Romney vs. Ryan On Medicare’s Solvency

Via Twitter, David Phillippe pointed out today that Paul Ryan has directly contradicted Mitt Romney on how to extend the solvency of Medicare. At issue are cuts to Medicare included in both Obamacare and the House GOP budget engineered by Ryan, which now total $716 billion over the current budget window. Mitt Romney told CBS on Wednesday he would undo those cuts and restore Medicare’s payments to their prior level, and claimed this move would extend the program’s solvency:

ROMNEY: The president’s cuts of $716 billion to Medicare, those cuts are going to be restored if I become president and Paul Ryan becomes vice president… My commitment is, if I become president, I’m going to restore that $716 billion to the Medicare trust fund so that current seniors can know that trust fund is not being raided and we’re going to make sure – and get Medicare on track to be solvent long-term on a permanent basis.

Meanwhile, Ezra Klein notes that back in July, Paul Ryan told ABC’s George Stephanopoulos that the exact opposite approach would extend solvency:

STEPHANOPOULOS: Your own budget, which Governor Romney has endorsed, would also have [$716 billion] in Medicare cuts.

RYAN: Well our budget keeps that money for Medicare to extend its solvency. What Obamacare does is it takes that money from Medicare to spend on Obamacare.

Paul Ryan has the right of it — maintaining these cuts will extend the solvency of Medicare’s trust fund, while undoing the cuts as Romney insists will shorten its solvency. That’s because the cuts do not target seniors’ benefits, but rather the payment rates to health care providers. Overpayments to private insurers in Medicare Advantage are trimmed, overall provider payments are reformed to encourage efficiency, and reimbursements are tied to improved economic performance.

Since the securities flowing into the trust fund come from the payroll tax, which is not cut, the funding remains the same while the services-per-dollar those funds can purchase goes up. As a result, the solvency of Medicare’s trust fund is extended, and the gap over the next 75 years between Medicare’s funding and its expected payments shrinks.

Of course, Ryan’s implication that Obamacare uses the money from the cuts to pay for its own spending instead of extending Medicare’s solvency is also wrong. Trust fund accounting, which deals with Medicare’s solvency, is a conceptually separate framework from the unified budget accounting under which Obamacare’s spending falls. It’s perfectly feasible for the same cut to make room for new spending under the latter, while simultaneously improving Medicare’s solvency under the former. As Paul N. Van de Water put it, “That’s no different than when a baseball player hits a home run: it adds to his team’s score and also improves his batting average.”

So Romney contradicts Ryan on whether these cuts extend Medicare’s solvency, and both incorrectly claim Obamacare fails to do so. Welcome to politics.