Response to Comments of “Obama’s Medicare Half-Truth”

I guess somebody liked my post Obama’s Medicare Half-Truth because it was picked up and re-posted on The Health Care Blog.

As is typical of my pieces that appear there, it sparked a bit of a debate (my other posts on The Health Care Blog to date are here, here, and here). Normally I would respond to comments on the same site they appear. But I have a lot to say, want to use hyperlinks, and prefer to have more editorial control so in this case so I’m making an exception and responding on my blog.

I do not have time to address every comment raised in the debate and won’t. Below I touch on what I feel are the most important points. Before doing so, one note to new readers coming here from The Health Care Blog: If you comment here I expect you are aware of my comments policy.

The Title. Some commentators objected to the title of the post. They did not like that I characterized Obama’s statement about Medicare as a “half-truth.” Actually, this is not only my judgment but also that of Some may worry that others will misunderstand my point or misuse my title to promote anti-reform propaganda. I give readers more credit. I think they will read beyond the title. As a blogger with a current three figure readership I am not terribly worried about fueling the anti-reform movement. (The title used at The Health Care Blog is not my responsibility.) Moreover, there are plenty of other sources for propaganda fodder. I stand by my title, and I encourage readers to write their own blog posts on this topic or others with titles more to their liking.

The Liar Charge. Some readers were concerned that my reference to Joe Wilson’s “you lie” charge in the first sentence of my post would be misunderstood to relate to Medicare. They correctly point out that Wilson’s outburst pertained to the coverage (or, really, the lack thereof) of illegal aliens under the reform proposals. The version of the piece that currently appears on my site makes it clear I am talking about two different issues. I referenced Joe the Liar as a means of bouncing off the current focus on that unfortunate incident.

I sure hope readers didn’t think I did not know what Wilson was referencing. Readers of this blog know that I don’t make stuff up and that I go to reasonable lengths to check my facts. Where appropriate and/or necessary I link to other credible sources. On the Wilson “you lie” charge I did just that. If you follow the link in the first sentence it will take you to a video in which it is as plain as day what Obama was talking about when Wilson lost control of his emotions.

So, maybe I was being too cute in playing off the Wilson incident. In light of the response I give myself no marks for style. Mea culpa! Let’s move on.

The Proportion in MA. Some issue was made about the importance of the size of the Medicare beneficiary population enrolled in MA plans: 23%. It is only these individuals who would be potentially directly affected by cuts to MA. (Actually, as I’ll get to below, all beneficiaries would be affected, but most of them positively.) Now, 23% is large, but it is nowhere near as large as the 77% of FFS enrolled beneficiaries who would not be negatively affected. The vast majority of Medicare beneficiaries have no direct stakes in the fate of MA. They ought to be at least indifferent on this issue.

The Main Point. Actually, those 77% in FFS Medicare have something to gain if payments to MA plans are cut, if they pay Part B premiums or are taxpayers. Part B premiums and taxes (payroll and income) support Medicare, including the MA program. The more MA costs the government, the more the 77% on FFS, and other taxpayers, pay. We all have a stake in Medicare costs (to government). Currently MA plans are paid, on average about 14% above the per beneficiary costs of FFS Medicare. (Let’s presume for now that all that extra money is converted into more generous benefits and/or lower beneficiary cost sharing. I don’t care to debate this as it is not essential for my main ponit, but it is debatable.)

This brings me to the main point of the post. It was fundamentally about the extent to which beneficiaries value current MA benefits relative to the lower level of (and less expensive) benefits in 2003, prior to the passage of MMA. (MMA is just the most recent of several statutes that raised payments to MA plans.) The paper I reviewed in the post shows that they don’t value it all that much: just $0.14 on the dollar. That means that there would be no change in beneficiary utility if the government paid beneficiaries in cash $0.14 for each dollar above 2003 levels it pays MA plans. The balance ($0.86) could be used for something else (like health reform).

Aside from paying beneficiaries cash, this appears to be exactly what Obama and the Democrats intend to do. Republicans too have proposed provisions that would reduce MA payments. So this is one of the elements of health reform with bipartisan support. CBO and MedPAC have been calling for MA payment reduction for years. It is probably inevitable that it will occur. I take it as a comfort that beneficiaries will not miss the extra benefits (above 2003 levels) that much, only at a monetized rate of $0.14 to the dollar.

Why should you believe my study on which this result is based? I can’t convince you to do so, but it may be useful to know the following. The work went through years of vetting before publication. The first stage was to get funding. If you’ve ever tried to get funding from the Robert Woods Johnson Foundation (the source for funding of the study on which my paper, and thus the post, was based) you know that there is a rigorous scientific review process with multiple stages of revision.

But that’s just the fist step. After my colleagues and I had completed the first (and second, and third) round of work we shared results at health policy and economics conferences and seminars. We did this for over a year, revising the methods in response to critiques. Finally, the paper itself underwent a very rigorous peer-review and revision process.

For a time, I am happy to entertain comments pertaining to the methods described in the paper. I refer readers to it and the HCFO Findings Brief that summarizes the study on which it is based, both of which are referenced in the original post.

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