Medicare Flimflammery

by Avik Roy

I’m a little late in doing so, but I wanted to comment briefly on the two Medicare-related controversies of the past few weeks: the 2010 Medicare Trustees report, and the contretemps between Pauls Krugman and Ryan.

Most right-of-center commentary on the Trustees report has focused on the essential dishonesty of the White House’s take: the administration has taken its Medicare cuts, which were used to claim that PPACA was deficit-neutral, and is now using the same cuts to extend Medicare’s solvency by twelve years. The New York Times editorial on the subject was strikingly unmoored from the clear facts of the case.

But the consequences of the Trustees report go far beyond those of political integrity. By pretending that Medicare’s solvency has been extended, when the program is in deep trouble, the Trustees have undermined the case for genuine Medicare reform. Historically, momentum for Medicare reform has been strongest when the program has been close to bankruptcy. This was true, for example, in 1997, when the Trustees projected that the Medicare Part A Trust Fund would be broke by 2001. Congress and President Clinton came together to enact changes that extended the solvency of the program.

This time around, the Trustees are arguing that Obamacare magically pushes back Medicare’s bankruptcy to 2029 from 2017. At a time when the baby boomers are starting to retire, dramatically increasing the urgency of Medicare reform, the Trustees are in effect saying “everything’s fine, nothing to see here, folks.” To me, this is the most irresponsible aspect of the Trustees’ behavior.

Stanford Ross and David Walker had an informative op-ed in the Times last weekend in which they pointed out that the Trustees report, for the third year in a row, lacked the contribution of independent trustees. It isn’t surprising, then, that Medicare actuary Richard Foster wrote that “the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range…or the long range.”

On the Krugman-Ryan flimflam flapdoodle: pointing out the inaccuracies of a Paul Krugman op-ed is a full-time job. But it was particularly disappointing to see Krugman slander the Ryan Roadmap as “dismantling Medicare as we know it.” This claim was endorsed by other, more fair-minded liberal columnists. For example, Ezra Klein wrote,

There’s nothing false about the claim that Ryan’s plan would end Medicare as we know it. In fact, it’s unambiguously true…Under Ryan’s plan, senior citizens would be given vouchers that they could use toward private insurance…Ryan should argue that this is a good thing, rather than try to obscure what he’s attempting to do.

Vouchers have been a part of Medicare since the establishment of Medicare Part C in 1982 — that is to say, for nearly two-thirds of Medicare’s history. Today, one-quarter of Medicare enrollees are enrolled in Medicare Part C. Part C plans are disadvantaged relative to traditional, government-run Medicare plans, and eliminating those disadvantages is a separate problem (see my next post for more on this). But to say that Ryan is “dismantling” or “ending” Medicare is simply not true: indeed, he is trying to restore the program’s solvency, a project to which Paul Krugman has contributed exactly zero.

Let’s be honest: these words, “dismantling” and “ending,” are scare words, meant to deceive the elderly into thinking that those meanie Republicans are out to take away their benefits. Ryan’s proposal is designed to affect Medicare for people who are more than ten years away from retirement; that is to say, not one current nor imminent retiree will see a change to his benefits under the Ryan plan.

I don’t expect more from Krugman, but Klein has previously been quite fair to Rep. Ryan. I hope that Klein returns to his earlier form, and that he encourages his own side to come up with plans as constructive as the Roadmap.

Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co., and blogs on health-care policy at The Apothecary.