Romney Campaign Press Release - Memorandum: Understanding A President Who Claims Cuts "Strengthen" Medicare, Payments To Hospitals Are "Waste," And Insurance For Seniors Is A "Subsidy"

To:                  Interested Parties

From:              Lanhee Chen, Ph.D., Policy Director

Date:               8/18/2012

Re:                  Understanding A President Who Claims Cuts "Strengthen" Medicare, Payments To Hospitals Are "Waste," And Insurance For Seniors Is A "Subsidy"

In an unprecedented blow to seniors who rely on Medicare, President Obama took $716 billion away from the program and spent it on his federal takeover of the health care system. This is not in dispute. You can watch President Obama acknowledge it in this interview with ABC News. You can watch the President's deputy campaign manager call it an achievement in this interview with CBS News. Or you can read about it in the latest Congressional Budget Office score of a proposed Obamacare repeal.

And yet, the President continues to put forward head-scratching claims like "FACT: President Obama's health care law strengthens Medicare benefits while cutting waste and insurance company subsidies." Let's unpack this a bit.

What exactly did the President cut, and what will the effects be?

The Largest Source Of Cuts Is A $415B Reduction In Provider Payments. This means that Medicare will reduce the amount that it pays to doctors and hospitals for the services they provide to seniors. In an imaginary world where government simply controls everything and everyone, this might sound like an effective way to control cost. In the real world, the result will be fewer providers accepting Medicare payments, and worse care for today's seniors.

The Medicare Trustees, for instance, have concluded that Obamacare's cuts "will not be viable." Medicare's chief actuary has called the cuts "unrealistic" (noting that they "could become unsustainable even within the next 10 years"), and testified that "almost every expert I have talked to thinks there is only a limited likelihood that that could work in the longer term." A recent report by the government's Centers for Medicare and Medicaid Services said that Obamacare's funding approach would be "inadequate" and quoted Health Affairs warning that reduced payments "could jeopardize Medicare beneficiaries' access to mainstream medical care."

President Obama knows exactly what this will mean. In his own words, sharp cuts to the payments that Medicare makes to providers will "jeopardize ... our seniors' health care." You can watch him explaining at length how reduced Medicare reimbursements will harm seniors in this address from 2010. In that context he was referring to the threat of failing to extend the "Doc Fix" for another year, thereby triggering a 21% cut in payments that would cost approximately $280 billion to avoid over ten years. Obamacare's $415 billion in cuts over ten years are deeper.

If Medicare refuses to pay for services, seniors will be denied care. A recent survey by the Physicians' Foundation indicates that Obamacare will compel more than half of doctors to close or significantly restrict their practices for Medicare patients. Additionally, the government estimates that 15 percent of hospitals, skilled nursing facilities, and home health agencies will begin losing money and have to consider cutting off Medicare patients from care.

These are the largest cuts, but the President ignores them when describing how Obamacare affects Medicare. They begin in 2013, affecting today's seniors immediately.

The Second Source Of Cuts Is A $156B Reduction In Funding For Medicare Advantage. Medicare Advantage (MA) allows seniors to use government funding to acquire a private insurance plan, rather than have the government pay for care directly. The popular program currently covers 13 million seniors, or approximately one in every four Medicare enrollees.

President Obama and his campaign have justified his cuts to MA as nothing but a reduction in "insurance company subsidies." The only problem is that these so-called subsidies are in fact payments for health insurance that today's seniors rely on. In other words, they are what most Americans would refer to as... Medicare.

The President made a straightforward promise to seniors. "Here's a guarantee that I've made: If you have insurance that you like, then you will be able to keep that insurance. If you've got a doctor that you like, you will be able to keep your doctor." But the government now reports that, thanks to Obamacare, fully half of the seniors who would use MA will lose access to their plans.

Massive Cuts Are Not Good For Medicare. It is unfortunate that this even needs to be said, but the Obama campaign insists on suggesting that these cuts for today's seniors are somehow a good thing for Medicare, and that the cuts have extended the program's life.

This is false, and the Centers for Medicare and Medicaid Services has said so: "financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions." Even President Obama, back before he would say anything to hold on to power, acknowledged as much: "you can't say that you are saving on Medicare and then spend the money twice." The $716 billion that Obamacare cuts from Medicare gets spent on expanding Medicaid and subsidizing exchanges. It is gone. Not a dollar of it is left to spend at any point in the future on Medicare.

Nor is it true, as the President has claimed, that the money gets spent within Obamacare on benefits for seniors. For instance, addressing the Medicare Part D coverage gap only uses $20 billion of the funds. In fact, the new Medicare-related spending is so insignificant that the current CBO score does not even bother mention it. It reports that Obamacare spends $642 billion on Medicaid expansion, $1,017 on exchange subsidies, $23 billion on tax credits, and that is all. One might forgive seniors for wondering whether strengthening Medicare is really the goal.

Mitt Romney And Paul Ryan Will Restore The Medicare Funding That Seniors Paid For And Deserve To Receive. Governor Romney and Congressman Ryan believe Obamacare was a terrible mistake, and have repeatedly made clear that they believe it must be repealed in its entirety. This includes repeal of President Obama's $716 billion in Medicare cuts that slash provider payments and Medicare Advantage and threaten seniors' access to care. Once Obamacare has been wiped off the books, America can move forward with patient-centered health care reforms that improve access and control cost, as well as with entitlement reform that protects Medicare for current seniors while strengthening it for future generations.

Romney and Ryan also believe that we must act to reduce waste, fraud, and abuse throughout the federal government, including within Medicare. That is why, in the same speech where he outlined his fiscal plan that included the repeal of Obamacare and reforms to Medicare, Governor Romney also highlighted the need to tackle improper payments. Similarly, the broader Romney-Ryan health care reforms to control costs throughout the system — e.g., greater choice and competition, tort reform, the block grant of Medicaid, etc. — will lead to lower costs for Medicare as well. But savings must come from lower prices in the marketplace, not from the government cutting support for the coverage and care on which seniors are depending.

So to be clear, Mitt Romney and Paul Ryan have the same vision for the future of Medicare. The plan put forward by Governor Romney in November 2011, and the bipartisan one put forward in December 2012, take the same approach that (a) makes no changes to Medicare for those over 55; (b) starting in 2022, transitions Medicare to a premium support model with competitive bidding to determine support levels, (c) offers traditional Medicare as an option competing in that system, and (d) means-tests the premium support so that lower-income seniors receive the most generous assistance. 

In the short-term, Romney and Ryan both believe that Obamacare must be repealed in its entirety, and they both believe that savings realized in Medicare must be preserved for the Medicare trust fund. The only "difference" in their approaches has been that the House Budget authored by Congressman Ryan uses the post-Obamacare baseline for Medicare spending for the ten-year budget window whereas Governor Romney's budget uses a pre-Obamacare baseline. But the principles are the same: repeal Obamacare, prevent the President's raid of Medicare, and pursue the long-term reforms they have both outlined to strengthen the program for future generations.

Only President Obama threatens access to care for seniors and cuts off the insurance plans that millions rely on, all to pay for a federal takeover of the health care system that barely affects seniors. If he believes this is the right approach, he should defend it instead of refusing to even acknowledge that it is what he has done.