Your Guide to "Ending Medicare As We Know It"

Yesterday, President Obama went to Florida and told seniors that Mitt Romney wants to end Medicare as we know it, and it appears that this argument (and some related ones) will be a central feature of the Obama campaign's message in the coming days. It's entirely possible, as Jonathan Chait has suggested, that all the Obama campaign's attacks on Romney's finances and record at Bain Capital are the first stage of a two-stage strategy that culminates with an attack on the Ryan budget. Since we'll be talking about this a lot soon, I thought it might be worthwhile to refresh our memories on what this is all about, particularly with regard to Medicare, and how it relates to the current campaign.

First: Is it fair to tar Mitt Romney with the Ryan plan? No question. While Romney's own policy proposals are quite a bit more vague than the Ryan plan is, they follow the same contours, and when Romney is asked about the Ryan plan he never hesitates to praise it. When asked about it last month, Romney's chief strategist Eric Fehrstrom said of his boss, "He's for the Ryan plan." Or in Romney's own words, "I'm very supportive of the Ryan budget plan. It's a bold and exciting effort on his part and on the part of the Republicans and it's very much consistent with what I put out earlier." Enough said.

Next: Does the Ryan plan actually "end Medicare as we know it"? This is the phrase that Democrats have used in the past to describe it, and that Obama will continue to use. Republicans claim the phrase is unfair and demagogic. But while it would be inaccurate to simply say the Ryan plan "ends Medicare," because if the plan were enacted there would still be a program going by the name of "Medicare," it is fair to say that Medicare would be a drastically different program, and some of the critical things that make it so successful would no longer exist.

Today's Medicare is an insurance program. If you're a senior, you go to your doctor, and your doctor gets paid by Medicare. It is a single-payer program that covers every senior, and though it doesn't pay for every conceivable procedure, because of Medicare's universality there are essentially no uninsured seniors in America, no seniors who are subject to the tender mercies of the notoriously unmerciful insurance companies, no seniors who need to worry about their pre-existing conditions or their lifetime limits or any of the other ways those companies find to screw their customers, and almost no seniors who find it impossible to pay their insurance premiums (seniors do contribute premiums to Medicare, but they are quite modest).

The Ryan plan in its initial incarnation eliminated Medicare as an insurance program, and replaced it with "premium support." There's an argument about whether premium support can be described accurately as a "voucher," but that's nothing more than a silly disagreement about semantics; premium support in practice is no different from any voucher. Under this plan, seniors would have to get their insurance from private companies, and the government would pay part of the cost. If those private premiums go up, then seniors will have to pay more out of their own pockets; indeed, this is a feature, not a bug, of the Ryan plan. The whole point is to limit government spending on Medicare by limiting how much seniors get in their vouchers/premium support.

And those limits could be vicious. The Ryan plan caps the growth of Medicare at GDP growth plus 0.5 percent. If health costs rise faster than that, seniors will have to pick up more and more of the tab. That means that if the Ryan plan were enacted, there would likely be many seniors who couldn't afford private premiums and would have no health coverage. This feature of the plan eliminates one of the fundamental pillars of Medicare: that it is an entitlement, meaning that if you qualify, you're entitled to the benefit. If this year's costs are higher than we'd like, we can make changes to the program for next year, but nobody goes without coverage. Under the Ryan plan, that would no longer be true.

But here's an important thing to keep in mind: After Ryan released the first version of his plan in 2011 and caught a whole bunch of flak for basically destroying Medicare, he came back with a revised plan earlier this year that has one critical difference: it allows seniors, if they so choose, to stay on traditional Medicare. Mitt Romney's Medicare plan does the same thing (Romney's plan, such as it is, is basically a Cliff Notes version of the Ryan plan). In other words, under political pressure they embraced a public option. But since the plan still caps overall spending at GDP+.05, seniors would likely have to pay more and more out of their own pockets, likely thousands of dollars.

At this point, it's good to remind ourselves that Medicare does a far better job of controlling costs than private insurance does, partly because of the negotiating power it has and partly because it spends just a fraction of what private companies do on overhead (around 98 percent of Medicare's costs go to paying for care, while private companies often spend 20 percent or more of their costs on administration, marketing, underwriting, and so on). Yet Republican philosophy tells us that no matter what the facts say, this is just impossible. A government program can't possibly be cheaper and more efficient (and deliver service that its customers love, by the way) than a private sector alternative. So if we introduce private competition, then costs will of course come down.

But there isn't much reason to believe they will, which means seniors will be left holding the bag, and most importantly, lose the security they have now. Anyhow, to return to the question we started with: Is it fair for the Obama campaign to charge that Mitt Romney wants to end Medicare as we know it? If you define "Medicare as we know it" as an insurance program that provides affordable, efficient, and most importantly secure health coverage for every American senior, then the answer is clearly yes.

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