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Obama and Romney on Medicare: The Basics Obama and Romney on Medicare: The Basics

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Obama and Romney on Medicare: The Basics


(AP Photo/Charles Dharapak/Carolyn Kaster)

With Rep. Paul Ryan, R-Wis., tapped as Republican presidential candidate Mitt Romney's running mate, Medicare has emerged as a top issue in the campaign, with both sides saying their plan will preserve the program while cuts in their opponent’s plan will rob seniors of the benefits they’ve come to expect.

Here’s a breakdown of the major features of the two candidates’ plans for the program, laying out how each would change life for current and future beneficiaries, and where future budget savings are achieved.



President Obama has already spelled out his vision for Medicare reform in his 2010 health reform law. The law pares back about $700 billion in Medicare growth over the next 10 years through several mechanisms and launches some payment reforms designed to reduce wasteful use of health care by beneficiaries.

  • The Medicare reforms in the 2010 Affordable Care Act would preserve the structure of the current program. Most seniors would continue to receive insurance from the government-run program, while a fraction would be able to get private insurance through Medicare Advantage plans, though the law cuts back on subsidies to insurers who offer the plans.
  • The health reform law reduces the rate at which hospital pay rates grow each year, under the theory that other incentives in the law will improve hospital productivity. It also cuts special payments to hospitals that provide care to a disproportionate share of poor or uninsured patients, because the law is designed to insure many of those patients.
  • The law sets an overall growth cap for the program and tasks an independent board with keeping the program inside that budget. Per-capita growth for the program must be less than the growth in gross domestic product plus 1 percent. The board has the authority to change rates paid to providers, but not benefits or cost sharing by seniors.
  • The law creates a series of payment reforms designed to encourage doctors and hospitals to deliver higher-quality care instead of just more of it. Those reforms include bonuses to providers who hit quality targets, penalties for hospitals with subpar performance, and new programs that pay providers bonuses if they can deliver care to patients less expensively. Some of these pilots are spelled out in the law, while others are authorized under a new “innovations center” tasked with launching experiments.



There are some small differences between Romney and Ryan’s proposals on Medicare, but they share a basic core — the assertion that competition and choice can drive down costs more effectively than a government monolith:

  • Instead of a government-run insurance plan for seniors, Romney would convert Medicare into a fixed-value voucher that seniors can use to pay insurance premiums. Traditional Medicare would remain a choice, but would have to compete with private insurance plans for customers. The value of the voucher would be determined by competitive bidding among the plans, including the public program.
  • Romney has been vague about the rate at which the  Medicare voucher's value would grow over time, but he has indicated that it would be more slowly than inflation in the health care industry. In an editorial board interview with the Washington Examiner in December, he said, “I think the key principle is this: It’s not going to grow at an open-ended rate driven only by medical inflation.” (Ryan has been more specific on this point. His budget says per-capita costs would grow at the rate of GDP plus half of 1 percent; his policy white paper with Sen. Ron Wyden, D-Ore., says it would grow at GDP plus 1 percent.) The growth rate will dictate how much the program ultimately saves the federal government — and how much cost will potentially be shifted to seniors if competition fails to slow down cost growth.
  • Romney would raise the retirement age over time. He has not spelled out an exact formula, but has indicated that the eligibility age should rise in accordance with increases in life expectancy.
  • The plan would not affect current retirees or anyone now age 55 or over. That means that current seniors will continue to get traditional Medicare, and that any budget savings from the program won’t kick in for years.
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