Critical Condition

Obama’s Medicare Cuts Will Affect Benefits

Question: If you cut funding for benefits, will you then affect persons dependent upon those benefits? Of course you will. Financing directly affects the quantity and quality of the benefits available to the beneficiaries. 

Uniquely in the case of the Medicare program, some folks are laboring mightily to obscure that simple fact; a feverish effort akin to what G. K. Chesterton once described as an elaborate exercise in the “fine art of missing the point.”

Exhibit A: The administration’s practiced defense of its $716 billion in Medicare payment cuts. In his recent debate with Representative Paul Ryan, Vice President Biden said, “We stopped overpaying insurance companies, doctors, and hospitals.” Likewise, in his first debate with Governor Romney, President Obama emphasized that Americans would be “no longer overpaying insurance companies . . . by making sure that we weren’t overpaying providers.” The messaging point: medical professionals and organizations will be cut, not your benefits.

Exhibit B: The labored disjunction between financing and benefits you find in the media. Chelsey Moran of CBS News in a September 12, 2012, report on “misleading Medicare ads,” commenting on the administration’s Medicare payment cuts, flatly declares: “The cuts, however, do not limit access to Medicare recipients, and Mr. Obama’s health care law actually gives more benefits to seniors — including new preventive care benefits and increased prescription drug coverage.” Likewise, John Presta, writing at, insisted, “The changes to Medicare does not affect Medicare recipients directly, but rather reduce payments to hospitals, health insurance plans and other providers. It eliminates a program called Medicare Advantage whose costs have gotten out of control and which will be covered by traditional Medicare at a lesser cost.” Jeffrey Bruner, a “fact-checker” writing for The Tennessean said of the $716 billion Medicare payment reductions: “It doesn’t cut any current benefits.” One finds similar declarations in many other media outlets, including Politifact and the Los Angeles Times.

But Obama’s Medicare payment cuts do directly affect Medicare benefits. Take the Medicare Advantage program, a popular system of private health plans, covering 27 percent of all seniors. Per capita spending is indeed higher in Medicare Advantage than traditional Medicare because patients get additional benefits. Cutting Medicare Advantage payments means cutting those benefits. On September 22, 2009, during the Senate Finance Committee’s consideration of the Senate version of the health-care bill, Senator Mike Crapo (R., Idaho) closely questioned Douglas Elmendorf, the director of the Congressional Budget Office (CBO). The topic was the impact of the administration’s proposed cuts on the value of benefits in the Medicare Advantage program:

Senator Crapo: It is my understanding that under your analysis the value of the additional benefits that those in Medicare Advantage receive today would end up being reduced to about $46 a month per member in 2019. And that is a little more but not too much more than just half of what it is today? 

Mr. Elmendorf: My notes say $42 of additional benefits per month in 2019, and I’m told that it’s a little less than half of what we would project under current law.

Senator Crapo: So, approximately half of the additional benefit would be lost to those current Medicare Advantage policy holders?

Mr. Elmendorf: For those who would be enrolled under current law, yes.

Senator Crapo: So, the current plan holders would recognize about half the benefits they see today under the current law?

Mr. Elmendorf: Yeah, that’s right.

Back to the media “watchdogs.” For example, Presta’s account is marred by basic inaccuracies. Notwithstanding his confident assertion that traditional Medicare covers Medicare benefits at lower cost, Medicare Advantage plans overwhelmingly bid below Medicare’s benchmark payment for standard Medicare benefits. Also, in point of fact, the president’s health law does not “eliminate” Medicare Advantage.

But it does severe damage. Medicare Advantage provides a variety of benefits that traditional Medicare does not cover, including protection from catastrophic illness. The Medicare actuary analyzed the payment cuts to Medicare Advantage in 2010 and projected that patient enrollment in the program would be cut in half by 2017. Likewise, independent analysts have confirmed Elmendorf’s initial CBO assessment. Heritage research shows that, by 2017, the value of an enrollee’s Medicare Advantage benefits will decline by an average of $3,714.

The administration’s Medicare payment cuts are also targeted to hospitals, nursing homes, home health agencies, and even hospice programs. Ms. Moran’s confident assertion that Obama’s payment cuts will not “limit access” of Medicare patients is based on precisely nothing. The truth is exactly the opposite. The Medicare actuary in his April 22, 2010, report said that the Medicare payment reductions would “jeopardize” patient access. In his addendum to the 2012 Medicare Trustees Report, the actuary reaffirmed his initial assessment that by 2019 the Medicare Part A payment cuts will cause an estimated 15 percent of these Medicare providers to operate in the red, shift their business away from Medicare, or withdraw from treating Medicare patients altogether. By 2050, the number of these Medicare providers operating in the red would climb to 40 percent under the scheduled cuts. The outlook: Fewer and fewer Medicare providers, reimbursed at bargain-basement Medicaid rates, caring for twice as many retirees, will not “guarantee” your access to Medicare benefits.   

There are lessons here. First, on Medicare especially, double check the media “fact-checkers.” Like the rest of us, they are fallible creatures, struggling with complex material. They also have strong (mostly liberal) views, even if they struggle mightily to repress them for the appearance of journalistic objectivity. Second, use common sense. Try to imagine a liberal media response to conservatives cutting subsidies for school-lunch programs, and defending it by saying they’re just reducing funding for cafeterias (the “providers”), not the kids’ soup and sandwiches.

Bottom line: Your Medicare benefits are not safe from Obamacare, unless your idea of a “guarantee” is a politician’s campaign promise. Good luck with that.   


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