Saturday, October 6, 2012

Why Romney Doesn’t ‘Preserve’ Traditional Medicare

During Wednesday night’s presidential debate, Mitt Romney tried his very best to convince American seniors and future beneficiaries that his Medicare reform plan would not fundamentally alter the longstanding safety-net program’s structure. The Republican nominee painted his plan as a well-meaning experiment meant to inject some much-needed marketplace capitalism into the Medicare system, theoretically lowering the program’s cost and offering flexible, quality coverage options to future Americans, all while maintaining the benefits of traditional Medicare.

But Romney consistently obfuscated the details of his plan, which would actually result in massive cost-shifting onto consumers and fundamentally weaken the traditional Medicare entitlement. Here is what Romney said about Medicare Wednesday night:

…Number two is for people coming along that are young. What I’d do to make sure that we can keep Medicare in place for them is to allow them either to choose the current Medicare program or a private plan — their choice.They get to — and they’ll have at least two plans that will be entirely at no cost to them. So they don’t have to pay additional money, no additional $6,000. That’s not going to happen.

Setting aside the fact that Romney’s own stated desire to repeal Obamacare wouldraise the price of prescription drugs, preventative care, and Medicare Advantage premiums on current as well as future beneficiaries, Romney’s statements underplay just how radically his proposal — and the plan laid out by running mate Paul Ryan — would change Medicare for beneficiaries in 2023 and beyond.

From his comments during the debate, you would think that his plan is a simple alteration in Medicare’s funding mechanism, or an expansion of the kinds of private coverage plans available under Medicare Advantage. But that’s just not true. The Romney/Ryan plan would take Medicare, which is a “defined benefit” program, and turn it into a “defined contribution” program.

Basically, instead of the federal government guaranteeing that beneficiaries receive a host of defined services — as it does now — the federal government would instead set a hard budget for Medicare and then toss a chunk of cash at beneficiaries and let them choose from a host of private plans or traditional fee-for-service Medicare to get coverage. This means that if the calculated “premium support” subsidies for insurance and benchmark plans under the Romney/Ryan proposal do not cover all of a beneficiary’s needs, consumers would be forced to pay the difference out of pocket to get a plan that does. As health care costs rise, that will shift more and more financial burden onto consumers while their federal subsidies grow at a rate that simply can’t keep up with medical inflation.

As this Center for American Progress Action Fund study demonstrates, Romney/Ryan’s proposed voucher system would also weaken the traditional Medicare program, raising premiums as seniors spill over into private plans intentionally designed to attract healthier populations by providing cheaper benefits like preventative care, while leaving out more expensive benefits for the elderly such as long-term or intensive medical care. The existing Medicare pool, which would be left with a sicker population that needs Medicare’s expansive benefits, would consequently have much higher medical costs and rising premiums.

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