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Romney Medicare Plan Draws a Stark Contrast

President Obama and Mitt Romney agree on one thing about Medicare:the differences between them are huge. Each man says his opponent’s policies would end Medicare as it now exists, undermining the rock-solid guarantee of health care for older Americans.

Jill Fromer | Photodisc | Getty Images

Given the emphasis both parties are placing on health care as a defining political issue, their contrasting approaches to the government-run health insurance program serving 49 million people are certain to command considerable attention in both the presidential and Congressional campaigns.

President Obama illustrated the importance he is placing on Medicare when, in a slap at Mr. Romney, he vowed this month: “I will never allow Medicare to be turned into a voucher that would end the program as we know it. We’re not going to go back to the days when our citizens spent their golden years at the mercy of private insurance companies.”

Mr. Romney, who would limit the government’s current open-ended financial commitment to Medicare, contends that Mr. Obama has no workable plan to prevent Medicare from going bankrupt. Under the Romney proposal, the government would contribute a fixed amount of money on behalf of each beneficiary, and future beneficiaries could use the money to buy private insurance or to help pay for traditional Medicare.

Mr. Romney says he offers not just a policy change, but “a dramatic change in perspective and philosophy,” and he cites his Medicare proposal as evidence of his willingness to tackle the cost of popular entitlement programs.

The president’s 2010 health care law, Mr. Romney says, “could lead to the rationing or denial of care for seniors,” as it will squeeze nearly a half-trillion dollars from the growth of Medicare over 10 years while putting the program’s future “in the hands of 15 unelected bureaucrats.”

Obama administration officials say the 2010 law improved Medicare’s finances and extended the life of its hospital insurance trust fund. They say that the “bureaucrats” — on the Independent Payment Advisory Board — are a backstop to help control costs and cannot recommend rationing care, increasing premiums or cutting benefits.

Mr. Obama assails the Romney proposal for the same reason he denounced a similar plan devised by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee: the government contribution, he says, would not keep up with the rising cost of health care, so Medicare beneficiaries — older Americans and people with disabilities — would have to pay more of the cost. Under the proposal, Mr. Obama says, the government would save money by shifting costs to beneficiaries.

Aides to Mr. Romney say his proposal is very similar to the latest version of Mr. Ryan’s plan, drafted with Senator Ron Wyden, Democrat of Oregon. But, the aides say, the Ryan plan offers more specifics than Mr. Romney has provided to date.

A Key Issue

The side that can win public opinion on Medicare is likely to find its political position strengthened in November; Medicare is extremely popular with older Americans, who turn out to vote in large numbers and have historically trusted Democrats more than Republicans on health care. But that trust has been undermined by continual Republican criticism of the 2010 health care law, which Republicans say cut Medicare to help offset the cost of covering the uninsured.

Mr. Obama also wants to slow the growth of Medicare spending. The 2010 law throttles back payments to health care providers, including hospitals, nursing homes and health maintenance organizations.

Under the law, Mr. Obama is testing new ways of delivering care, notably by encouraging doctors and hospitals to team up to coordinate care, to see if they save money and keep patients healthier. In his latest budget, Mr. Obama proposed $300 billion of further savings in Medicare, most of it from providers.

Of the 49 million Medicare beneficiaries, one-fourth already receive comprehensive care through H.M.O.s and other private plans run by companies like UnitedHealth, WellPoint and Humana. The number could rise significantly under Mr. Romney’s proposals.

Medicare actuaries and trustees say Medicare’s hospital insurance trust fund will be exhausted in 2024 under current law. And Medicare spending could surpass estimates based on current law. The law requires cutbacks in payments to providers that many experts see as unrealistic and unsustainable.

Premium Support

The idea espoused by Mr. Romney — known as premium support, because the government helps pay premiums — has been around for more than 15 years. Liberal Democrats tend to view it as a right-wing idea to privatize Medicare. But Medicare’s financial problems may ensure that “premium support” remains part of the political debate, whoever wins the election.

More moderate Democrats like former Senator John B. Breaux of Louisiana and Alice M. Rivlin, former director of the Congressional Budget Office, have endorsed the idea, with important qualifications.

The traditional fee-for-service Medicare program should be one of the options for beneficiaries, along with commercial insurance plans, they say.

Under Mr. Romney’s proposal, “traditional Medicare will compete against private plans.” How to ensure fair competition is a huge challenge, given the size of the traditional Medicare program and the government’s power to regulate private plans.

A summary of the proposal, provided by the Romney campaign, explains how it would work: “Traditional fee-for-service Medicare will be offered by the government as an insurance plan, meaning that seniors can purchase that form of coverage if they prefer it. However, if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged by the government will have to be higher, and seniors will have to pay the difference to enroll in the traditional Medicare option.”

This prospect alarms many Democrats. But Mr. Romney says, “Lower-income seniors will receive more generous support to ensure that they can afford coverage, and wealthier seniors will receive less support.”

Another crucial question is how the federal contribution to private plans would be calculated, updated and increased from year to year. If the government starts with the current level of Medicare spending and increases it to keep pace with the Consumer Price Index or the size of the economy, it would cover a smaller and smaller share of medical costs, which have historically grown faster than those benchmarks.

Under his proposal, Mr. Romney says, the government contribution would be based on competitive bidding. An insurer’s bid would reflect its estimate of the cost of providing a standard package of benefits to a typical beneficiary. Mr. Romney says tax increases are “off the table” as a way to deal with Medicare’s financial problems. He would gradually increase the eligibility age for Medicare, now 65, by one month a year. In the long run, he says, the eligibility age should rise with life expectancy.

The type of competition Mr. Romney wants to see in Medicare is strikingly similar to the competition that is supposed to drive down commercial insurance prices under Mr. Obama’s health care law. Under the law, people under 65 could choose among competing health plans offered through an insurance exchange in each state, and the government would subsidize premiums for lower- and middle-income people.

Ms. Rivlin pointed to a curious paradox: “Republicans object to exchanges in the Affordable Care Act and favor them in Medicare, while Democrats take the opposite, equally inconsistent, position.”

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