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In the Nation's Interest

Another Punctured Trial Balloon?

By Joseph Minarik

Two troubling stories hit print this week.  They are troubling because they bode ill for the prospect of meaningful Medicare reform, and therefore for a budget deal.

The later of the two appeared in this morning’s Washington Post.  It uses poll results to show that voters in key swing states — Florida, Ohio, and Virginia — strongly oppose the premium-support Medicare model of Governor Mitt Romney and Representative Paul Ryan.  At least 70 percent of seniors responded to the poll that they want to retain Medicare as a system of guaranteed benefits, rather than receiving fixed-dollar premiums to choose among alternative plans.  In Florida, 65 percent of the entire population favor the current system.

On the question of whom they trust to deal with the Medicare program, respondents favored President Obama by 19 percentage points in Ohio, 15 percentage points in Florida, and 13 percentage points in Virginia.  In a different poll, strikingly, respondents in these states who consider Medicare to be an important issue favor President Obama by 59 percent to 36 percent; those who do not consider Medicare to be an important issue favor Governor Romney by 54 percent to 36 percent.

The Romney campaign challenged whether the poll accurately reflects what the informed opinion of citizens would be.  In the words of the Post story:

    Romney campaign spokeswoman Andrea Saul said the poll findings were “irrelevant” because the question on the type of Medicare overhaul that Romney advocates did not accurately describe the plan. In an e-mail, she said that respondents were not told that Romney has promised not to change Medicare for Americans older than 55.

    She said it also was misleading to present voters with the alternative of leaving Medicare as is, “considering the program will go bankrupt.”

    “Words matter,” Saul said. “None of those descriptors were in the question, and that wildly changed the understanding of Governor Romney’s plan.”

    The poll question did not mention Romney or Ryan by name.

This substantive criticism of the poll seems justified — but also irrelevant, if it devolves into a post mortem of the ultimate election results that contends that the voters were misinformed.  Misinformed ballots count just as much as the others.

Which leads to the second press story, which appeared in this Wednesday’s Politico, a Washington paper.  David Rogers, an old-hand Capitol Hill reporter (formerly of the Wall Street Journal), tracks down some key decisions that Representative Ryan made about the formulation of his Medicare “premium-support” proposal in his budget resolution.  The key takeaway is that a crucial parameter — the cap on the rate of growth of the premium support payments to beneficiaries — has been torqued up and down, with enormous impact on the assumed future level of Medicare premiums, to reconcile the desired future size of the budget deficit with the desired size of the budget resolution’s proposed tax cut.

In recent years, “excess cost growth” — the margin by which the growth of the annual cost of serving each Medicare beneficiary exceeds the rate of growth of per capita gross domestic product (GDP) — has been in a range of roughly 1.0 to 2.5 percentage points.  House Budget Committee Chairman Ryan’s first budget resolution, proposed in early 2011 for fiscal year 2012′s budget, put a cap on Medicare premium growth at the rate of growth of the consumer price index (CPI).  That would be an enormous cut from the recent observed rate of cost growth — in effect, the cut would equal the entire “excess cost growth” rate of 1.0 to 2.5 percentage points per year plus the approximately 1.0 to 2.0 percent per year rate of growth of productivity in the economy.  (The rate of growth of productivity constitutes approximately the difference between the rate of growth of consumer prices and the rate of growth of nominal per capita GDP — which itself is approximately equal to the sum of the rates of growth of productivity and of prices.)  So the slowdown in premium-support-payment growth under the first Ryan budget resolution would be considerable, leading the Congressional Budget Office (CBO) to project that the Ryan plan would entail a large shift of the cost of the program from the payroll taxpayers to the elderly themselves, in the form of higher out-of-pocket premium payments.

The back-story about that initial Ryan Medicare plan is recounted here.  But basically and for current purposes, that extraordinarily rigorous, even harsh, provision set the tone for all of the subsequent debate.  The cap on premium-support-payment growth, far tighter than proposed by anyone else, was easily characterized by Democrats as needed to “pay for” tax cuts for the “rich.”  But Democrats did not stop there.  They went on to attack the underlying program as “ending Medicare as we know it” — turning the program into a “voucher,” to “pay for tax cuts for the rich.”  From the polling results, it appears that these attacks have worked, at least thus far.

Since that time, Representative Ryan has moderated his Medicare plan.  As the Politico story and our earlier blog post linked above detail, Representative Ryan subsequently collaborated with Senator Ron Wyden (D-OR) to propose a version that retained traditional Medicare as an option, and set a more generous premium growth-rate cap.  But when he released his second (FY 2013) budget resolution, Chairman Ryan tightened the cap again — not nearly to its original version, but lower than the rate on which he had agreed with Senator Wyden.  That destroyed any Ryan argument that his plan was “bipartisan” — and as the Politico article explains, gave Democrats one more firm handle on the contention that the Ryan Medicare plan was designed to “pay for tax cuts for the rich.”  And meanwhile, despite the changes, Democrats continue to use figures relating to the impact of the original Ryan plan in their attacks.

Republicans say that Democrats are mischaracterizing the current Ryan Medicare plan.  Democrats say that Representative Ryan is voucherizing Medicare to finance regressive tax cuts.  Deciding who hit whom first is a little like designating the villain in a schoolyard fight.  You can refer to the security camera for evidence, but the answer will depend on when the recording starts.  In this instance, some might argue that running the video back to 1985 — the occasion of a bitter Social Security vote in the Senate — would not be too early.

But the stakes now are much greater than who goes to detention.  Representative Ryan’s Medicare proposals in his budget resolutions were like trial balloons; and the problem with trial balloons is that they tend to get shot at.  Too often, good proposals that are sent up for ill-considered test flights wind up discredited in the subsequent consequential debate.  CED believes that some form of premium support is the only way to slow the unsustainable growth of healthcare costs — in both Medicare and the private sector.  But one must fear that this presidential campaign could render such an option non-viable in the political realm.

Is there some exit from the current mutual stranglehold to an affordable, high-quality Medicare system?  Perhaps the two sides can find linguistic loopholes in their campaign rhetoric.  Of perhaps some modifications of the current Medicare Advantage program can introduce cost-responsible beneficiary choice without violating all of the election-year promises.  But the picture does not look bright — in fact, it looks even more like a replay of the blundering into World War I.