Jeff Gelles: Consumer 12.0: The truth about the safety net

David Grande, a Penn medicine professor, fears privatizing Medicare would slowly erode affordable care.
David Grande, a Penn medicine professor, fears privatizing Medicare would slowly erode affordable care.
Posted: August 19, 2012

Obama wants to steal $716 billion from Medicare! Wait, Paul Ryan wants to steal the same $716 billion!

At the risk of leaping into partisan crossfire, I'm going to take a shot of my own today: directly at some of the more deceptive rhetoric flooding the airwaves on this topic since last weekend's announcement of U.S. Rep. Paul Ryan as Mitt Romney's GOP running mate.

One plain truth: We face a real fork in the road for the future of Medicare and other elements of America's safety net. Since the Great Depression and New Deal, there's probably never been a starker split in our major parties' governing philosophies.

For that bit of clarity, we owe a debt to Paul Ryan - or at least to the old Paul Ryan, the one who liked to warn that President Obama and the Patient Protection and Affordable Care Act - a.k.a., Obamacare - were leading us down a path to "a European-style welfare state."

Ryan, too focused on tax cuts to qualify as a genuine fiscal conservative, has at least been forthright about wanting to dramatically shrink government - including his plan to remake Medicare into a system in which seniors would get vouchers to buy private insurance coverage. Basically, it's a plan that would rely on competition to control costs and shift the burden of failure onto individual seniors.

Romney's campaign has embraced the same vision. "Mitt's Plan" for Medicare on MittRomney.com also exempts "current seniors or those nearing retirement," and adds the latest twist: You could use your "premium support" voucher to buy into traditional Medicare - if you can afford it.

Alas, Ryan seems to have abandoned his forthrightness.

How so? Consider his campaign speech Thursday, when the new Paul Ryan claimed the president "raided $716 billion from Medicare to pay for Obamacare. This will lead to fewer services for seniors."

"Next time you get your pay stub, take a look at the line that says payroll taxes, FICA," he went on to advise voters. "Those payroll taxes that come out of our paychecks are designed for two programs and two programs alone: Medicare and Social Security. But now, because of Obamacare, it's funding Obamacare as well."

Of course, Ryan's much ballyhooed GOP budget plan did assume the same cuts, a detail that Ryan tried to downplay last week as a budgeting technicality. But that wasn't the worst part of last week's deception, according to Massachusetts Institute of Technology economist Jonathan Gruber.

Gruber has a rare perspective on today's health-care debates. He helped design both Obamacare and "Romneycare," the Affordable Care Act's pathbreaking predecessor in Massachusetts.

Although he says he "will always have a special place of respect for Romney," he is less charitable toward Ryan. "Any scintilla of respect I had for Paul Ryan is gone," he told me last week - a week when he says he saw "three big lies" in the GOP's Medicare spin.

The first is the claim that the $716 billion - the Congressional Budget Office's latest estimate for the next 10 years' savings as a result of the Affordable Care Act - is somehow being raided from care for senior citizens.

The Affordable Care Act does cut future spending for Medicare - chiefly by slowing planned increases in payments to providers such as hospitals and nursing homes. But the providers largely agreed to the cuts for a simple reason: They expect to get the money back, because the law also promises to cover tens of millions of formerly uninsured people - ensuring that they'll get more paying patients and fewer cases of uncompensated care.

"It's like the health-care providers are finding a $100 bill on the sidewalk and being asked to give $50 back," Gruber says.

The second big lie - central to Ryan's Thursday speech - is that the $716 billion cut from Medicare's growth curve is "funding Obamacare."

That's not the way Medicare works. Payroll taxes for Medicare go into Medicare Trust Funds. Like the Social Security Trust Fund, those funds can be used only for Medicare. The Medicare savings were important to the expanded coverage of Obamacare, but only because they offset the impact on overall budget deficits.

"That lie is shown by the fact that Obamacare extends the life of the trust fund," Gruber says. Though the projections change yearly based on a complex calculus, Medicare is currently expected to run short of funds in 2024, seven years later than expected before the law was enacted.

And the third big lie? That Obama is a threat to Medicare.

"Ryan would cut Medicare more than Obamacare does," Gruber says. "Ryan's cuts come from shifting the cost of Medicare onto seniors."

This is probably the most important lie of all, because it highlights a problem both parties recognize - that Medicare costs are a long-term budget buster - as well as sharp differences in how they'd fix it.

Obama and most Democrats see the issue as part of a broader problem of escalating health-care costs - not just in Medicare and Medicaid, the program for the poor that Romney and Ryan would drop from the federal safety net by making it a state-run block-grant program, but in the private market, as well.

The Democrats tried to begin addressing it in the Affordable Care Act through a variety of pilot projects, such as support for so-called accountable care organizations. A key aim is to replace the most problematic incentives of fee-for-service medicine - provide more services, earn more fees - with incentives to improve outcomes while controlling costs.

By contrast, Ryan, Romney and most of today's laissez-faire conservatives want to apply their usual prescription for everything: the magic of the market, even though it has largely failed to control costs in medicine's private sector.

"You tend to get much more focus on making the patients more financially liable - to give the patient more of a stake, to have more money on the table," says David Grande, an internist and professor at the University of Pennsylvania and a senior fellow at Penn's Leonard Davis Institute of Health Economics.

Grande says there's little evidence that theory works, at least for something as essential as health care, where consumers see their well-being and lives at stake. Grande sees little reason to privatize. "Right now, the fundamental promise of Medicare is that you get a certain set of benefits when you turn 65. And the fundamental promise of the Ryan alternative is that you'll be promised a certain amount of money to buy coverage," he says.

The result, he fears, would be "a slow erosion over time in the amount of health care affordable by senior citizens."

In other words, ideology would be served, but at a cost for generations to come.


Contact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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