president’s record generally begin by admitting that, well, yes, the Medicare cuts in Obamacare do total $716 billion over ten years. But they then say that these cuts won’t do any harm because they come at the expense of insurance companies and waste in the health-care sector, not benefits for seniors. This is demonstrably false. One of the largest cuts in Obamacare is in the payments made to Medicare Advantage plans. Today, some 13 million seniors are signed up with these plans. Very often, these are seniors with modest incomes who are attracted to the better coverage provided by Medicare Advantage, including reduced cost-sharing, without the expense of a Medigap plan. The Medicare trustees expect that the Obamacare cuts will drive 4 million seniors out of Medicare Advantage by 2018. This is a direct violation of the president’s tattered promise that, under Obamacare, Americans who like their current insurance plans would get to keep them.

The cuts to Medicare Advantage will drive up costs for all 13 million enrollees. They will have fewer benefits covered by their plans, and their premiums and cost-sharing will go up in direct proportion to the payment rates’ going down. That’s a fact. Indeed, it’s a direct consequence of the Medicare law, which requires the insurance plans to pay out in benefits any amounts that they receive from Medicare that are above the bids submitted by the plans for covering basic Medicare. In a study I co-authored with Robert Book, we estimated that the average reduction in benefits for seniors enrolled in Medicare Advantage plans would reach $3,700 in 2017. In addition to providing the average cut by state, that study also calculated the average cut by county and congressional district.

Obamacare also imposes large cuts in reimbursement rates for hospitals, nursing homes, home-health-care agencies, and other providers of medical services. These cuts will hinder access to care for millions of seniors. Medicare’s chief actuary has repeatedly warned that these cuts are not sustainable, because they would drive so many hospitals and other institutions out of the program. According to the latest Medicare trustees’ report, the cuts in Medicare are so deep that 15 percent of hospitals would be forced to stop admitting Medicare patients by the end of the decade, and 25 percent would be in that position by 2030. The idea that these cuts in Medicare payments will not harm care for seniors does not stand up to the slightest scrutiny.

Having failed to make a persuasive case that these cuts are painless, the president’s apologists next assert that Paul Ryan also supports these cuts, by virtue of the fact that his budget plan did not undo the savings associated with them. And it is certainly true that the Ryan budget’s numbers for Medicare did not assume the undoing of the cuts, largely because the committee was unable to find enough offsetting cuts elsewhere in the budget. But that does not mean the Ryan budget endorsed the Medicare cuts in Obamacare. Far from it. The Ryan budget allowed for substituting sensible savings in Medicare for the blunt and irrational cuts contained in Obamacare.

More importantly, the Ryan budget did not use the Medicare savings to pay for a new entitlement elsewhere in the federal budget. Instead, the savings were used exclusively to replenish the Medicare trust fund (and thereby reduce the federal budget deficit, too).

But even these points are now no longer relevant because Governor Romney has made it clear that his budget will undo these cuts in their entirety. As president and vice president, Romney and Ryan will have much greater ability to find other spending cuts throughout the rest of the federal budget that are more sensible than the Obamacare cuts in Medicare.

In an attempt to change the subject from these uncomfortable facts, the president’s defenders have also regurgitated the tired and empty attacks on Paul Ryan’s plan to reform Medicare the right way.