Yesterday, Mitt Romney addressed a group of demonstrators protesting Medicare cuts outside of a town hall in The Villages, Florida. “I saw some signs out there, you may have seen them, that said ‘Keep your hands off our Medicare’” Romney said, “By the way, there’s only one person I know of that has cut Medicare. That’s the president of the United States.”
This is really wrong on two very, very big counts. First, Paul Ryan’s Medicare plan, which Romney applauded back in April, maintains the $500 billion in Medicare and Medicaid savings that are part of the Affordable Care Act and goes much further in shrinking the program. Second, many presidents have made changes to Medicare since 1965, including Republican idol Ronald Reagan who instituted a series of reforms that are strikingly similar to some of the payment changes included in the Affordable Care Act (policies Romney now refers to as cuts or price controls.)
For instance, Reagan adopted DRGs or Diagnosis Related Groups for paying hospitals under Medicare. As David Henderson explains, “the idea was to get out of cost-based reimbursement, which gave an incentive to have high costs, and replace it with a system of prices,” in which hospitals were paid a pre-determined rate for each Medicare admission. “But what made it a system of price controls was that the government, along with DRGs, made it illegal for hospitals to charge even a penny more than the price the government came up with.” As a result of the changes, Medicare saved $49 billion by 1986, far exceeding what even the Congressional Budget Office had predicted.