insurance

What the election really means for Medicare

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Highlights
  • Both campaigns want to tamp down the growth in Medicare spending.
  • Obama's plan would reduce Medicare reimbursements to hospitals, other providers.
  • Romney would replace today's Medicare with insurance "premium support" for seniors.

Politics » What The Election Really Means For Medicare

Medicare was thrust into the presidential campaign spotlight when Republican Mitt Romney chose his running mate Rep. Paul Ryan, R-Wis., the author of a plan to dramatically overhaul the federal health insurance program for older Americans.

Now, rhetoric from the Romney campaign and President Barack Obama's camp has created what the nonpartisan, nonprofit media watchdog FactCheck.org labeled a campaign season of "Mediscare," with both sides offering plans to control Medicare spending while accusing the other of "hurting seniors."

By now, you've doubtless heard enough spin to make your head, well, spin. So let's start with a few basic facts.

Created in 1965, Medicare is best known for insuring Americans 65 or older, though it also covers health care for some disabled people and those with serious kidney disease. The U.S. spent about $560 billion on Medicare in 2011, providing coverage for about 48 million people, according to the Congressional Budget Office, or CBO. Spending is expected to swell by about 14 percent this year, to more than $569 billion.

With its rising price tag, Medicare is consuming a greater share of the federal budget -- and the overall economy. CBO expects spending on Medicare to grow to 4.3 percent of the nation's gross domestic product by 2022, from an estimated 3.7 percent next year.

Where Obama and Romney agree

Both campaigns have roughly the same goal -- to slow down Medicare spending enough to ensure the program's financial health.

The Obama administration and Republicans both favor limiting Medicare's growth to just 1 percentage point more than growth in the overall economy, as measured by the gross domestic product, says Gail Wilensky, the head of Medicare under former President George H.W. Bush and now with the international health foundation Project HOPE.

"The question of how to achieve that rate is another story," Wilensky noted recently in the New England Journal of Medicine. Under the GDP-plus-one scenario, the 14 percent growth in Medicare spending projected for this year would have to be reduced to 3 percent or less because the economy has been growing at a rate of 2 percent or less.

Constraining Medicare in such a fashion would require big changes that would represent a "fundamental move away from Medicare as an open-ended entitlement," Wilensky writes.

Where the two sides differ

The Medicare cost controls in the two parties' plans would be implemented through different means, says Dr. Stephen Schimpff, the former CEO of the University of Maryland Medical Center and author of "The Future of Health-Care Delivery: Why It Must Change and How It Will Affect You."

Under the Obama vision being carried out through the health care reform law the president signed, patients aren't supposed to see any change in Medicare benefits, says Schimpff, but providers will see a reduction in their payments, a move meant to eliminate what some broadly label as "waste, fraud and abuse." Meanwhile, the Democratic platform says the party "opposes any efforts to privatize or voucherize" Medicare.

"Obama's idea is to cut reimbursements to providers (by about $716 billion over 10 years), putting the onus on the health care system to figure it out," says Schimpff. "By contrast, the Republican plan is a substantial change that relies heavily on market-driven cost controls."

Under Romney's vision, those currently older than 55 won't see a change in their Medicare. But the Romney website outlines some significant changes that would begin in 2023.

  • Medicare will consist of a voucher, or "premium support," system, meaning seniors will receive fixed amounts of money to buy health insurance.
  • All health insurance plans must offer coverage at least comparable to what Medicare provides today.
  • If seniors choose more expensive plans, they pay the difference between the subsidized amount and the premium price; if they choose less expensive plans, they can use their leftover government support money to pay other medical expenses, such as copays and deductibles.
  • Traditional fee-for-service Medicare will still be offered, but seniors might have to pay extra for it. Lower-income seniors will receive additional government support to ensure that they can afford coverage, while wealthier seniors will receive less support.

Romney also has called for gradually raising the Medicare eligibility age for seniors to 67 from the current 65. President Obama has shown an openness to raising the eligibility age, though he has not been pushing the issue.

Looking beyond Election Day

No matter who wins in the fall, many observers point out that there's no guarantee either party will have the political will to do what's needed so that health insurance under Medicare can be sustained over the long term.

"Unfortunately, this is a complicated issue, and I haven't seen anything from either side that indicates a willingness to talk about solutions beyond simple sound bites," says cardiologist Dr. Fredric Tobis, author of "The Healthcare Crisis: The Urgent Need for Physician Leadership."

"There are a lot of really smart people in Congress," says Schimpff. "But I think they're often too busy beating each other up than focusing on solutions."

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