Medicare, Medicaid and Obama

  • Article by: JILL BURCUM , Star Tribune
  • Updated: September 20, 2011 - 8:54 AM

Photo: Susan Walsh, ASSOCIATED PRESS - AP

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President Obama’s newly-released deficit reduction plan calls for $320 billion in savings over 10 years from Medicare and Medicaid, two popular government-run health programs serving the elderly, the disabled and the poor.

That sum sounds like a lot but context is critical, especially given the shameless demogoguing that always accompanies any proposed Medicare changes.

A closer look at the numbers is also sobering. President Obama deserves credit for tackling these programs but his proposed savings — a mix of cuts, taxes and higher user fees — are relatively small cost-control measures.

The proposed savings occur over 10 years, delivering $32 billion a year on average. That still sounds like a lot — until you consider the overall amount of spending on both programs.

In 2011, the federal government’s costs for Medicare, which provides health care for those 65 and over, are projected at $485 billion.

Federal spending this year on Medicaid is projected at $275 billion. Medicaid, which is paid for jointly by the feds and the states, pays for much of the nation’s nursing home care as well as health care for the poor and disabled

That totals $760 million in annual federal spending on both programs. What Obama is proposing is a 4 percent annual cut at 2011 spending levels. That percentage will be smaller in years ahead because of rising health care costs.

The changes outlined by Obama Monday will bend the cost curve somewhat — and will come on top of other savings projected from the federal health reform law —  but they won’t be enough to put these programs on the path to sustainability.

Whether these changes become reality is questionable. Obama did not push to raise Medicare’s eligibility age of 65, which would have been unpopular but truly groundbreaking.

The changes he does propose aren’t likely to sit well with some of the nation’s most powerful special interest groups — the elderly, health care providers and drug manufacturers.

Will drug companies settle for lower Medicare payments? Will providers accept new payment systems or reductions in federal funds to offset training costs or uncompensated care?

Will seniors support a $25 increase in Medicare Part B deductibles for new beneficiaries or an increase in the higher premiums for higher-income beneficiaries?

Republicans, of course, have offered a different option: Wisc. Rep. Paul Ryan’s plan to eventuall replace Medicare with vouchers for those who are now under 55.

That plan, which would shift too much of the program's costs to the elderly, deserved to get more backlash than support, but it was at the very least an attempt at broad reform.

Obama’s plan is much smaller in scope, but it’s unclear if a nation averse to taxes and entitlement cuts even has the stomach for that.

Jill Burcum is a Star Tribune editorial writer.

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