A new television ad by Republican presidential candidate Mitt Romney says cuts in Medicare spending by the Obama administration will hurt seniors.
The ad takes aim at more than $700 billion in cuts that were included in the administration’s health-care overhaul to help defray the cost of expanding coverage to millions of uninsured Americans.
The offensive comes as Republicans find themselves under fire for vice presidential candidate Paul Ryan’s own proposal to rewrite Medicare, a plan critics say will save money by shifting costs onto seniors. Republicans are trying to blunt those attacks by arguing Democrats have done something similar.
It’s true the health-care overhaul increases cost-sharing for wealthier seniors, a change that could be considered a benefit cut. That money represents a very small share of the savings, however, and Republicans including Romney have said they support charging higher-income seniors more – two facts the ad leaves out.
Seniors who participate in Medicare Advantage, a program in which private insurance companies deliver Medicare benefits, will also see cuts – at least compared with what they had been receiving.
A bit of background: The Medicare Advantage program was set up decades ago in hopes that insurers could deliver benefits more cheaply. The government ended up spending more on the program than it would have if those seniors had remained on traditional Medicare. Insurers, attempting to lure seniors out of the original Medicare program, used those higher federal payments to offer extra benefits seniors couldn’t get from regular Medicare.
The administration’s cuts will reduce those extra benefits, according to the Congressional Budget Office, though the basic Medicare benefits guaranteed by law will remain untouched. That’s a distinction Democrats are now careful to make. In response to the Romney ad, Obama campaign spokeswoman Lis Smith said: “The savings his ad attacks do not cut a single guaranteed Medicare benefit.”
The biggest and most contentious Medicare cuts total $415 billion. They come in the form of smaller annual increases in federal payments to hospitals, skilled nursing services and others providing goods and services to Medicare’s 50 million beneficiaries.
Experts are divided on what difference the cuts will make, in part because they will only slowly be phased in over the next decade. It’s also just hard to know when the government is paying providers too much, said Joe Antos, a health-care economist at the American Enterprise Institute. “If we’re paying somebody too much, they don’t tell us,” Antos said. “I know, shocking.”
Medicare’s actuaries are skeptical of the cuts, predicting 15 percent of hospitals, nursing services and home health agencies will become unprofitable by 2019 and may leave the program. Republicans say that would be tantamount to a benefit cut. “The idea that you can just keep squeezing rates and it doesn’t affect patient care is nonsense,” said James Capretta, a former Bush administration budget aide.
Former Congressional Budget Office Director Robert Reischauer said it’s too soon to know.
“These changes occur slowly – it’s not like you’re going to fall off a cliff,” he said. “You’re talking about giving a 1.5-percent increase as opposed to a 2.5-percent increase.”
Providers will have incentives to squeeze inefficiencies out of their operations, so they can live with the cuts, because Medicare is such an important customer, he said.
“You have to wait and see,” Reischauer said. “The jury is out on that and will remain out for a long time.”