Mitt Romney’s Medicare Mythology

Mitt Romney laid out his Medicare reform plan at the “Defending the American Dream” summit in Washington, DC this afternoon, endorsing a Paul Ryan-like privatization scheme that would do more to shift costs to seniors than reduce overall health care spending. Below are the top four health care myths from Romney address:

CLAIM 1: “[Obama is] the only President in modern history who has cut Medicare for seniors.”

FACT: Many presidents have made changes to Medicare since 1965, including Republican idol Ronald Reagan. Reagan 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 more efficiently. As a result of the changes, Medicare saved $49 billion by 1986, far exceeding what even the Congressional Budget Office had predicted.

CLAIM 2: “And he put the future of Medicare in the hands of 15 unelected bureaucrats…President Obama’s so-called Medicare reforms could lead to rationing of care or denial of care to seniors on Medicare.”

FACT: The board will be composed of doctors, economists, and consumer representatives who will be confirmed by the Senate and will be tasked with designing a savings plan if health care spending increases beyond a certain threshold. The proposal is statutorily prohibited from rationing benefits or increasing co-pays and will go into effect unless Congress acts to alter the proposal or discontinue automatic implementation.

The health law does not cut the current Medicare budget; it slows the growth in the program by removing $500 billion from future spending over the next 10 years. The cuts help stabilize Medicare by eliminating overpayments and slowly phasing in payment adjustments that encourage greater efficiency. As a result, the law extends the life of the Medicare trust fund by nine years and allows seniors to retain all of their guaranteed Medicare benefits.

CLAIM 3: “Competition will lower costs and increase the quality of health care. That’s the answer for Medicare. The federal government will pay seniors for the coverage they choose with a level of support that ensures that all can obtain the coverage they need.”

FACT: Competition in Medicare hasn’t lowered health care costs. In fact, managed care — as it currently exists as an option through Medicare Advantage — lacks the bargaining power of the traditional Medicare program and has produced only limited savings. Private plans are currently receiving a subsidy from the federal government to offer additional benefits, but are often less efficient and charge more for the same coverage. In a “premium support” system, private insurers would also have an incentive to cherry pick the healthiest beneficiaries, increasing costs for seniors who choose to remain in fee-for-service coverage. The subsidy from the federal government, meanwhile, will not keep up with actual health care costs, forcing seniors to pay more for coverage every year.

CLAIM 4: “The eligibility should slowly increase to keep pace with increases in longevity.”

FACT: Raising the age would increase overall system costs and save the federal government money by shifting costs to most of the 65- and 66-year-olds who would lose Medicare coverage, to employers that provide health coverage for their retirees, to Medicare beneficiaries, to younger people who buy insurance through the new health insurance exchanges, and to states. In fact, the Kaiser Family Foundation found that raising the eligibility age to 67 would cause an estimated net increase of $5.6 billion in out-of-pocket health insurance costs for beneficiaries. Seniors in Medicare Part B would also face a 3 percent premium increase since younger and healthier enrollees would be routed out of Medicare and into private insurance.