Fiscal Fact Checker: What did President Obama do to Medicare?

Aug 17, 2012

A recent advertisement from the Romney-Ryan campaign claims that “Obama Cut $716 billion from Medicare… to pay for Obamacare.” It continues by claiming that “The Romney-Ryan plan protects Medicare benefits for today’s seniors and strengthens the plan for the next generation.”

Is this true?

Let's look at the facts: 

It is true that the Affordable Care Act (“Obamacare”, or the ACA) cut Medicare spending to finance a new health program. The number that the Romney-Ryan ad cites is from a Congressional Budget Office (CBO) report that estimates repealing the ACA would increase Medicare spending by $716 billion through 2022. This funding was used primarily to offset the coverage expansion in the ACA – though the net effect (including the increased revenues) of the bill would reduce total deficits by $109 billion.

Importantly, most of the cuts do not directly increase costs to beneficiaries, as implied, but instead reduce payments to providers, pharmaceutical companies, and health insurance companies. A small portion of the cuts do come from increasing Medicare premiums for certain higher earners. Additionally, beneficiaries could in some cases be indirectly affected by lower payments to providers, insurance companies, and drug companies.

President Obama’s budget would continue these cuts and proposes an additional $276 billion in Medicare reductions to reduce the deficit, however, only $35 billion of that would come from beneficiaries. Governor Romney has proposed repealing the ACA in its entirety, and to date has not proposed any changes to Medicare over the next decade other than by enacting medical malpractice reform.

Chairman Ryan’s budget would repeal the coverage provisions of the ACA, but would keep most of the $716 billion in Medicare cuts. In addition, Chairman Ryan’s budget would retain the $88 billion in Medicare cuts from the “sequester” (from a 2% across-the-board provider reduction) and calls for some additional Medicare cuts.

On a comparable basis, President Obama supports about $990 billion of past and future Medicare cuts through 2022. The Ryan budget supports $930 billion. And Governor Romney has so far voiced support only for enacting tort reform – which would save $30 to $40 billion from Medicare.

Understanding the Differences between Obama, Ryan and Romney:

President Obama supported using most of the $716 billion in Medicare savings to help pay for coverage expansion, and supports enacting further savings for deficit reduction. Congressman Ryan supports largely retaining those same Medicare savings, but repealing the coverage expansions and using the money – along with addition savings – for deficit reduction. Governor Romney believes those Medicare reductions, along with coverage expansions, should be reversed – and has not made any significant short-term Medicare proposals for deficit reduction.

Governor Romney and Congressman Ryan support implementing a premium support system in Medicare for those currently below the age of 55 (when they reach eligibility), which could result in substantial long-term savings. President Obama uses the Independent Payment Advisory Board (IPAB) to make further provider payment changes to slow Medicare cost growth. It should be noted that both Ryan and Obama support in the long-term the same growth rate per beneficiary for Medicare - GDP + 0.5 percent. 

Important Take-Aways:

Regardless of whether the ACA is repealed, we need to be vigilant to control Medicare costs. Although some lawmakers may not want to retain all of the Medicare reductions from the ACA, many of them stem from ideas with broad bipartisan support – particularly in the policy community – and should at least be kept on the table as we consider ways to slow the growth of Medicare.

It is absolutely vital that we find a way to control the long-term growth of Medicare, but we cannot afford to wait ten more years to begin enacting cost-control measures. A number of proposals made by both sides of the aisle, as well as many bipartisan groups, could start immediately and allow Medicare to deliver care on a more cost-effective basis. Some of those options are available in a recent paper of ours that you can read here.

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