Princeton students should be more cautious in outsourcing their own critical thinking to oversimplified, often biased media analysis. Liberals surely believe that these cuts are justified by the value of the new programs they finance. Conservatives obviously disagree. But let’s not obscure the Obamacare debate by pretending the costs of the law are not real.
In order to offset some of the $1.9 trillion in new Obamacare expenditures, Congressional Democrats chose to make major cuts to Medicare. They thought the media and the public wouldn’t catch on if they spun the cuts well and they’re testing that theory in this election. Democrats claimed that the cuts would merely limit “overpayment” to providers. Moreover, they argued these cuts made the health care insurance overhaul fiscally responsible by noting that these cuts would extend the life of the Medicare hospital insurance trust fund.
The latter claim regarding the trust fund was true but misleading. By trust fund accounting rules, Obamacare has, indeed, extended the life of the bonds held by Medicare. But this extension only puts the program and the country on a more sound footing if the government holds onto the dollars represented by those bonds.
Unlike Rep. Paul Ryan, whose budget retains the Medicare cuts in its baseline but preserves the money to ensure that Medicare obligations can be fulfilled in years to come, President Obama has instead committed the dollars from these cuts to the new health care exchange subsidies that will kick in later this decade. The trust fund IOUs may stay in the Medicare coffers for a few additional years, but by the time they are redeemed, the government will have spent the money that backs them on Obamacare outlays. Reductions in Medicare spending should be applied to deficit reduction in order to strengthen the government’s ability to finance the program in future years. The program should not be treated as a piggy bank to offset new present day spending.
More disturbing is the nature of these cuts. The Obama campaign argues these provisions do not cut a single guaranteed Medicare benefit, which is true as far as it goes. (Strange that Democrats don’t use the same language when describing the proposed Romney-Ryan Medicare exchange private plans, which will guarantee the same benefits as traditional Medicare. Must be an oversight on their part.) But those guaranteed benefits only matter if doctors agree to honor Medicare’s commitments.
The bulk of Medicare cuts are reductions in the reimbursement rates for doctors providing Medicare services. In other words, they’re price controls, and they will lead to shortages of care available for Medicare seniors. According to testimony before the House Budget Committee by Rick Foster, the chief actuary of Medicare, “Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.” Outside that period, things will surely get worse as the Independent Payment Advisory Board established by Obamacare will be charged with imposing even more drastic cuts.
Those of you with doctors in the family may be hearing they won’t take on more Medicare patients in the years to come. Ever wonder why?
The President may claim Republicans would end Medicare as we know it, but his own law has already done that. Our generation will bear the brunt of this style of entitlement “reform.” We’ll pay into Medicare all our lives, and by the time we retire, the program will be so worthless that many of us will opt for private insurance instead. Those of us who can’t afford it will be stuck in a broken system.
The alternative to price controls is the efficiency of market competition. Mitt Romney and Paul Ryan have proposed a plan for Medicare that will limit costs by allowing Medicare recipients access to private plans competing against the government’s own option to provide the same services. Low cost plans will receive full subsidies, and individuals will be able to choose to pay the difference for higher cost plans. Traditional Medicare will still exist, and if it is as efficient as liberals believe, it will thrive in this marketplace. More likely, individuals will receive the same care for less from the private sector. It’s a win-win scenario for patients and for the government, and it’s a more plausible mechanism for preserving the program for our generation than anything the President has proposed.
The members of the Editorial Board asked last week for the presidential candidates to engage in more substantive head-to-head debates. They must have missed the one Gov. Romney won in Denver last Wednesday. I hope they’ll pay closer attention to tonight’s skirmish between Vice President Biden and Rep. Ryan.
Jacob Reses is the president of College Republicans. He is a Wilson School major from Linwood, N.J. and can be reached at email@example.com.