Romney/Romney: Sorting the Medicare Lies

Crossposted from Democratic Convention Watch

A lot of the chattering class view the choice of Paul Ryan as an easy win not only for President Obama, but a sure thing for holding the Senate and recapturing the House (or at least coming close enough to count). However, I've seen Paul Ryan up close and personal and he is incredibly good at speaking in a manner that convinces people his lies are truths. We must be ready! So, this is the first in a series, telling you what you need to know when people you know believe the dark side.

Romney/Ryan likes to say that President Obama cut $700 million (sometimes $500 million) from Medicare and that “they” are working to save it. To understand why this is an out and out falsehood, you need to understand the difference between defined benefit and defined contribution. 

In terms of retirement (and we'll get to how it applies to Medicare), defined benefit was a pension program. That is, the retiree received a set amount of money every month for the rest of his/her life. Defined contribution is a 401(k) program, where the potential retiree places a set amount of money in an account and hopes for the best in terms of payout.

Currently, Medicare is a defined benefit program. The “benefits” are things like doctor visits, medications, surgeries, durable medical equipment and hospital stays, to name a few. These are NOT specific dollar amounts, they are paid in terms of goods and services, whatever that costs the government. Yes, Medicare recipients are required to chip in, but the majority of the costs are covered by the program. 

Romney/Ryan wants to replace this with a voucher program. That is a defined contribution program: Medicare recipients would receive a set amount of dollars a month with which they can purchase health insurance.  Thus, Romney/Ryan would contribute to Medicare recipients care, but whether or not that would be enough to cover the cost of premiums, much less co-payments and deductibles is completely unlikely. If you doubt this, pretend that you're in your 60's and have a pre-existing condition, and then go price private health insurance. 

This changes the spread of costs between the government and individuals. Below is a chart from the Center on Budget and Policy Priorities (reprinted with permission) that shows things very clearly.


You may wonder why there is such a disparity in total costs. If you remember back to 2009 when DCW was all over the various health care proposals, the insurance companies take 15 – 30% in administrative costs out of every premium dollar paid, while it costs Medicare 2 – 4%. Plus, many more items would be excluded from the list of covered services. Remember, the Romney/Ryan plan would repeal the ACA, so there would be no holding down of premium costs because there would be no public option, not even for Medicare. There may well be, in their dreams, a Medicare “insurance” option, but it would be limited in terms of payouts. 

Let's get back to that huge $700 million cut. What the ACA did was to decrease the amount paid to doctors, hospitals, and durable goods providers. They did not cut the defined benefit to the recipients. The cut is also not current, it's a going-forward amount over 10 years. Further, the Ryan budget (as published) specifically includes the ACA cuts while repealing all other portions of the law.

So there you have it: the Medicare lies. Next in the series, the lies Ryan and Romney tell about themselves. By way of coming attractions: did you know, for example, that Ryan is a trust fund baby, went to college with government funds, and comes from a family that made its megamillions on government contracts? Yes, really.


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