Reader Question – Won't there be cuts to Medicare?

A reader writes:

You keep saying that it’s not true that this will be paid for by cuts to Medicare.  But I keep seeing that there are cuts to Medicare waste in the bill?  Who is telling the truth?

I just got this one on the radio yesterday as well. If you can find it on replay, you can hear my answer.  But when it comes to writing it agian on the blog, I make it a point not to restate things when others have done it well.  With that said, here is Ezra Klein (emphasis mine):

At issue are payments to the Medicare Advantage program. Medicare Advantage is a Medicare carve-out that allows private insurers to offer plans for seniors. The original vision for the program was simple enough: Private competition will drive costs down. The private market, as you may have heard, is more efficient and effective and adaptable. No reason seniors shouldn’t benefit from that ingenuity. So Medicare would give private insurers the money it would spend on a beneficiary, and the private insurers could try to do a better job with it.

Medicare Advantage, however, failed in its mission: prices shot up. Private insurers complained that they couldn’t compete with Medicare for the same amount of money Medicare spends. So Republicans systematically increased reimbursement rates, and now Medicare has to pay the average private plan 114 percent what it would’ve spent to cover that beneficiary itself. That’s helped the private plans provide better service (as you would expect), and now 23 percent of seniors are in an Advantage plan.

Democrats don’t want to eliminate the Medicare Advantage program. But they want it to live within the same budget that Medicare uses. Republicans argue that pulling back these payments will force some Medicare Advantage plans to trim their benefits. That may well be true. But it is an argument against ever eliminating government overpayments to any program. It is an argument, in other words, for waste and abuse.

It is also an interesting moment of insight into the conservative philosophy on these matters. The problem with government programs, we’re often told, is that they are expensive and wasteful, and the private market could do better. But faced with an instance where the government program proved relatively lean and efficient, and the private market expensive and wasteful, Republicans have mounted a ferocious defense of the market’s right to continue burning through taxpayer dollars.

This is one of those hypocritical arguments that make me want to lose my mind.  You see, we’re paying – with tax dollars – more for private companies to do the same thing the government was doing already for less.  Private companies said that they cannot provide Medicare benefits to the elderly for the same amount that the government does.  Instead of sending them packing, the government started giving them more to do it.  That’s wasteful.  We can stop paying them extra.  If – for the same money – Medicare Advantage can’t provide the same benefits, people will go back to regular Medicare.  That’s not a cut.  That’s a return to fiscal sanity.  Moreover, it won’t affect the 77% of seniors who remained on regular Medicare at all!

Ironically, this is the same pitch you’d make as to why there should be a public option, but why even bother with a rational argument?

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