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On Mitt Romney, Medicare and Making the Math Work

Mitt Romney’s tax and jobs policies have seen extensive examinations in recent days. In the debates and elsewhere, there have been lively exchanges on the Romney/Ryan plan to have insurance exchanges and premium support for Medicare.

But to my astonishment, the debates and analyses of the Medicare plan ignore or gloss over a key element of the Romney/Ryan position, one that puts every other promise about government spending, deficits and the present and future of the Medicare program into code blue.

The key element of the plan is that benefits in the Medicare program and its fundamental structure will not be touched for 10 years. Here are the key, and related, promises made by the governor and his running mate: Not one dime of benefits for current Medicare recipients, or those over 55 today, will be touched; changes in the program, moving to premium support with competition for insurance in exchanges, will not start for 10 years. Not one dime of the $716 billion cut from the Medicare program by President Barack Obama and Congress as part of the 2010 overhaul will be cut. 

And the Romney/Ryan administration will move much more swiftly and effectively to reduce America’s debt and move the budget toward balance, while pledging to cap all federal spending at 20 percent of the gross domestic product.

Many commentators, including the New York Times’ David Brooks, have endorsed the Romney/Ryan Medicare plan over the approach of the Obama administration, underscoring that our long-term debt problem cannot be tackled without tackling entitlements, starting with Medicare, and reducing their growth path, and that the premium support approach, with its competition, is the right way to go.

There is much to commend the idea of premium support — but what happens if Romney/Ryan does not even begin the reform or move in any way to address the growth of Medicare for 10 years? In the meantime, without contemporary changes, the Centers for Medicare and Medicaid Services projects that Medicare will grow an average of 6.3 percent a year over the next decade, and Medicare as a share of the GDP will grow by about a third, to more than 6 percent alone. 

All government spending on health, without major change, is projected to grow to 50 percent of all health spending in the country, or to 10 percent of the GDP — accounting for half of all government under Romney/Ryan, with the rest divided among defense, interest and everything else. With a concomitant promise to put a floor under defense of 4 percent of GDP, that means, according to the Center for Budget and Policy Priorities, a cut for all programs other than Social Security and defense, by 32 percent by 2016 and 53 percent by 2022. 

Waiting 10 years before tackling Medicare, meaning much larger deficits, is what prompted Ryan to include in his budget the full $716 billion in cutbacks in Medicare outlays over the coming decade, a sum that was necessary to enable him to project a balanced budget by the mid-2030s. 

Taking out the $716 billion, as Romney has pledged, moves the balance date to sometime in the 2040s. If the country waits until 2022 to reform Medicare, from a much larger base, moving to reduce debt, reduce government as a share of the GDP, or balance the budget, will require a different glidepath to bend the Medicare cost curve — meaning much larger and swifter cutbacks in the growth of the program than would be applicable now.

That’s not all. The $716 billion in cuts in growth of Medicare, mostly taken from providers, extends the solvency of the program by eight years, to 2024. Taking it out, according to Medicare’s actuary, would move the date for Medicare insolvency to 2016 — in other words, during Romney’s first presidential term. 

Keeping the program intact would then require either that premiums paid by Medicare recipients go up or that provider payments go down — or that reforms in the interim, which in turn would deeply affect current Medicare recipients, could stave off insolvency or extend the life of the program. Any of those options will violate one of the promises on the table — protecting all 55-and-older Americans in the program from any disruption or change in their benefits while also restoring the $716 billion reductions in the 2010 health care law.

The political appeal behind pledging not to touch Medicare benefits for current and soon-to-be seniors is obvious. The political appeal of attacking the president for slashing the Medicare program by $716 billion and pledging to restore it is equally obvious. The political appeal of promising to cut deficits and debt and cap government spending at 20 percent of  the GDP is also apparent. 

But the combination of the three is utterly inconsistent and impossible. Something has to give — the question is what. It is that question the 113th Congress will have to confront immediately if Romney wins, with no palatable answer.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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