Ethics & Public Policy Center

The Democrats’ Growing Medicare Dilemma

Published in National Review Online on August 15, 2012


Yuval Levin

Yuval Levin is the Hertog Fellow at the Ethics and Public Policy Center and the editor of National Affairs.


In the last few days, the Romney campaign has moved to dramatically change the terrain of Medicare politics, and it looks like the Democrats are beginning to realize how vulnerable they might be. Because of Obamacare, it is the Democrats who now plan to cut current seniors’ benefits (especially those in Medicare Advantage) and access to care (thanks to the IPAB) while still failing to avert the program’s (and the nation’s) fiscal collapse, and because Romney would repeal Obamacare and pursue a version of the Ryan-Wyden premium-support reform it is the Republicans who would protect current seniors’ benefits and make them available to future seniors while saving the program from collapse through market reforms. Through the candidates’ statements this week and through this new ad, Romney and Ryan have made clear they’re going to inform voters about this and force the Democrats to defend themselves on Medicare.

That won’t be easy for the Left, since the Romney campaign’s charges are true, and it is beginning to become apparent that the Democrats are totally unprepared for the coming fight. Their defenses so far fall into roughly three categories: Ryan did it too, the Obamacare Medicare cuts aren’t very serious, and finally what can only be called frantic distractions. Even as pure demagoguery (let alone as efforts at actual substantive arguments) all three are exceptionally weak defenses, and suggest the Democrats could be in serious trouble. Let’s examine each one.

The “Ryan did it too” defense is perhaps the most amusing of the three, as it succeeds in being simultaneously untrue, irrelevant, and an admission of the basic charge against the Democrats. Even as they call Paul Ryan a cruel and merciless budget cutter who cares not for the weather service and would gladly see children exposed to E. coli, the Democrats justify their taking $710 billion out of Medicare and spending it on Obamacare over the next decade by pointing out that Paul Ryan didn’t put that money back into Medicare in his budget. So if he had, would that have made their cuts unjustifiable? Well it so happens that he did. By repealing all of Obamacare’s spending, the Republican budget does not spend the money Obamacare took out of Medicare and thus those funds are used to extend the Medicare trust fund. And this point is hardly hidden in the Ryan budget. The budget document spells it out in its spending tables and also explains it in its narrative section, noting on page 54 that:

This budget ends the raid on the Medicare trust fund that began with passage of the new health care law last year. It ensures that any potential savings in current law would go to shore up Medicare, not to pay for new entitlements. In addition to repealing the health care law’s new rationing board and its unfunded long-term care entitlement, this budget stabilizes plan choices for current seniors.

That Ryan and other House Republicans saw this undoing of the raid on Medicare as essentiallyno different than just not taking the money out in the first place is evidenced by the fact that all of them (including Ryan) also voted twice (once before the first Ryan budget was adopted and once just a month ago, on July 11th) to flat-out undo the Obamacare cuts, in exactly the way that Romney proposes to do.

And most importantly, there has never been any doubt about Romney’s intentions—so even if they were genuinely unclear about how the Ryan budget undoes Obamacare’s raid on Medicare, the Democrats couldn’t be unclear about how Romney would do it, and he’s the presidential candidate. Obviously his view is the view of the ticket, and of a Romney administration should there be one.

The second Democratic defense, the “it’s not so bad” defense, suggests the Democrats don’t grasp just how the fee-for-service design of Medicare that they’re eager to retain forever actually works. The basic argument the Democrats are trying to make is that because the cuts consist mostly of reductions in provider payments, they’re not actually cuts to benefits that seniors get but only to money given to the people who provide them with coverage or care. So, for instance, the New York Times today quotes a White House spokeswoman saying these cuts “do not cut a single guaranteed Medicare benefit.” But in a fee-for-service system, cuts to fees are cuts to services, especially because administrative price controls create supply shortages, which means seniors will have fewer options and less access. That’s exactly why the way to reform Medicare is through market competition—which increases options and seeks an equilibrium between supply and demand—rather than yet more administrative price controls.

Health-care providers have to make a profit to survive, they’re not just cows to be milked by Medicare. And blunt reductions in payment rates within a very inefficient fee-for-service system that stands in the way of real productivity improvements mean that these providers just won’t be able to keep treating Medicare patients. The actuaries of the Medicare program itself (who work for Barack Obama) have made it clear that they think taking $710 billion out of Medicare to pay for Obamacare is likely to create serious problems for current seniors, writing shortly after the law was enacted that:

providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries). Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.

So no big deal: We’ll just drive one in six hospitals that treats seniors out of business, but in return younger people will get to lose the coverage they now have and be dumped into Obamacare exchanges. Everyone’s a winner.

The final Democratic defense I include mostly for comic relief. It consists of just throwing out unrelated claims and numbers in the hope of drowning out the basic argument. The best instance is this simply wonderful tirade sent out by the Center for American Progress yesterday, which at first just makes the “Ryan did it too” and “it’s not so bad” arguments, then repeats the notion that the Romney-Ryan premium-support reform would shift costs to seniors, which is just plain false, and then concludes with what it calls a “handy inforgraphic” which I think I’m just going to have to print out and hang on my wall. It acknowledges that Obamacare makes those $716 billion in cuts, but then says the Romney plan would cut $2 trillion “in total cuts between 2014 and 2020″ and that “instead of keeping those savings in health care” it would “divert money away from Medicare programs” and give tax breaks to the wealthy and increase seniors’ costs. This doesn’t even qualify as wrong—it simply bears no relation to reality. The $2 trillion number, as best I can figure, is an estimate of the amount of spending Romney would cut over the entire budget during those six years (he would spend $2 trillion less than Obama in that time, which isn’t saying much), but has nothing to do with Medicare. The idea that any of it is diverted “away from Medicare programs” is simply untrue, as are the now familiar fantasy about tax cuts for the rich and the falsehood about shifting costs to seniors. Just bizarre.

This last approach is a particularly clear indication that some on the Left are getting worried about their Medicare problem. And so they should be. Romney obviously won’t win this election on Medicare—though he has a very good plan for fixing it. Voters are far more worried about jobs and the economy. But the Democrats were counting on a Medicare onslaught to lift their chances this fall since they can’t exactly run on jobs and the economy. Their chances of mounting such an onslaught grow increasingly unlikely the more that voters realize that Republicans offer a better approach both for current seniors and for future ones.

A real market reform would allow us to leave those seniors already in the program where they are and enable future ones to use their Medicare benefits to drive competition and improve quality while lowering costs across the American health-care system. The Democrats’ approach makes Medicare’s problems worse in order to make the larger system’s problems worse.

I guess they’ll just have to run on taxing and spending.

Yuval Levin is the editor of National Affairs and a fellow at the Ethics and Public Policy Center.

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