Medicare is a national social insurance program administered by the federal government that guarantees access to healthcare for Americans ages 65 and older and younger people with disabilities. Hospital care is covered under Part A and outpatient medical services are covered under Part B. Medicare offers a choice between an open-network single-payer plan (traditional Medicare) and a network plan (Medicare Advantage, or Medicare Part C), where the government pays for private health coverage. Medicare Part D covers outpatient prescription drugs through private plans. In 2010, Medicare provided health insurance to 40 million people ages 65+ and 8 million people with disabilities. On average, Medicare covers 48% of health care costs. (Wikipedia - Medicare)
According to the Office of the Actuary of the Centers for Medicare & Medicaid Services, President Obama's Affordable Care Act (ACA) is paid for in part by $575 billion in reduced Medicare expenses expected thru 2019. However, in their report of August 5, 2010 they state that the immediate physician fee reductions required under the ACA are clearly unworkable and are almost certain to be overridden by Congress. This would lead to higher costs or reduced access by enrollees to their physician of choice. They also state that the productivity adjustments (which are typically very low in the medical services industry) will affect other Medicare price levels much more gradually, but there is a strong likelihood that without very substantial and transformation changes in health care practices, payment rates would become inadequate in the long range. At present, U.S healthcare in total consumes 18% of the GDP and growing and no transformational changes are in sight.
The Medicare HI Trust Fund is due to run out of money in 2024, at which time revenues would be able to pay 90% of hospital insurance costs. Since Medicare began, this solvency projection has ranged from 2 to 28 years, with an average of 11.3 years. The Office of the Actuary of the Centers for Medicare & Medicaid Services estimates that the aggregate net savings to the Part A trust fund would postpone the exhaustion of trust fund assets by 12 years - from 2017 under prior law to 2029 under the ACA.
The combination of lower Part A costs and higher tax revenues contributes to a lower Federal deficit based on budget accounting rules. However, trust fund accounting considers the same lower expenditures and additional revenues as extending the Part A trust fund. In practice, the improved Part A financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the ACA) and to extend the trust fund. Therefore, if those dollars are allocated to extending the Hospital Insurance trust fund, they cannot be used to reduce the federal deficit.
Mr. Romney's plan consists of 7 key elements: 1) nothing changes for seniors or those nearing retirement, 2) existing spending is repackaged as a fixed-amount to each senior that can be used to purchase an insurance plan, 3) all insurance plans offer coverage at least comparable to what present-day Medicare provides, 4) if seniors choose more expensive plans they will have to pay the difference and if they choose less expensive plans they can use any leftover support to pay other medical expenses, 5) traditional fee-for-service Medicare will be offered by the government as an insurance plan that seniors can purchase, but seniors will have to pay more for that plan if it costs more than a comparable private plan, 6) lower income seniors will receive more generous support to ensure that they can purchase coverage and wealthier seniors will receive less support, and 7) competition among plans are expected to hold costs down and maintain high quality.
Congressman Paul Ryan and Senator Ron Wyden introduced a bipartisan proposal that almost mirrors Romney's plan. Mr. Romney believes that by replacing the inefficiency of the current system with a competitive, market-oriented system in which every provider wants to provide high quality care, the plan puts the future of Medicare on sound footing (www.mittromney.com). He does not provide any cost-savings estimate versus the current system.