2012 campaign

Hey Paul Ryan, Obamacare Doesn't Steal From Medicare


Vice presidential candidate Paul Ryan addressing the Republican National Convention in Tampa.

Photograph by Andrew Harrer/Bloomberg

Vice presidential candidate Paul Ryan addressing the Republican National Convention in Tampa.

To hear Paul Ryan’s speech at the Republican convention Wednesday night, you’d think President Obama was robbing from the elderly. “The greatest threat to Medicare is Obamacare, and we’re going to stop it,” Ryan told the crowd.

He went on: “Even with all the hidden taxes to pay for the health-care takeover, even with new taxes on nearly a million small businesses, the planners in Washington still didn’t have enough money. They needed more. They needed hundreds of billions more. So they just took it all away from Medicare. Seven hundred and sixteen billion dollars, funneled out of Medicare by President Obama.”

The Romney campaign has been making this argument a lot lately. The $716 billion line gets people pretty riled up. When Ryan delivered it Wednesday, the convention floor roared. The problem is, the claim is flat-out wrong. “The Affordable Care Act doesn’t steal anything from Medicare,” Henry Aaron, a health-care expert at the Brookings Institution, tells me. “It actually improves Medicare’s finances. No matter how you slice it, the Affordable Care Act strengthens medical hospital insurance.”

Here’s how: Money in the Medicare trust fund comes mostly from payroll taxes, premiums, and general revenue. The trust fund then pays that money out to health-care providers. Part of the trust fund was expected to go bankrupt by 2016. Obamacare actually saves it money in a variety of ways. From 2010 to 2019, Obamacare trims payments to providers by $196 billion. They agreed to take a cut because they will get so many new patients, thanks to the individual mandate. Another $210 billion will be generated by raising Medicare taxes on the wealthy (that’s households earning more than $250,000). Another $145 billion comes from phasing out overpayments to Medicare Advantage. About 25 percent of seniors use the program—in which private plans compete for Medicare dollars—instead of traditional fee-for-service Medicare. Under Obamacare, the government has to keep Medicare Advantage costs in line with those of traditional Medicare. More savings come from streamlining administrative costs.

Paul Ryan is conflating cutting Medicare spending, which Obamacare does reduce, with cutting Medicare benefits—which Obamacare preserves. The spending cuts are in place to keep the system from going bankrupt. When the Congressional Budget Office scored the health-care law, it found that the law keeps Medicare’s trust fund solvent for eight more years, until 2024.

Mitt Romney’s Medicare plan would also cap spending, for the same reason—to keep the program going. Romney would just do in a different way—by giving seniors the choice of traditional fee-for-service Medicare or a fixed benefit for purchasing private insurance. When Ryan proposed a very similar plan last year, the CBO said it would add a few thousand dollars to seniors’ out-of-pocket costs.

Ryan said Wednesday night that “Medicare is a promise, and we will honor it.” What he didn’t say is that he proposed a policy that would … take money from seniors.

Dwoskin is a staff writer for Bloomberg Businessweek in Washington. Follow her on Twitter: @lizzadwoskin.

Later, Baby
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