Medicare Reforms Roil Senate Contest

Flake and Carmona now in a dead heat, with misleading attack ads about Medicare central to the debate

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The debate about the future of Medicare has exploded in the middle of the fierce, dead-heat contest between Rep. Jeff Flake and former U.S. Surgeon General Dr. Richard Carmona to replace outgoing U.S. Sen. Jon Kyl.

The bitter back and forth between the fiscally conservative congressman and the former Special Forces medic and health care reformer echoes the themes of the Presidential race.

Rep. Flake, a Republican, has criticized Carmona, an Independent turned Democrat, for supporting President Obama’s Affordable Care Act, which includes new benefits for Medicare recipients, but also features $716 billion in reductions in the high-cost Medicare Advantage plans over 10 years. The plans cover 25 percent of the 49 million Medicare recipients.

Carmona, meanwhile, has criticized Flake for supporting a Republican budget plan to turn Medicare into a “premium support plan” which gives people less than 55 years old a “voucher” to buy private insurance.

Several recent polls have shown Flake’s once sizeable lead in the polls when matched against the relatively unknown Carmona has melted away, leaving the race essentially tied.

Independent, non-partisan groups like the Kaiser Foundation and FactCheck and the American Association for Retired People have published analysis that say both sides in the Medicare debate have distorted one another’s positions, without proposing a plan likely to solve the long-term crisis.

Medicare current spends $528 billion annually, which will roughly double by 2020. Any long-term solution requires lowering the rate of increase, reducing benefits, increasing payroll taxes. Medicare remains embedded in the world’s most expensive medical system, which costs more than twice as much per person as any other advanced industrialized nation while producing a less healthy population than many far cheaper systems.

The political debate in the senate race turns on the Republican House voucher plan and the changes in Medicare embedded in the massive Affordable Health Care Act – better known as “Obamacare.”

Flake spokesman Andrew Wilder said “Obamacare means devastating consequences for Medicare, because it cuts $716 billion from the program. It’s irreconcilable for anyone to support Obamacare while also claiming to support protecting Medicare for seniors. Yet that’s Richard Carmona.”

The debate got an added wrinkle recently when Rep. Flake, speaking in Tucson, said he opposed looming automatic cuts in the defense budget due to a breakdown in budget negotiations. Instead, he said Congress should limit the cuts to domestic spending programs and entitlements, including Medicare.

Carmona has supported the Medicare spending reductions in the health care reform package, but points out that Flake voted for the same set of reductions in Medicare Advantage plans in the Republican House budget.

“Congressman Jeff Flake is knowingly lying to Arizonans about Medicare savings he voted for. Even for a career politician and former lobbyist, that’s a stunning level of hypocrisy,” said Carmona communications director Andy Barr. “Dr. Carmona will protect Medicare and firmly opposes Congressman Flake’s plan to turn Medicare into a voucher system, rising out-of-pocket health care costs for an average Arizona senior by $6,400 a year.”

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Richard Carmona

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Rep. Jeff Flake

That $6,400 figure comes from a non-partisan Congressional Budget Office analysis of an early version of the House budget plan. The plan did not include limits on how rapidly the cost of the vouchers could rise, making it unclear how it would affect out-of-pocket expenses. The latest version would link the rate of increase in the vouchers to the Gross Domestic Product plus 1 percent – the same spending cap included in the Affordable Health Care Act.

The controversial $716 billion figure represents changes made in Medicare by the Affordable Care Act and the Republican budget. The savings would come from phasing out the 10 percent bonus Advantage plans now receive.

Congress originally approved the experiment in using private plans to cut costs. Congress gave the Advantage plans a surcharge to get set up, but then never took it away. Many of the Advantage plans used the extra money to add benefits like dental care and vision coverage. The extras rapidly boosted enrollment in the plans, which ended up costing Medicare about $70 billion annually more than if they had stayed in traditional plans. Arizona has a higher share of its Medicare patients on Advantage plans than almost any other state – a whooping 35 percent.

The non-partisan Congressional Budget Office has concluded that Medicare will start spending more than it takes in eight years sooner if Congress restores the extra payments to the Advantage plans.

The federal Health Care Reform also included about $100 billion in new Medicare spending, mostly to reduce prescription drug costs for recipients, according to an analysis by the Kaiser Foundation. Those savings would reduce future payments to doctors and hospitals and crack down on billing abuses.

The reforms also established an expert panel to impose additional savings if Medicare costs rise much faster than the rate of inflation – as they’ve done for years. The cuts would take place automatically unless Congress approved substitute reductions or revenue increases.

The Congressional Budget Office estimated the reforms would reduce the growth rate in Medicare spending from 6.8 percent annually to 5.5 percent.

Independent analysis has challenged the scare tactics used by both sides, while pointing out that neither party has so far proposed a long-term solution.

The Kaiser Foundation concludes Medicare has actually done a better job of controlling costs than private insurance plans. Nonetheless, projections suggest that as the baby boomers retire Medicare spending as a share of the Gross Domestic Product will rise from an estimated 3.5 percent in 2010 to a projected 6.4 percent in 2030. By then, Medicare will cover 81 million Americans, according to projections.

Congress has repeatedly expanded Medicare and raised the payroll tax.

The program remains the federal government’s largest entitlement program, since most recipients collect three times as much in benefits as they paid into the system. About 42 percent of the money spent on the program comes from general revenues, not premiums or payroll taxes. Medicare payments now account for about 14 percent of the federal budget and about 20 percent of the nation’s $2 trillion health care bill.

The program gets most of its money from a 2.9 percent payroll tax, split evenly between workers and employers. Premiums paid by recipients account for 25 percent of revenues.

On average, Medicare recipients pay about 16 percent of their income on medical care and premiums, up from about 12 percent a decade ago. The program has dramatically increased medical coverage for the elderly – from less than 50 percent to more than 98 percent.

Without changes, the program will have enough to pay only 87 percent of the hospital bills in 12 years. By 2050, the program will have enough to pay only 67 percent of the promised benefits.

The U.S. is already spending far more than any other country on medical care, an estimated 18 percent of its gross domestic product. That’s roughly $8,362 per person, according to the World Health Organization.

By contrast, Canada spends $4,400 per person (11 percent of its GDP), Australia spends $3,441 (8.7 percent of GDP), the United Kingdom spends $3,480 (9.6 percent of GDP), Germany spends $4,332 (11.6 percent of GDP) and France spends $4.21 (11.9 percent of GDP). Most of the rest of the world spends far less, including China ($371/person, 5.1 percent of GDP), the Soviet Union ($998/person, 5.1 percent of GDP), India ($132/person, 4.1 percent of GDP), South Africa ($935/person, 8.9 percent of GDP).

But none of the reform proposals featured in campaign ads would do much to lower the cost of health care, say an assortment of independent groups.

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