Medicare: The latest round in the great American healthcare fight

The latest round of the great American healthcare fight centers on whether the private sector can save Medicare.

Both parties agree the entitlement program faces a financial crisis and needs to be fixed, but while the House GOP budget written by Rep. Paul Ryan (R-Wis.) relies on market competition to do so, Democrats say this would ruin the program.

Neither side is showing any signs of giving in, even with an upswing of GOP angst after the party’s surprising loss of a House seat in New York, where Democrats accused the Republican candidate of siding with Ryan.

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The victory has left Democrats vowing to hammer away at the controversial plan throughout the 2012 campaigns, which they hope will allow them to retain the White House and Senate and regain the House majority.

Ryan and other Republicans, on the other hand, say their message was distorted and demagogued, and that when people understand what the Ryan plan will actually do for the national healthcare system, they will be supportive.

Senate GOP Leader Mitch McConnell (R-Ky.) on Friday said Medicare reform would remain a part of the discussions on reducing deficits.

The part of the Medicare reform plan that has become a lightning rod deals with how the federally run health insurance system for senior citizens will change in a decade for recipients now 54 and younger.

“Starting in 2022,” according to Page 46 of the Ryan budget proposal, “new Medicare beneficiaries will be enrolled in the same kind of health care program that members of Congress enjoy. Future Medicare recipients will be able to choose from a list of guaranteed coverage options, and they will be given the ability to choose a plan that works best for them.”

Ryan predicted his proposal would be used as a weapon by Democrats before he introduced it, and Republicans have tried to cast the proposal as anything but a voucher program.

Ryan’s proposal states: “This is not a voucher program, but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.”

Rep. Tom Cole (R-Okla.) said Republicans don’t use the term because it doesn’t apply.

Cole, who sits on the House Budget Committee, told The Hill that what the Ryan plan sets up for people now 54 years and younger is “clearly not a voucher system.”

Cole said the term voucher implies that “you are left on your own with just a piece of paper. But, with the Ryan plan, that is simply not the case.”

“You choose from a list of plans that have been negotiated by Medicare. Your coverage is still guaranteed. It’s a system similar to the current Medicare Part D,” Cole said.

But Democrats say that what the Republicans are proposing is a voucher system, no matter what they choose to call it.

“What’s more important is its impact,” Rep. Chris Van Hollen (Md.), the senior Democrat on the Budget panel, told The Hill. “Under this proposal, the Medicare recipient has to eat a lot more of the additional costs.”

A recent report from the nonpartisan Congressional Budget Office estimates that under Ryan’s Medicare plan the federal government’s share of Medicare costs would fall to 39 percent of the actual medical costs in 2022 and to 32 percent by 2030. Seniors would be responsible for the rest of the bill.

Currently, according to the Department of Health and Human Services, Medicare covers about 70 percent of total medical costs.

Cole took issue with the CBO figures, calling them “dubious,” and noting that the agency “woefully overestimated the costs” of Medicare Part D, the Medicare prescription drug plan enacted during the presidency of George W. Bush.

“This is understandable because the CBO is limited in what it can include,” Cole said. “They cannot take competition and choice into account in their estimates.”

Cole and Republicans contend that competitive market forces will bring insurance costs down, so that, by the time the 54-and-younger set is in need of Medicare, the new system should be at least as cost-effective as the current system.

Van Hollen does not agree.

“The free market argument is not valid in the health insurance market,” he said. “If it was, there would never have been a need to develop Medicare in the first place.”

Medicare, which debuted in 1965, was created because the health insurance market could not adequately provide cost-effective products for the nation’s senior citizens, Van Hollen said.

“The notion that the private market will fix everything – history simply does not support it,” Van Hollen said.

Cole and other Republicans have criticized Obama and Senate Democrats for not offering their own solution. He referenced a recent report by the Medicare Board of Trustees that estimated the system could be bankrupt as early as 2024. 

“Change nothing, spend everything and go broke – that’s seems to be the only Democratic plan,” Cole said.

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But Van Hollen responded that the Democratic plan already exists and is called the Affordable Care Act, passed in 2010 and incessantly attacked by the GOP.

“The ACA provides significant reforms to reduce the costs of Medicare, and not on the backs of seniors,” Van Hollen said.

Van Hollen said that many of the provisions of the Obama healthcare reform have yet to go into effect, and many of these are intended to streamline Medicare and reduce costs.

“According to the trustees, the ACA has already extended the life of the Medicare program,” he said.

Considering that the repeal of the ACA – what Cole and many others call “Obamacare” – was the first order of business for the new Republican-controlled House this January, the GOP appears as likely to accept the ACA as the solution to Medicare’s difficulties as the Democrats seem ready to accept the Ryan plan.

Get ready to rumble.