It may come as a surprise that President Barack Obama and GOP vice presidential nominee Paul Ryan are pushing the same target rate for controlling federal spending on Medicare. Each would set it at half a percentage point higher than the growth rate of the economy – the gross domestic product – after a phase-in period.
Looking at their plans in more detail, however, their approaches to curbing costs are very different. And the practical effects on seniors are also likely to be different.
"There is a consensus, an agreement that Medicare is unsustainable," Ryan spokesman Conor Sweeney said in the spring after the House approved Ryan’s proposal as part of the budget resolution. "That's where the agreement is, and it's where the agreement ends."
That hasn’t changed. Republican presidential nominee Mitt Romney has embraced the broad outlines of Ryan’s proposal. Like Ryan, he would replace Medicare’s current defined-benefit coverage of all medical costs incurred by a beneficiary with a defined contribution toward premiums for private health insurance or traditional, government-run, Medicare.
While Democrats have criticized Ryan’s Medicare proposals for years, their attacks have become more vociferous since Romney tapped the House Budget Committee chairman as his running mate. Democrats charge that Ryan’s plan would raise out-of-pocket costs for seniors and ultimately destroy traditional Medicare. Republicans have countered with a spirited reprise of their claims from the 2010 congressional elections that Democrats already cut hundreds of billions of dollars out of Medicare as part of that year’s Affordable Care Act.
Here are some questions and answers about the Democratic and Republican approaches to moderating spending on the popular program, which covers 47 million seniors and disabled people.
1. If both Obama and Ryan are proposing a target growth rate of GDP plus half a percentage point for Medicare, shouldn’t federal spending be the same under both scenarios?
There are important differences. Ryan's plan, which would only affect people currently under age 55, would impose a hard cap on federal spending on the program.
Obama is proposing a softer cap. His proposal follows an effort in the 2010 health law to curb Medicare cost growth by tying the spending target to the Consumer Price Index in early years, and later on to the rate of GDP growth plus 1 percentage point. If federal spending per Medicare beneficiary is rising faster than that – a determination made by the Medicare actuary – then cuts would be triggered. The cuts would come as a percent reduction in Medicare spending, but they wouldn’t necessarily be sufficient to meet the target.
Later, in budget deficit reduction negotiations, Obama proposed to lower the target to the growth of GDP plus half a percentage point.