Medicare was a hot issue in last week's presidential debate, with both President Barack Obama and GOP contender former Gov. Mitt Romney arguing for their view of the way to put Medicare on stronger financial footing.
The biggest bone of contention was the $716 billion that Romney repeatedly accused Obama of cutting from Medicare through the Affordable Care Act, which he vowed to repeal on day one of his presidency.
Obama attacked the Romney-Paul Ryan plan to convert Medicare into a "voucher" or premium-support system, in which beneficiaries would receive a set amount of money to be used to purchase insurance in the private market. Obama said running parallel systems -- traditional and a premium-supported system, which Romney has said he would do, would destroy Medicare because private insurers would cherry-pick the healthiest seniors and leave the poorest and sickest in the current form of the program.
So, who is right? Which side will provide the strongest approach for anyone concerned about retirement planning? Here are some insights from Charles Roehrig, an economist and director of Altarum's Center for Sustainable Health Spending, a nonpartisan health care economics think tank.
About one-third of Obama's $716 billion in Medicare cuts comes from a reduction in hospital reimbursement rates. Another third comes from cuts in reimbursements to Part C Medicare Advantage plans. The rest comes from small cuts to various parts of the plan, including a 9 percent decrease in reimbursements to home health providers.
Roehrig says the cuts to hospital reimbursement rates are offset by payments from 30 million previously uninsured people who are now insured under health care reform and able to pay for their treatments. "Hospitals are accepting Medicare payment cuts because they also are seeing a cut in the amount of uncompensated care that they must give," he says.
In the long run, will these cuts make hospitals less likely to accept Medicare patients? Roehrig says no. "I am of the opinion that access to care isn't going to be a major issue. Hospitals are so reliant on Medicare patients that they can't afford to refuse them."
Roehrig sees cuts to Medicare Advantage plans, which are more expensive to operate than traditional Medicare, potentially driving some private insurers that operate them out of the market. "The worst thing is that there would be fewer Medicare Advantage plans and people who were enrolled them would have to go back to standard Medicare," he says. "I think this would be money saved with not that great of an inconvenience to the Medicare population."
Roehrig believes that the main differences between the two contenders' approaches to controlling future Medicare spending are philosophical.
Democrats want to save money by managing payment rates, using government clout to set rates and implement innovation in payment policy.
The Republicans believe giving Medicare recipients less money to spend on Medicare will hold down prices. Private insurers will have an incentive to charge recipients less and insurers will tell hospitals and doctors, "This is all we can afford."
Which approach is best for your retirement? Pick your poison.
"Exchanges and vouchers both can be used to effectively hold down prices if they are fairly applied and not used to create unfair outcomes," Roehrig says. "It is all in how you apply them. Those are the details that we don't know yet."