"The fact is," says Yuval Levin of the Ethics and Public Policy Center, "Medicare is going to crush the government, and if Republicans leave it unreformed then the debt picture is very, very ugly. They might never -- literally never -- show the budget reaching balance. Not in the 10-year window and not if they take their graphs out a hundred years. Obama could probably show balance just past the budget window in the middle of the next decade because of the massive Medicare cuts he proposes, even if in practice they will never actually happen."
But major Medicare reform is politically risky. Republican plans would provide generous but limited subsidies to individuals to purchase their own health insurance, controlling costs by providing premium supports on the basis of need, and by encouraging competition among insurers. These are large changes, with no immediate chance of passage -- leaving Republicans with a lively, internal debate on their next step. Do they take up an ambitious Medicare reform -- or allow Obama to get to their right on the budget?
Republicans should be able to make a strong case for reform. Price controls in Medicare -- if actually implemented -- would cause immediate pain. Republican plans would kick in more gradually -- touching no one who is over 55 today. The Democratic approach to Medicare cuts would give doctors and providers less and less money while expecting them to cover the same services. "In reality," says Levin, "providers won't just provide the same care for less money -- some will stop taking Medicare patients, some will go out of business, and some will reduce the level of care or amenities. That's what we see in every system that takes this approach to cost control: waiting lines, dirty unsafe hospitals with horrible food and amenities."
Republicans may have the better policy case. But Obama has an easier political task. He can promise to keep the same Medicare system at a lower cost with fewer cuts in other programs -- while attacking more drastic Republican domestic cuts and the voucherization of Medicare.
If Obama takes this path, he may win the political day -- but he would lose the contest of credibility.