PE: Morning Bell: Two Liberal Whoppers on Medicare

Amy Payne

October 2, 2012

A debate that has been fought largely over the airwaves is about to go head-to-head. Medicare reform is a huge part of that debate, and the left—bolstered by the media—has been promoting two huge falsehoods on the issue.

Several proposals from conservatives and liberals for Medicare reform, including The Heritage Foundation’s Saving the American Dream proposal, are based on a financing model called “premium support.” What that means: Medicare has a premium cost, just as other health insurance does. When the government makes a contribution (sometimes referred to as a “defined contribution”) toward paying your premium, that is called premium support. The difference with reform is that the government would no longer dictate to seniors which Medicare plan they would have to use. The government would still support the premium, but the seniors would have the option to choose from a variety of plans tailored to their needs, including traditional Medicare.


The concept is already working in several areas of Medicare, including Medicare Advantage plans and the prescription drug benefit program. Program savings in the drug program have been spectacular, and in Medicare Advantage and the drug program premiums have been stable. Patient satisfaction is very high in both programs.
But two whoppers are still circulating—let’s put them to rest once and for all.

1. “Vouchercare”

Vice President Joe Biden has described the Medicare reform proposal championed by Representative Paul Ryan (R-WI) and others as “Vouchercare.” Heritage expert Robert Moffit dispatches this claim with zero ambiguity:

There is no major Medicare reform proposal, including the Ryan proposal, that would issue future senior citizens a voucher (a certificate or coupon or a check for a fixed dollar amount) and then force them to fend for themselves — on their own – in negotiating with health-insurance companies…It’s all scary nonsense.

Under the left’s definition of “vouchers,” the existing Medicare drug benefit program is a voucher. Under the left’s definition of “vouchers,” the Federal Employees Health Benefits Program is a voucher. And under the left’s definition of “vouchers,” Obamacare’s insurance exchanges will be funded by vouchers in 2014.

This simply isn’t what we think of as a “voucher.” An example of a true voucher plan? The food stamp program. People are given vouchers, which they take to the store and use to buy something. Medicare reform proposals do not work this way.
Moffit plainly lays out the features of a premium support plan:

• It would provide direct payment from the government to a health plan of a person’s choice, including traditional Medicare, if that was the patient’s choice.
• Health plans, including employer-based retiree plans, would have to meet government standards, including benefit standards of the traditional Medicare program, plus new and much-needed protections against the costs of catastrophic illness.
• Plans would be offered like the Medicare Part D program, governed by existing Medicare insurance rules, meaning people could not be legally denied coverage or dropped merely because they are sick.
• Low-income Americans would be specially protected from unforeseen out-of-pocket cost hikes.
• All enrollees would benefit from an improved risk adjustment among plans in the competitive market to guarantee continuity of patient care and health-plan stability.

Use of the word “voucher,” with the accompanying mental picture of confused seniors wandering around with coupons in their hands, is merely a rhetorical scare tactic. It has no basis in fact.

2. The $6,400 Question
You’ve likely heard that reforming Medicare would cost seniors $6,400 out of pocket. This charge is based on a Congressional Budget Office (CBO) analysis relating to an outdated version of Ryan’s budget proposal.
This figure is meaningless and misleading for two reasons. Not only has Ryan’s proposal changed significantly since then, but the CBO has also admitted that its estimates would be limited—because it cannot account for the effects of competition on prices.
As Heritage’s Rea Hederman reports, “CBO director Douglas Elmendorf has publicly acknowledged that his agency does not have the methodological tools to accurately model Medicare premium-support plans and the impact of market competition.”
The most recent academic analysis indicates that introducing premium support into Medicare could save 9 percent in annual costs. In addition to reducing Medicare spending across the board, the more important effect would be the competition between plans—giving people options for their coverage plans and saving individuals money.
Share this article with friends so we can put these falsehoods to rest and move the debate forward.
MORE:
Why Medicare Premium Support Would Not Cost Future Beneficiaries $6,400 More by Rea Hederman
Medicare Reform Myths Debunked from Heritage Action for America
In-Depth: Premium Support: Medicare’s Future and Its Critics by Robert Moffit
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