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Columbia Missourian

McCaskill, Akin and Dine on Medicare

By Nassim Benchaabane
October 31, 2012 | 6:49 p.m. CDT


Claire McCaskill

McCaskill wants to continue funding Medicare. She said she would fight to reduce Medicare fraud and use the savings to further fund Medicare. She also suggested raising taxes on earnings of more than 250,000 to help fund Medicare and Social Security programs.

Todd Akin

Akin, like McCaskill, has stated his support for Medicare. He differs in how he believes the program should be run, though, and supports vice presidential candidate U.S. Rep. Paul Ryan’s budget plan, which would turn Medicare into a voucher program. 

Under Ryan’s proposal, retirees now 55 or younger would receive a set amount of money to buy insurance from companies in the private market. There would be no changes for current retirees. Akin believes this allows insurance companies to compete while giving people more choice.

Jonathan Dine

Dine is against federal government involvement in health care and prefers transferring control of Medicare to the states.

What experts said

Dean Crader, research analyst with the MU Economic and Policy Analysis Research Center, said that allowing insurance companies to compete across state lines is merely a political argument and that it is impossible to predict what the real effect of such a policy will be. 

Saku Aura, MU professor of economics, said introducing competition between insurance companies in different states would lower costs but also could mean insurance companies would move to whichever states had the least regulations, just as many national banks are headquartered in the few states with minimal regulations.

“There has been much back and forth on Medicare between politicians, but beyond the blame game, there hasn’t been any strong proposal to reform Medicare that either one of the main candidates has taken,” Aura said. “The underlying problem is that medium- and long-run sustainability predictions of the program are dire.”

“Any serious discussion over Medicare in the long run will have to include some bad news to somebody, as the current operation is unsustainable and isn’t going to be possible within the next 10 years,” Aura said. “The Affordable Care Act attempts to address a lot of these issues, but nothing is guaranteed to work.”

Aura doubts either proposal supported by McCaskill or Akin would be sufficient in the long run. McCaskill’s aim of fighting fraud to raise money is valid, but the revenue regained will never be enough to solve deficits, he said.

“Turning Medicare into a voucher program has the positive spin of allowing beneficiaries choices in the free market," Aura said. “The bottom line of that proposal, however, is that it would lead to less generous provisions of health care, measured in dollars.”

Aura said he does not want to sound too critical of the voucher idea, however, because doing nothing is not an option.

By contrast, Social Security, which is a separate from Medicare, has predicted moderate funding deficits and can be fixed with taxation or moderate changes in benefits, Aura said. McCaskill has proposed an increase on incomes of more than $250,000, but Aura predicts there won’t be enough political support in Washington, D.C., to enact it. 

Deanna Sharpe, MU professor of personal financial planning, said the current rate of Medicare spending is not sustainable. 

“Medicare is a 'pay as you go' system, funded by premiums for some parts of the program and by payroll taxes. Decline in the number of workers per retiree over time reduces the money flowing into Medicare from payroll taxes. Increased retiree life expectancy extends the time coverage would be needed. Rising health care costs make both health insurance and health goods/services more costly. As the large baby boomer generation retires, costs will only go up.

“Both parties agree decline in growth of Medicare spending is needed. Obama’s plan focuses on restrictions. A panel of government experts would be in charge of controlling costs. His plan would operate more like a defined benefit plan with government deciding what will be covered,” Sharpe said. 

“Ryan’s plan would have market prices allocate resources, reducing costs via market competition. His plan would operate more like a defined contribution plan with government deciding what it will pay in vouchers and seniors using that money to buy their own insurance, using their own money if the cost insurance exceeds the voucher given by the government.”

Comparison and cost reduction of each approach is difficult, and both approaches have critics, Sharpe said.

“Rationing limits the type and amount of health care services consumers want,” she said. “Market prices can be set higher than some seniors can afford.”

Sharpe said Obama’s Affordable Care Act provisions are expected to reduce future growth of payments to hospitals by $415 billion over a decade. Because of these low payments, there is a rising number of doctors refusing to treat Medicare patients.

Meanwhile, recent estimates of the cost of Ryan’s plan by the Congressional Budget Office were based on earlier versions rather than the current one, Sharpe said, so the voucher system was not considered.

“A recent study by the (Henry J.) Kaiser Family Foundation concluded that a premium support system would make federal outlays more predictable, but ultimate costs for consumers are harder to pin down because they are affected by many things: policy provisions, geographic regions, local market conditions or beneficiary choices regarding type and amount of health care desired,” she said. “In their estimates, about six in 10 Medicare beneficiaries would face additional premiums as compared with the current system if they did not opt for a lower cost plan.” 

Sharpe said no perfect health care payment exists that would please everyone.

“No matter what plan is ultimately adopted, health care costs will increase, and some method of cost containment is needed to avoid depletion of Medicare funding for retirees,” she said. 

Supervising editor is Scott Swafford.