By Wire News Sources on September 15, 2012
by Suevon Lee
Medicare and Medicaid, which provide medical coverage for
seniors, the poor and the disabled, together
make up nearly a
quarter of all federal spending. With total Medicare spending projected to cost
$7.7 trillion over the next 10 years, there is consensus that changes are in
order. But what those changes should entail has, of course, been one of the hot-button
issues of the campaign.
With the candidates slinging
charges, we thought we’d lay out the facts. Here’s
a rundown of where the two candidates stand on Medicare and Medicaid:
THE CANDIDATES ON MEDICARE
Earlier this year, the Medicare Board of Trustees estimated
that the Medicare hospital trust fund would remain fully funded only until
2024. Medicare would not go bankrupt or disappear, but it wouldn’t have enough
money to cover all hospital costs.
Under traditional government-run Medicare, seniors 65 and
over and people with disabilities are given health insurance for a fixed set of
benefits, in what’s known as fee-for-service
coverage. Medicare also offers a subset of private health plans known as
Medicare Advantage, in which roughly one-quarter
of Medicare beneficiaries are currently enrolled. Obama retains this structure.
The Obama administration has also made moves that it says
would keep Medicare afloat. It says the Affordable Care Act would extend
solvency by eight years, mainly by imposing tighter spending controls on
Medicare payments to private insurers and hospitals.
In contrast, Rep. Paul Ryan, Mitt Romney’s running mate, has
proposed a more fundamental overhaul of Medicare, which he says is on an “unsustainable
path.” On his campaign
website, Romney says that Ryan’s proposals “almost precisely mirrors” his
ideas on Medicare. But he’s been fuzzy on other aspects of the plan.
A Romney-Ryan administration would replace a defined
benefits system with a
defined contribution system in which seniors are given federal vouchers to
purchase health insurance in a newly created private marketplace known as
Medicare Exchange. In this marketplace, private health plans, along with
traditional Medicare, would compete for enrollees’ business. These changes wouldn’t start until 2023, meaning current
beneficiaries aren’t affected – just those under 55.
Under the Romney-Ryan, the vouchers would be valued at the second-cheapest
private plan or traditional Medicare, whichever costs less. Seniors who opt for
a more expensive plan would pay the difference. If they choose a cheaper plan,
they keep the savings.
In the current system, people 65 and over are eligible for
Medicare, which Obama has said he would keep for
Romney has proposed
raising the eligibility age for Medicare beneficiaries from 65 to 67 in 2022,
then increasing it by a month each year after that. In the long run, he would index
eligibility levels to “longevity.” Ryan’s budget plan proposesraising Medicare eligibility age by two months a year
starting in 2023, until it reaches 67 by 2034.
Many others looking to keep Medicare solvent have also proposedraising the age of eligibility.
The Congressional Budget Office estimates
that raising the minimum age from 65 to 67 would
reduce annual federal spending by 5 percent.
But it would also result in higher premiums and out-of-pocket costs for
seniors who would lose access to Medicare.
Obama’s health care law also adds
some benefits for seniors, such as annual wellness visits without co-pays,
preventive services like free cancer screenings and prescription drug savings.
The Affordable Care Act is projected to reduce Medicare
spending by $716 billion over the next 10 years. These reductions, as detailed
by Washington Post’s Wonkblog, will come mostly from reducing
payments to hospitals, nursing homes and private health care providers.
“The ACA grows the trust fund by giving more general revenue
to the Treasury, which then gives the trust fund bonds. But it then uses the
money from those bonds to expand coverage for low- and middle-income people,” explains
Dylan Matthews on Washington Post’s Wonkblog.
Romney hasn’t really come up with a solid answer: he
previously said he would restore
the $716 billion savings that the health care law imposes. Per this New York
the American Institutes for Research calculates this would increase premiums
and co-payments for Medicare beneficiaries by $342 a year on average over the
next 10 years.
For more on where the candidates stand on the $716 billion, the
private health policy Commonwealth Fund offers this helpful
Caps on Spending
Both Obama and Ryan have set an identical
target rate that would cap Medicare spending at one-half a percentage point
above the nation’s gross domestic product.
But they have different ideas on mechanisms to achieve it.
The Affordable Care Act establishes a 15-member Independent
Payment Advisory Board that, starting in 2015, would make binding recommendations
to reduce spending rates. As Jonathan Cohn points
out in the New Republic, the commission is prohibited from making any
changes that would affect beneficiaries.
Ryan has proposed hard caps on spending and derided
this panel of appointed members as “unelected, unaccountable bureaucrats.” When
laying out his plan in a 2011 memo, Ryan
wrote that to control spending, “Congress would be required to intervene and
could implement policies that change provider reimbursements, program overhead,
and means-tested premiums.”
stated clear proposals for imposing a cap on spending.
THE CANDIDATES ON MEDICAID
Though, it’s far less discussed
on the campaign trail, Medicaid actually covers more people than Medicare. The
joint federal-state insurance program for the poor, the disabled, and elderly
individuals in long-term nursing home care currently covers about 60 million
Americans. The Affordable Care Act has
Medicaid coverage further. Beginning 2014, Medicaid will include
people under 65 with income below 133 percent of the federal poverty level (roughly
$15,000 for an individual, $30,000 for a family of four). This was estimated
to cover an additional 17 million Americans as eligible beneficiaries.
In June, however, the U.S. Supreme Court ruled that
states could opt out of the Medicaid expansion. A ProPublica analysis estimated
that the 26 states that challenged the health care law, and thus may possibly
opt out, would account for up to 8.5 million of those new beneficiaries.
Romney and Ryan would overhaul this current system by
turning Medicaid into a system of block grants:
the federal government would issue lump sum payments to the states, who would determine
eligibility criteria and benefits for enrollees. These grants would begin in
Effects on spending
The Congressional Budget Office estimates that Medicaid
expansion under the new health care law would cost an additional $642 billion
over the next 10 years.
Under the Ryan plan, federal Medicaid grants would be adjusted
only for inflation, but not health care costs, which grow at a much higher
rate. The CBO estimates
Ryan’s plan would save the federal government $800 billion over the next 10
years. Another study conducted by Bloomberg News shows that the block-grants
could decrease Medicaid funding by as much as $1.26
trillion over the next nine years.
The New York Times points
out that more than half of Medicaid spending goes toward the elderly and
disabled. An Urban Institute analysis estimates
the Ryan plan would result in 14 million to 27 million fewer people receiving Medicaid
coverage by 2021.
Though rarely mentioned by any of the candidates, Medicaid
costs are soaring to cover the elderly who require long-term nursing care. As
the Times’ details
how, states saddled by high Medicaid costs have begun turning to private
managed care plans to blunt the cost.
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