History Shows Medicare Can Be Cut While Sparing Beneficiaries

Jul 22, 2011
Originally published on July 25, 2011 5:48 pm

Lately you'd think President Obama was threatening to push Granny off the cliff.

That's pretty much been the reaction of liberal Democrats to even the hint that the president might consider reductions in spending for Medicare as part of a deal to raise the nation's debt ceiling.

"Any cuts to Social Security, Medicare and Medicaid should be taken off the table," the Congressional Progressive Caucus wrote in a letter to the president. "These cuts would hurt households and damage the country's economic recovery as well."

But most of the outrage assumes — incorrectly — that any cuts would necessarily be aimed directly at Medicare patients. History suggests otherwise.

Because Medicare is such a huge budget target, "we've had a series of cuts, year after year, decade after decade," says Joe Antos, a health economist with the conservative American Enterprise Institute.

How big a target is Medicare exactly? This year the Congressional Budget Office figures the program for the elderly and disabled will spend $562.8 billion.

Even with all the cuts to Medicare over the years, Antos says, "We've hardly ever directly touched beneficiaries."

In fact, says Antos, who spent years estimating savings for some of those budget cuts at CBO, "the whole political history of (cutting) Medicare has been focused not on beneficiaries, it's been focused on health care providers," such as doctors, hospitals and nursing homes.

And in many of those cases, he says, beneficiaries have often not even felt the reductions in payments.

One example was the 1983 shift in the way Medicare pays hospitals from simply paying each bill to a prospective payment system, that paid a set amount per diagnosis. That encouraged hospitals to become more efficient.

"We saved an enormous amount of money by moving to that system, and in the process, we changed the way hospital service is delivered to people, for the better, I think" Antos says. "That was, I think a win for everybody."

Now it's true that most of the cuts have been reductions in scheduled increases, which served to restrain growth of Medicare's budget some.

And it's also the case that patients have been touched by Medicare payment changes, and could be again in the future. Higher-income beneficiaries now pay higher premiums for Medicare outpatient coverage as a result of the 2003 Medicare prescription drug law. And the budget plan passed by the House in April would shift considerable cost from the government to seniors on the program.

But Antos says beneficiaries are always last in line when it comes to making cuts in Medicare spending. "In terms of direct cuts to beneficiaries or benefits, that is a highly unpopular thing for a politician to do," he says.

Just ask all the Democrats who lost their seats last year after getting pummeled by Republicans who complained about the $500 billion in Medicare reductions in the Affordable Care Act, the federal law overhauling the health care system.

How many of those cuts directly increase costs or reduce access for beneficiaries? Zero.

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However the debt ceiling debate is resolved, it's expected to involve cuts to the massive Medicare health program. And that prospect has caused a huge backlash among Democrats and advocates for seniors. They say cuts would hurt those who can least afford to pay. But as NPR's Julie Rovner reports, history shows the program's beneficiaries are usually spared when Medicare gets a fiscal haircut.

JULIE ROVNER: So, the question isn't really whether Medicare spending needs to be restrained, but how. Democrats actually took a scalpel to Medicare as part of last year's health overhaul. They reduced future spending by more than $450 billion over 10 years. Almost all of those cuts were to health care providers, and will be felt little, if at all, by patients. But you wouldn't know it to hear the ads run by Republicans in last fall's elections.


ROVNER: Grayson and Kosmas, they betrayed the trust of Florida's seniors.

ROVNER: And this November...

ROVNER: We'll remember.

ROVNER: So, when Republicans in this year's budget bills actually did propose to increase costs to Medicare beneficiaries, Democrats were quick to fight back. Here's New York's Ed Towns on the House floor last week.

NORRIS: Cutting back on Medicare is unfair to senior citizens who have worked hard all their lives and should not have to worry at this point whether they can afford to go to the doctor or buy the medicine that they need.

ROVNER: And many progressive and senior groups, including the influential AARP, want Medicare completely off the table during the deficit talks. Here's part of the ad AARP has been running.


ROVNER: But instead of cutting waste...

ROVNER: ...or closing tax loopholes...

ROVNER: ...next month...

ROVNER: ...Congress could make a deal that cuts Medicare.

ROVNER: But how much are beneficiaries really at risk? Not that much, says Joe Antos. He's a health economist with the conservative American Enterprise Institute

NORRIS: In fact, the political solution to all of Medicare's spending problems is to lower payment rates to hospitals, doctors, and everybody else. But the last thing they really want to do is directly go after benefits or eligibility.

ROVNER: Antos says Congress has actually been cutting Medicare almost as long as the program has been around and the targets have almost always been those who deliver health care rather than those who consume it.

NORRIS: We've had a series of cuts year after year after year. We've hardly ever directly touched beneficiaries.

ROVNER: But Antos says that Congress can also make changes that can both save Medicare money and improve the quality of care. One example is the 1983 change in the way the program pays hospitals.

NORRIS: We saved an enormous amount of money by moving to that system. And in the process, we changed the way hospital service is delivered to people, and for the better, I think.

ROVNER: Julie Rovner, NPR News, Washington. Transcript provided by NPR, Copyright NPR.