President Obama has seized on Republican proposals to overhaul Medicare as a top campaign issue, saying that the GOP plan to add a private insurance option would end seniors’ guarantee of government health care. But behind the election-season politics, influential experts who have advised Obama on health care are open to a future for Medicare that includes competition among private insurance plans.
The drumbeat against privatizing Medicare was loud and clear at last week’s Democratic National Convention and over the weekend as Obama campaigned in Florida and made Medicare a top issue. Obama has warned that the plan from GOP nominees Mitt Romney and Paul Ryan would cost seniors $6,400 more a year for their health care.
It may not be what voters hear on the campaign trail from Obama and his surrogates, but converting Medicare from a government program that covers all of seniors’ health needs into subsidies that seniors use to buy private health insurance is the future—not the apocalyptic event Democrats would have voters believe.
One private e-mail exchange illuminates this point well. In e-mail exchanges with the staff of the White House-appointed fiscal commission that were obtained by National Journal, David Cutler and Jonathan Gruber, who have both advised Obama, gave qualified support to a Medicare voucher plan offered by Ryan and former Clinton budget director Alice Rivlin in talks to reduce the deficit.
Cutler and Gruber are both hot shots of the health economics world. Cutler is a professor at Harvard, Gruber at MIT. Both advised Obama on health care in the 2008 campaign, and both had major roles in helping develop Democrats’ 2010 health care law. When they offer counsel, the White House is listening.
Staff from the National Commission on Fiscal Responsibility and Reform — which was led by former White House chief of staff Erskine Bowles and former Sen. Alan Simpson — asked Cutler and Gruber in November 2010 for their thoughts on the Ryan-Rivlin plan, which did not keep traditional Medicare as an option for seniors. Both experts offered suggestions to make it more palatable to commission Democrats. Neither balked at the plan, which is arguably more conservative than the Medicare plan offered by GOP presidential nominee Mitt Romney.
“How about this … removing the special status of [traditional] Medicare,” Cutler wrote. He then suggested giving an executive board created by the Democrats’ health care law the option of “moving the Medicare population into the exchanges.”
“That would be the same as the voucher,” Cutler concluded.
In other words, Cutler wasn’t just recommending that the Democrats incorporate vouchers into Medicare, something the Obama campaign is squarely against now. He was also proposing that the federal government move seniors into insurance exchanges through a much-criticized executive-branch Medicare board. That is a proposition you won’t hear in talking points from either Cutler or the Obama campaign.
Cutler now says he was only proposing an idea for Medicare if insurance exchanges are “shown to work well for the non-elderly population,” by getting people into good plans and lowering costs.
“If you show me evidence that something works, I am in favor of doing more of it,” Cutler said in an e-mail to National Journal. But that caveat was not included in his 2010 e-mails with fiscal-commission staff.
Gruber also said he approved of the Ryan-Rivlin plan in 2010 e-mails to fiscal-commission staff, as long as the insurance market reforms of the Democrats’ health care law are kept in place.
“So overall I like this proposal for Medicare – SO LONG as it is built on top of health reform,” Gruber wrote in 2010. “Without broader health reform, I don’t think it works.”
Gruber now says that economists don’t know enough yet to move the majority of Medicare enrollees into private-insurance plans. As part of the effort to expand coverage to the uninsured, President Obama’s health care law would establish insurance exchanges for people younger than 65 to buy private health care. Gruber said that this is a better way of testing out new approaches, adding that it would be “stupid” to experiment first on the older and sicker Medicare population.
“We are getting better, but we are not quite there yet,” Gruber said in an interview. “But premium support is ultimately where we need to be.”
The complicated politics of Medicare and private competition are also at play in some of the Obama administration's own policies. As National Journal reported on Saturday, Obama's Health and Human Services Department is giving states leeway and funds for pilot programs that would move some of the poorest and most vulnerable Medicare patients into managed-care programs.
Regarding the broader future of Medicare, Gruber agreed that any plan shifting the majority of the program's beneficiaries out of the government-run Medicare program and onto private plans would “end Medicare as we know it,” a phrase Obama and his surrogates have often repeated on the trail.
“It does. I don’t think it’s a lie,” Gruber said. “In theory, [premium support] is not wrong. In practice it’s not ready yet.”
There are three key problems that still must be worked out, Gruber said. First, policymakers have to figure out how to keep insurance companies from cherry-picking healthy people and essentially forcing the sickest patients on to traditional Medicare, which would drain the program of money. Second, policymakers must find a way to make sure insurance companies design benefits so they are easy-to-understand for beneficiaries, and don’t trick seniors into buying more expensive plans that aren’t suitable for them. Third, they have to figure out just how quickly government checks for seniors to buy coverage could grow.
Still, Gruber said he could see Medicare becoming a premium-support-style plan within a five-year timetable, after the Affordable Care Act’s health insurance exchanges start enrolling an estimated 30 million people into insurance plans in 2014.
“In the first few years of the insurance exchanges we will learn a lot,” Gruber said.
Of course, anything five years away would require action in the upcoming presidential term, whether it belongs to Obama or Romney. It is unclear if Obama would be willing to approach any premium-support-style plan for Medicare — even if it meets the caveats his external advisers have now laid out. The Obama campaign did not return repeated requests for comment.
The Cutler and Gruber e-mails must be considered in the context of the challenge of securing support for long-term deficit-reduction measures. In any serious effort to rein in deficits, health care costs, mainly through Medicare, are the albatross that neither party can get off its neck. The Democrats’ health care law contains dozens of pilot programs and billions of dollars to test new ways to reduce health care costs by restructuring how hospitals and doctors are paid. But it isn’t enough to change the deficit outlook now. So it makes sense to test every theory you can.
Meanwhile, Cutler continues to warn that the Romney-Ryan Medicare plan would be catastrophic for seniors.
“Mitt Romney — like his counterparts on the campaign trail and Paul Ryan — would end Medicare as we know it, turning it into a voucher program,” Cutler wrote in March memo for the Obama campaign.
“Some Republican plans, including Romney’s, offer traditional Medicare as an option for seniors. But whether the plans force new retirees out of traditional Medicare immediately or steadily raise its cost over time, the result in the same.”
That public statement does not jibe with Cutler’s 2010 private e-mail, which proposed having the executive-branch Medicare board simply move seniors into exchanges to buy their own coverage, where traditional Medicare would not be an option. Cutler says he criticized the Romney-Ryan plan because the way they are designed will “bleed out traditional Medicare.”
“Nowhere in the campaign memo do I say that private plans are a bad idea for Medicare,” Cutler said in an e-mail to National Journal. “Indeed, my recent JAMA paper explicitly says that such plans could be more efficient than traditional Medicare — though the case is not completely clear.”
But Cutler’s JAMA article ultimately concludes that premium support plans “may offer” a solution for Medicare, if the Democrats' health care law fails to slow health care costs.
He attributes the differences in his 2010 e-mail and what he says now for the campaign and in public articles to “trying to explain health care economics to people who are not economists or health care specialists.”
“I agree, people should read my articles and books. But if they don’t, I need to communicate in pieces,” Cutler wrote.