Medicare is supposed to be the third rail of American politics – but only for Republicans. Rep. Paul Ryan learned this the hard way last week, when New York Times columnist Paul Krugman unleashed a vitriolic attack on Ryan’s proposal to reform Medicare by transforming it into a voucher program for seniors.
Calling Ryan a “flimflam man,” Krugman claims that the main savings from the congressman’s plan would “come from sharp cuts in Medicare, achieved by dismantling Medicare as we know it.” Ryan’s vouchers, Krugman continues, would be “too small to pay for adequate coverage,” meaning that “wealthy older Americans would be able to supplement their vouchers” but “everyone else would be out in the cold.”
Krugman’s not the only Democrat gunning for Ryan. In his last speech as President Obama’s White House budget advisor, Peter Orszag also claimed that Ryan’s plan “mechanically cuts Medicare” and shifts “more and more cost and risk onto seniors.”
Well, if you’re worried about government cutting your Medicare benefits, or if you’re afraid of cruel politicians leaving seniors without critical access to care, don’t worry: It already exists, and it’s called Obamacare.
President Obama’s hallmark legislative achievement, the Patient Protection and Affordable Care Act, cuts hundreds of billions of dollars from Medicare. Of course, the bill is 2,400 pages long – so maybe Democrats missed the fine print in their haste to vote the bill into law.
Consider what Medicare chief actuary Richard Foster has to say in the recently released 2010 Medicare Trustees Report. Obamacare’s projections for cuts in Medicare spending are not realistic, he concludes, because providers won’t be able to slash their own expenses enough in response to remain profitable. Instead, “the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services.”
Translation: Obamacare’s vaunted savings comes from automatic, across-the-board cuts to Medicare. These it would achieve by slowing the rate at which Medicare payments for hospitals and nursing homes can go up compared to the overall rate of medical inflation. Assumptions for large health-care savings from Obamacare hinge on the premise that Medicare can pay less – a lot less over time – for seniors’ care, and that providers will respond by becoming more productive and efficient, finding ways to provide the same benefits more cheaply.
The problem is that these top-down cuts don’t work. In fact, by 2019, Medicare payment rates would actually dip below those for Medicaid – which already pays much less than private insurers do. Medicaid recipients can find it very difficult to get timely access to quality care. Over the long run, Medicare payments would fall to half Medicaid rates.
Medicare actuaries predict that under Obamacare, “beneficiaries would almost certainly face increasingly severe problems with access to care.” In 10 years, 15 percent of Medicare providers would be unprofitable; by 2030, one in 4 would be, rising to 40 percent by 2050.
Krugman’s criticism of Ryan’s plan is actually an apt description of what will happen if Obamacare is implemented as written: Medicare payments would become “too small for adequate coverage” and “wealthy older Americans would be able to supplement” their Medicare coverage out of pocket, while “everyone else would be out in the cold.”
Now, to be fair, no one actually expects Congress to allow Obamacare to be implemented as written. Medicare’s actuaries expect the Medicare cuts to be phased out starting in 2019. But that also means most of the long-term savings from Obamacare will be illusory – and along the way, we’ve put taxpayers on the hook for another massive federal health-care entitlement and an expanded Medicaid program. These new obligations will make future budget reforms even more difficult.
Krugman’s response to Ryan’s proposal is hard to distinguish from hysteria.
The real and important debate is over who buys health-care coverage and how. Liberals believe that the government should buy coverage for everyone, because it will be able to dictate prices to providers and force them down by fiat. Conservatives believe that Obamacare spends too much, shifts far too much power to Washington bureaucrats, and puts real reforms farther out of reach. Real reforms, we argue, should come from less government regulation (not none), and by empowering individuals to choose their own coverage – with a safety net for the poorest and sickest among us. Innovation and competition, we believe, will drive health care costs down, just as it does in the other 80% of the U.S. economy.
Ryan’s plan for Medicare reform is linked to a number of other market-based reforms, along with added financial protection for especially poor or sick seniors. One can argue about whether his plan would be successful, but it is a serious and thoughtful proposal. Our national leaders should be confronting health-care with the same seriousness.