By David Pinar
I’m sorry, but do Republican politicians have no shame? They’ve been running with the bold faced lie that “ObamaCare”, aka the Affordable Care Act, “cuts Medicare” since the day it was signed into law. Jesse Kelly pasted signs that “Gabby voted to cut $500 Billion Medicare” on his campaign signs in 2010. What do you do when a lie doesn’t stick? Tell a bigger lie. Now that Mitt Romney has selected Paul Ryan as his running mate Ryan’s “Path to Prosperity” Budget Plan that converts Medicare into a voucher system that will result in much high medical cost for future retires has become a campaign issue. So Romney figures the best defense is a good offense and has dusted off the old “Obamacare cuts Medicare” lie and upped the ante – now he claims the Affordable Care Act “cuts Medicare” by an absurd $700 Billion.
Whatever amount you want to use, the Affordable Care Act doesn’t “cut Medicare” – it saves Medicare by reducing expenses. Let SeniorCorps.org explain:
Despite the doom and gloom tactics of some members of congress and talking heads, the cuts will come from two prime sources; (1) eliminating Medicare fraud, and (2) a reduction in the amount of payments that are paid into Medicare Advantage programs that are offered by private insurance companies.
Medicare fraud cost the program an estimated $60 Billion every year. By beefing up the enforcement of fraud detection, the Affordable Care Act enables the Medicare Administration to significantly reduce this waste. As for Medicare Advantage program, that was a program passed by a Republican Congress under the theory that private business can always do something better than government. Enron anyone? Medicare Advantage benefits typically cost much more than benefits directly from Medicare. As my blogging colleague Denise in her Medicare and More blog explains so well in her Paul Ryan’s Medicare Plan article today, Medicare administrative costs average 3-4%, while private insurance companies’ administrative costs average around 15%. One reason is that the Medicare Administration doesn’t pay hundreds of millions in salaries & benefits to CEOs like the big insurance companies do. And private insurance companies don’t like to lose money, so they got the Republicans to include a “risk adjustment” factor into the Medicare Advantage program that guarantees the insurance companies will always get paid more than their actual cost. It doesn’t matter if their higher costs are from bloated administrative costs or actual benefits paid out to enrollees, they always get paid more. The Affordable Care Act remedies that by reducing and capping payments to insurance companies offering Medicare Advantage policies. The leaner, more efficient companies will do just fine and continue to offer policies, while the companies with bloated costs will abandon the market. Capitalism at its finest. And seniors don’t lose a single benefit – if they don’t fine find a Medicare Advantage policy that meets their needs they simply re-enroll to get those benefits directly from Medicare.
Another big “cuts Medicare” lie about the Affordable Care Act is that it makes drastic cuts in payments to doctors, hospitals and other healthcare providers. Nope, that’s a law passed by the Republican Congress and signed by President Clinton in 1997. It went into effect in 2002, but so far Congress has constantly voted to defer those payment reductions. If there are any reductions in payments to healthcare providers, it will be from an Act of Congress, not the Affordable Care Act.
No, the Affordable Care Act (“ObamaCare”, if you must) doesn’t cut Medicare – it saves Medicare expenses by eliminating fraud and billions in payments to inefficient insurance companies. But “RyanCare” clearly does – it raises the age for eligibility to age 67, and converts Medicare to a government subsidy to private insurance companies. And if the fixed voucher payments to insurance companies doesn’t cover the cost of private insurance, future retirees will be faced with making up the difference out of their own pocket, or do without.
On July 24, the Congressional Budget Office sent a letter to House Speaker John Boehner, detailing the budget impact of repealing the Affordable Care Act. If Congress overturned the law, “spending for Medicare would increase by an estimated $716 billion over that 2013–2022 period.” As to how the Affordable Care Act actually gets to $716 billion in Medicare savings, that’s a bit more complicated. The majority of the cuts, as you can see in this chart below, come from reductions in how much Medicare reimburses hospitals and private health insurance companies.
I can’t include the chart in my blog as it’s copyrighted material. You can see it at the link to Sarah Kliff’s article, or I’ll explain it: It’ s pie chart showing that 34.8% of the $716 Billion in Medicare savings over the next 10 years comes from reduced reimbursements to hospitals. The hospital companies agreed to it as they expect to have many more paying customers (as opposed to the uninsured) from the Affordable Care Act’s expansion of medical insurance coverage. About 30.2% of savings comes from reduced payments to insurance companies in the Medicare Advantage program. Ms. Kliff explains how that works:
Medicare Advantage plans allows seniors to join a private health insurance, with the federal government footing the bill. The whole idea of Medicare Advantage was to drive down the cost of health insurance for the elderly as private insurance companies competing for seniors’ business.
That’s not what happened. By 2010, the average Medicare Advantage per-patient cost was 117 percent of regular fee-for-service. The Affordable Care Act gives those private plans a haircut and tethers reimbursement levels to the quality of care administered, and patient satisfaction.
Reducing the government subsidy to insurance companies to provide benefits that cost more than if Medicare itself provided them, and ties reimbursement rates to the quality of care provided and patient satisfaction. Sounds like a darn good thing to me. Finally, around 35% of Medicare savings come from a number of small changes. Reductions to Medicare’s Disproportionate Share Payments — extra funds made to hospitals for services made to uninsured patients. Lower payments to home health providers make up another 8.8 percent. About a dozen cuts like this make up the 35% in savings. Ms. Kliff concludes with this point:
It’s worth noting that there’s one area these cuts don’t touch: Medicare benefits. The Affordable Care Act rolls back payment rates for hospitals and insurers. It does not, however, change the basket of benefits that patients have access to. And, as Ezra pointed out earlier today, the Ryan budget would keep these cuts in place.
The bold emphasis is mine. The Affordable Care Act, “ObamaCare” if you must, doesn’t cut back on any benefits for Medicare. It saves over $716 Billion in Medicare expenses over the next 10 years. Repealing it – which Mitt Romney and pretty much anyone with an “R” after their name has vowed to do – would add over $716 Billion to the deficit.