This is not your typical lawsuit against the Government. Plaintiffs here have sued because they don’t want government benefits. They seek to disclaim their legal entitlement to Medicare Part A benefits for hospitalization costs. Plaintiffs want to disclaim their legal entitlement to Medicare Part A benefits because their private insurers limit coverage for patients who are entitled to Medicare Part A benefits. And plaintiffs would prefer to receive coverage from their private insurers rather than from the Government.

Plaintiffs’ lawsuit faces an insurmountable problem: Citizens who receive Social Security benefits and are 65 or older are automatically entitled under federal law to Medicare Part A benefits. To be sure, no one has to take the Medicare Part A benefits. But the benefits are available if you want them. There is no statutory avenue for those who are 65 or older and receiving Social Security benefits to disclaim their legal entitlement to Medicare Part A benefits.

To be fair to Armey, there is apparently some significance to his desire to not simply refuse Medicare benefits, but also be declared ineligible for them — private insurers do not provide certain benefits to people who are Medicare eligible. Nevertheless, it is truly strange that Armey would seek this declaration. Why would someone decide to pay for inferior private insurance when they have the option of enrolling in Medicare for free, especially when Medicare is in many ways superior to private insurance?

The GOP has repeatedly argued that it would preserve benefits for existing seniors:

– PAUL RYAN: “If you take a look at our reforms…[they] don’t change any Medicare benefits for a person 55 or above.” [Fox News, 1/29/2012]

– MITT ROMNEY: “We will never go after Medicare or Social Security. We will protect those programs.” [TPM, 1/31/2012]

– ERIC CANTOR: “To today’s seniors, those 55 and older, we’re not going to touch those programs. For the rest of us, we realize these programs won’t be around in their current state and we have to change the nature of those programs for the rest of us.” [CNBC, 4/13/2011]

It’s very very likely that beneficiaries 55 and older would see changes in their Medicare benefits under Ryan’s plan. In 2022, newly-eligible seniors would have to enroll in a private plan, but existing beneficiaries (those who are over 55 today) would also have the option of leaving traditional Medicare. That opens up the possibilities of private plans trying to lure away the healthiest beneficiaries (as is currently the case in Medicare Advantage) and of health care providers abandoning traditional Medicare patients for the higher reimbursement rates of private insurers. For chronically ill seniors who are more likely to remain in fee-for-service Medicare this means two things: higher costs (as the healthier beneficiaries exit the risk pool) and fewer doctors.

The average Medicare enrollee will save approximately $4,181 from 2011 to 2021, while those with high prescription drug costs could save as much as $15,710 over the same period. Those with low drug costs should save roughly $2,964:

The report identifies three other sources of savings for Medicare recipients: 1) premiums for Part B physician and certain other services are expected to increase at a slower rate, 2) beneficiary copayments and coinsurance under Part A and B will increase more slowly because the Affordable Care Act slows the rate of growth in payments to hospitals and other providers, and 3) offer seniors preventive services at no additional cost.

Yesterday, the administration announced that a growing number of seniors are enrolling in Medicare Advantage plans and are paying lower premiums as compared to last year.

– Fatima Najiy

Interestingly, the growth in Medicare spending per beneficiary over the 2012–2022 period will only average “1 percent a year more than the rate of inflation” — compared to a 5 percent a year growth between 1985 and 2007 — as a result of “the anticipated influx of younger, healthier beneficiaries” and the constraining effects of the SGR formula and the limits on updates to payment rates for other services,” the CBO projects. Per-beneficiary spending will increase thereafter as a result of “rising drug costs” and “more generous benefits enacted in the Affordable Care Act.” Outlays will increase if Congress patches the Sustainable Growth Rate (SGR) and prevents a scheduled 27 percent fee reduction for Medicare doctors in March 2012, as lawmakers have pledged to do. “If payment rates stay as they are now through 2022, outlays for Medicare (net of premiums) would be $9 billion higher in 2012 and about $316 billion (or about 5 percent) higher between 2013 and 2022,” CBO concludes.

Expenditures on Medicaid, on the other hand, will decrease in 2012 “as states become responsible for a higher share of total costs than had been the case in recent years.” The program grow steadily between 2014 an 2016, when more lower-income Americans become eligible for Medicaid under health care reform. By 2022, about “95 million people will be enrolled in Medicaid at some point in the year, CBO estimates.”

SCARBOROUGH: That is the most shameful demagoguery that I have heard on the campaign trail yet this year. To tell senior citizens that the program that is going to bankrupt America unless we figure out a way to bend the cost curve, is going to be protected forever and can you believe that Barack Obama cut $500 billion from it? It’s just unspeakable…it is unspeakable, because this country is going bankrupt and Mitt Romney is trying to scare senior citizens — you know what? It’s what we called Mediscare in ’95 and ’96. It was pathetic when Bill Clinton did it it’s pathetic when Mitt Romney does it, it’s pathetic when he does it because of Medicare Advantage. Pathetic.

Watch it:

“And Mitt Romney’s on record as supporting Paul Ryan’s plan, which as far as I remember it, actually takes huge, makes huge savings/cuts to Medicare,” New York Magazine’s John Heilemann added. Indeed, the Ryan plan fundamentally transforms Medicare’s structure into a guaranteed contribution program, significantly reduces its growth rate, and actually maintains many of the savings included in the Affordable Care Act. Romney himself has introduced very similar reductions as part of his own Medicare proposal.

Ryan would do well to follow his own advise, as the indignant House Budget Committee chairman grossly misrepresented the Affordable Care Act and the details of his own Medicare premium support solution. Below is a brief fact check:

CLAIM — MEDICARE WILL GO BANKRUPT: “The Congressional Budget Office also says Medicare is going bankrupt in 2021. The trustees at Medicare say that there’s $37 trillion unfunded liability.”

FACT: The CBO says that one part of Medicare — Part A or hospital insurance — will become “insolvent,” not bankrupt. Dedicated revenues will not be sufficient to pay all of its bills and the hospital fund will meet about 90 percent of its commitments, rather than the full 100 percent. In the succeeding years that shortfall will slowly widen and then contract, so that in 2085, Medicare could pay out 88 percent of its obligations, the program’s trustees conclude. The savings in the ACA — lowering annual payment updates to providers — has actually extended the life of the trust fund by nine years.

CLAIM — NOTHING CHANGES FOR CURRENT SENIORS: “If you take a look at our reforms, which don’t change any Medicare benefits for a person 55 or above, and says for people 54 and below, when they’ll retire, they’ll have a list of guaranteed coverage options over by Medicare just like we do it in Congress and federal employees have, and we’re not going to subsidize the wealthy as much as everybody else.”

FACT: It’s likely that beneficiaries 55 and older would see changes in their Medicare benefits. In 2022, newly-eligible seniors would have to enroll in a private plan, but existing beneficiaries (those who are over 55 today) would also have the option of leaving traditional Medicare. That opens up the possibilities of private plans trying to lure away the healthiest beneficiaries (as is currently the case in Medicare Advantage) and of health care providers abandoning traditional Medicare patients for the higher reimbursement rates of private insurers. For chronically ill seniors who are more likely to remain in fee-for-service Medicare this means two things: higher costs (as the healthier beneficiaries exit the risk pool) and fewer doctors. Ryan’s proposal also does not resemble the “coverage options” of federal employees, because his “premium support” payments do not keep up with health care costs. The FEHBP’s do.

CLAIM — ACA WILL RATION CARE: “Put that in comparison to the president’s health care law. This year, he appoints 15 unelected, unaccountable bureaucrats to a board called the IPAD, Independent Payment Advisory Board, and their job is to put price controls and therefore rationing on Medicare for current seniors. So, the president’s law takes half a trillion dollars out of Medicare to spend on Obamacare and now he’s putting this new rationing board in place, which will lead to denied care to current seniors.”

FACT: The 15 members of the IPAB are appointed by the President, but confirmed by the Senate. The group is tasked with making binding recommendations to reduce expenditures in the Medicare system, unless Congress acts to alter the proposal or discontinue automatic implementation. Significantly, their proposal to reduce spending cannot “include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums…increase Medicare beneficiary cost- sharing (including deductibles, coinsurance, and co- payments), or otherwise restrict benefits or modify eligibility criteria” (Section 3403 (page 409) of the Affordable Care Act stipulates.)

Frank Donatelli

Start with Medicare. The trustees who run the program have been telling us for some time that the current benefit and financing system is unsustainable. Indeed, its 2010 report notes that the Medicare “trust fund” will be exhausted five years sooner than previous estimates.

The passage of “Obamacare” has made this deplorable situation worse. This law does increase various Medicare taxes and includes some cost-containment features. However, as Medicare’s own actuary has pointed out, “Obamacare” uses the savings not to strengthen Medicare but to start another unfunded entitlement. The changes — a $500 billion cut in the program — do nothing to shore up the existing Medicare trust fund.

The $500 billion in cuts Donatelli is touting is not coming out of the current Medicare budget. Rather, the law slows the program’s growth by reducing spending over the next 10 years,” phasing out overpayments to private insurers in Medicare Advantage, eliminating waste, and lowering annual payment updates to encourage more efficient care.

As a result of these savings, reform improves the sustainability of Medicare — precisely what Donatelli is so concerned about! The latest Medicare trustees report concludes that if Congress had failed to pass the ACA, the Health Insurance Fund would have started to run out out of money in 2016. But because of the law, the trust fund won’t face a shortfall until 2024.

– Zachary Bernstein

You can read the full policy analysis of Wyden’s proposal here and here, but Democrats are worried that Wyden is also undermining the politics of Medicare reform by providing Republicans with “bipartisan” cover for their ultimate goal — complete privatization of the Medicare program:

“It neutralizes the weapon,” Sen. John Cornyn, chairman of the National Republican Senatorial Committee, said in an interview. [...]

Asked if there was frustration among Senate Democrats with Wyden over Medicare, Senate Majority Whip Dick Durbin (D-Ill.) told POLITICO: “I’ve heard that sentiment expressed.” But he quickly added that he’s also heard “some say that initiating a bipartisan conversation that will preserve Medicare is worthwhile. So let’s see if the Ryan-Wyden approach meets that test.”

Privately, the criticism is more biting. “Democrats believe in Medicare and, rather than bolster it, Wyden undermined a great issue for us all so he could grab a couple of headlines,” one furious Democratic source said. “Just embarrassing.”

Wyden stresses that his plan preserves traditional fee-for-service Medicare as an option for seniors — and it does, while also shrinking its impact and market power and undermining its effectiveness. What’s even more troubling, however, is that Wyden is cashing in one of the Democrats’ most important chips in this debate: Medicare’s large market power and success in containing health care costs. He is accepting the GOP’s alarmism about Medicare’s future — which isn’t nearly as dire as they suggest — and laying Medicare on the table as a legitimate target for further cuts. That kind of approach not only muddles the Democrats’ political message (we will strengthen this efficient government-sponsored program, while Republicans aim farm it out to private insurers), but also greatly increases the likelihood of greater privatization and coverage erosion in the future.

“There is a second item on our national must-do list: we must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three quarters of a century respectively, it’s not surprising that they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too. [...]

“The mortal enemies of Social Security and Medicare are those who, in contempt of the plain arithmetic, continue to mislead Americans that we should change nothing Listening to them much longer will mean that these proud programs implode, and take the American economy with them. It will mean that coming generations are denied the jobs they need in their youth and the protection they deserve in their later years.

Watch the speech:

The comments were meant to lay the groundwork for the GOP’s renewed push for Medicare privatization, a rebranded effort — hinted at last week by House Speaker John Boehner (R-OH) — to cloak Rep. Paul Ryan’s (R-WI) “premium support” plans in bipartisan colors and tout more moderate initiatives that would add more legitimacy to the GOP approach. In reality, Daniels’ rhetoric about Medicare’s impending demise is greatly exaggerated.

As Maggie Mahar has points out, according to the program’s trustees, by 2024 Medicare’s Hospital Insurance (HI) won’t be exhausted, but rather “insolvent” — which simply means that dedicated revenues will not be sufficient to pay all of its bills. The hospital fund will meet 90 percent of its commitments and in the succeeding years that shortfall will slowly widen and then contract, so that in 2085, Medicare could pay out 88 percent of its obligations.

That’s hardly an implosion, but it also doesn’t mean that we can allow the program to grow at its current rate. Fortunately, the Affordable Care Act will reduce Medicare spending by $86.4 billion from previous projections and lower the average annual Medicare spending growth by 1.4 percentage points between 2012 and 2019. “By 2019, it is projected to grow 7.7 percent—0.9 percentage point more slowly than we projected in February 2010,” a Center for Medicare and Medicaid Services (CMS) report has concluded.

In fact, far from misleading Americans that “we should change nothing,” Obama has proposed to accelerating those savings by expanding the authority of the Independent Payment Advisory Board (IPAB) — a 15-member commission that would make recommendations for lowering Medicare spending to Congress if costs increase beyond a certain point — and finding more savings in the Medicare program.

Republicans, however, reject these measures or other reforms that would actually slow Medicare’s growth rate. After all, the success of any of these changes would undermine the political argument for privatization.

GINGRICH: I publicly favored Medicare Part D for a practical reason. That reason is simple. The U.S. government was not prepared to give people anything — insulin, for example. But they would pay for kidney dialysis. They weren’t prepared to give Lipitor but they would pay for open heart surgery. That’s a terrible way to run medicare. I’ll say this in Florida. I’m proud that I publicly advocated Medicare Part D. It saved lives. It’s run on a free enterprise model, includes health savings accounts and includes Medicare alternatives which gave people choices.

Romney pressed harder, arguing that Gingrich was “getting paid by health companies” that benefited from the prescription drug bill. “You then meet with Republican Congressmen and encourage them to support the legislation you can call it whatever you’d like,” he said. “You are being paid by companies at the same time you’re encouraging people to pass legislation which is in their favor,” Romney charged. Watch it:

Gingrich has long argued that by investing in prescription drug coverage, Medicare would “avoidable treatment and care” that could occur from “not covering the drugs.” In 2003, shortly after founding his for-profit Center for Health Transformation, Gingrich returned to Capitol Hill to deliver a powerful speech touting the Medicare Modernization Act and ultimately convinced conservative Republicans to support the bill 204-to-25. “Newt was critical to the passage of Medicare Part D,” recalls John Feehery, who was Speaker Dennis Hastert’s chief spokesman at the time.

Gingrich’s health care clients also benefited from his advocacy. As the New York Times reported last month, Gingrich “worked to ensure that it would cover new diabetes treatments sold by Novo Nordisk, a Danish drug company and a founding member of Mr. Gingrich’s center.” “According to a presentation by a Gingrich aide to health care executives in 2004, the center was ‘working to insure’ that Medicare covered insulin products manufactured by Novo Nordisk, and Mr. Gingrich planned to meet with members of Congress ‘to help them develop priorities’ on fighting diabetes.” The devices were ultimately covered by the government.

The Congressional Budget Office (CBO) initially estimated that the MMA would add to the deficit by $395 billion between 2004 and 2013 and the actuaries at the Center for Medicare and Medicaid Services (CMS) now project that the program will cost the government $16.1 trillion “through the infinite horizon.” But ironically, Gingrich convinced Republicans to support the measure by appealing to their sense of fiscal responsibility. “If you are a fiscal conservative who cares about balancing the federal budget, there may be no more important vote in your career than one in support of this bill,” Gingrich wrote to lawmakers in a newspaper ope-ed.

ThinkProgress intern Fatima Najiy contributed to this report.

WALLACE: Will the House pass a budget this year, and will it have serious entitlement reform in it again such as last year’s proposal by Paul Ryan for premium supports (ph) as a way to change and reform Medicare?

BOEHNER: Well, that was one option on how we could save Medicare. There are other ideas. Paul Ryan and Ron Wyden, the Democrat senator from Oregon, came up with a bipartisan proposal. The idea here is that we’ve got to make changes to Medicare. Otherwise, it will not be there for seniors who count on it. So we will do a serious budget. But also, remember this: on Tuesday, it will be 1,000 days since the United States Senate passed a budget. One thousand days, and they have yet to pass a budget. How do you deal with the long-term fiscal problems that we have if you refuse to come to an agreement on a budget?

WALLACE: So I want to make it clear, because there had been some thought that maybe because of the hits that you guys took last year, you weren’t going to pass a budget. You are going to pass a budget again this year?

BOEHNER: Of course we are.

Watch it:

House Budget Chairman Paul Ryan (R-WI) echoed Boehner’s sentiment at the House Republican retreat in Baltimore on Friday, telling Reporters, “We’re not backing off on the kinds of reforms that we’ve advocated, but we have to write it.” “We’ve done more to normalize the idea of premium support than anything at all. We’re confident that these are the right policies. There’s an emerging bipartisan consensus that’s occurring on doing premium support reform to Medicare is the best way to save Medicare.”

Only one Democrat in the Senate, Ron Wyden (D-OR), has publicly embraced a watered down version of Ryan’s premium support proposal, but the plan — which would preserve traditional Medicare as an option for seniors and offer premium support credits that would do a better job of keeping up with health care costs — was rejected by Congressional Democrats and the White House. They argued that no version of premium support can achieve real savings without adverse consequences for beneficiaries, noting that the proposal could significantly shift costs to beneficiaries and fail to fully prevent private health insurance plans from attracting healthier beneficiaries and driving up premiums for those who remain in traditional Medicare.

In fact, there is very little evidence to suggest that private plans have or can do a better job of lowering spending. Medicare’s sheer size and bargaining clout have contributed to its greater success in controlling health care costs and the program has introduced market innovations and payment reforms that were later adopted by private industry. The Affordable Care Act will build on this structure by investing in new demonstration projects and payment reforms that will reward providers for delivering care more efficiently and — ultimately — lower the rate of growth in health care spending.

Santorum is a strong supporter of Ryan’s original Medicare privatization scheme to completely eliminate traditional Medicare as an option for seniors and has promised to accelerate its implementation. Medicare, however, has a better track record of controlling health care costs than private insurers and has introduced market innovations and payment reforms that private plans later adopted.

The study found 35.3 percent of new enrollees in a fitness membership benefit plan reported “excellent” or “very good” health, compared with 29.1 percent in the group without the benefit. The number of plans offering the memberships rose to 58 in 2008 from 4 in 2002, the researchers said.

The five largest insurers are looking to expand their roles in offering government-subsidized health plans as the number of Americans covered by them grows under the 2010 U.S. health law. In doing so, the companies may try to “cherry pick” members who are more likely to be healthy using the fitness memberships, said Amal Trivedi, an assistant professor of community health at Brown University in Providence, Rhode Island, and the author of the report released yesterday.

Gym memberships are certainly a good preventive benefit for some beneficiaries, but as Trivedi points out, they also allows insurers to skim the cream off the top and attract the healthiest and most profitable risk pool, leaving older and sicker seniors in traditional Medicare. That is precisely the problem with the GOP’s (and Ron Wyden’s) Medicare premium support proposals. It is very difficult, from a policy standpoint, to counteract private insurers’ market-driven desire to maximize returns (by trying to keep out sick and expensive applicants) with existing risk adjustment mechanisms. They are clearly less than fully effective in preventing cherry picking and any Medicare proposal that does not level the playing field by requiring companies to offer standardized benefits and preventing too much variation is asking for a serious adverse selection problem.

CBO expects that most people affected by the change would obtain health insurance from other sources, primarily employers or other government programs, although some would have no health insurance. Federal spending on those other programs would increase, partially offsetting the Medicare savings. Many of the people who would otherwise have enrolled in Medicare would face higher premiums for health insurance, higher out-of-pocket costs for health care, or both.

CBO estimates that raising the MEA would reduce Medicare outlays, net of premiums and other offsetting receipts, by $148 billion from 2012 through 2021. By 2035, Medicare’s net spending would be about 5 percent below what it otherwise would be—4.7 percent of GDP rather than 5.0 percent under current law. A rise in the MEA would cut by a larger percentage the number of years during which the average person would receive Medicare benefits, but the percentage reduction in outlays would be smaller because the people affected would be the youngest beneficiaries, who tend to be the healthiest and thus to require the least costly health care.

But this is just one small part of the cost picture. CBO isn’t calculating how raising the age would actually increase overall system spending “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.” As the Center On Budget and Policy Priorities’ (CBPP) Paul N. Van de Water has concluded, that estimated increase in costs could “total $11.4 billion — twice the net savings to the federal government” in 2014 alone.

And then of course there is the human cost of essentially privatizing Medicare for the youngest beneficiaries (those between the ages of 65 to 67). As the CBO’s own brief concedes, “Some people would end up without health insurance. People without health insurance are likely to receive lower quality care and pay more than insured people do.” Much more on that point here.

Proponents of the plan argue that opening up Medicare to greater private competition would ultimately lower health care costs, but today Santorum admitted that if the GOP’s “trust” in insurers’ ability to lower spending is misplaced, seniors will be forced to spend more on health insurance:

SANTORUM: In Medicare, we’re saying, trust the private sector to drive down costs and it’s a belief that that will happen. And if it doesn’t of course seniors will have to participate more in the increasing cost of health care. So there is a downside, I freely admit that.

Watch it:

In fact, there is very little evidence to suggest that private plans have or can do a better job of lowering spending. Medicare’s sheer size and bargaining clout have contributed to itsgreater success in controlling health care costs and have allowed it to introduce market innovations and payment reforms that were later adopted by private industry. Here is the per-beneficiary comparison:

As Paul Krugman points out, “if Medicare costs had risen as fast as private insurance premiums, it would cost around 40 percent more than it does. If private insurers had done as well as Medicare at controlling costs, insurance would be a lot cheaper.”