Romney, however, rejects any price controls on providers and relies on competition to hold down costs. His plan calls for repealing Obamacare and replacing Medicare with a fixed-benefit, voucher-style system that would allow private companies to compete for business, beginning in 2023. Repealing the Affordable Care Act would also mean that the program could go bankrupt by 2016 unless Romney proposes reduced benefits or raises the cost to seniors to avoid it.
Under Romney’s plan, people would use the voucher to purchase either private insurance or traditional Medicare and all plans would be required to offer at least what traditional Medicare provides. Medicare and Medicare Advantage would remain for those in or near retirement today, but would be replaced with privately run insurance plans that have yet to be designed.
“Exactly how you do it is one of those things you have to work out,’’ said Jonathan Burks, policy advisor to Romney. “The goal isn’t necessarily to achieve budget savings, the goal is to remain solvent for a long time and provide the level of service and care seniors have earned.’’
According to a study released Monday by the non-partisan Kaiser Family Foundation, a hypothetical plan to privatize Medicare, such as the approach used by the Romney/Ryan plan, would increase costs by as much as $200 per month for the average Floridian. Seniors would pay the difference between the fixed benefit they receive and the cost of care. The difference is expected to be especially wide in states like Florida, where medical costs are higher on average, the study found.
“There’s just no evidence at this point that there is much competition in health care,’’ Polivka said. “It doesn’t mean it couldn’t occur if it were set up and rigorously managed. We just haven’t had any experience with it at this point.”
While Romney’s plan is still conceptual, much more is known about Obama’s proposal, which has already been spelled out as part of the Affordable Care Act.
Contrary to many GOP assertions, the Affordable Care Act did not cut $716 billion from Medicare but, according to the CBO, it did reduce payments to providers by that amount — mostly hospitals, home health providers and non-doctor medical programs.
Medicare Advantage gives Medicare beneficiaries the option of receiving their health care coverage through private health plans, mainly HMOs. The program covers 25 percent of the 49 million people on Medicare nationwide, and 31 percent in Florida.
The scare ads don’t mention it, but while Medicare Advantage was intended to save money by allowing seniors to receive benefits through private health insurance plans, it had been growing faster than any other Medicare program and had not realized the expected savings.
Private companies operating the program were paid more than traditional Medicare because they were expected to use the extra money to sweeten the pot and add additional benefits to their packages. It worked, and private companies were able to attract healthier seniors into their programs by offering prescription drug, dental and vision coverage and, in some cases, gym memberships.
But the Obama administration considered the costs unsustainable and proposed scaling back the payments across the board. The cuts were so dramatic that many in Congress feared that providers would pull out and strand seniors currently in the program.
Last year during budget negotiations, Sen. Bill Nelson joined with other Democrats to carve out an exception to the Medicare cuts and shield the nearly 1 million seniors in Florida and thousands more in other states where Medicare Advantage is popular. Nelson’s carve out didn’t pass but a compromise did, one that required the private insurers to limit their costs in each region or have their payments cut.
The result will cut payments to Medicare Advantage an estimated at $156 billion over 10 years, and the CBO predicted that an estimated 4 million of the 12 million Medicare Advantage customers would be forced back into the traditional Medicare plans because of providers dropping out.
But, Polivka said, “There’s no great evidence that has occurred.’’ Instead, a report by the Kaiser Family Foundation in June found that despite the changes to Medicare Advantage, premium costs to seniors in the program have dropped and enrollment rose 10 percent over the last year.
Polivka predicts that regardless of the outcome of the election and the fate of the changes to Medicare, one certainty will remain: “As we come out of the recession, health care costs will return to their historic pattern and continue to rise,’’ he said.
“At this point, there’s no reason to think that either [Obama or Romney’s] program will materially reduce that.”