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A Project of The Annenberg Public Policy Center

Old Medicare Claims in Arkansas Senate Race

Democratic Sen. Mark Pryor taps his party’s playbook in attacking Republican challenger Tom Cotton for his support of Rep. Paul Ryan’s Medicare plan. Two ads from Pryor make misleading claims about seniors’ costs rising or benefits being cut — the likes of which we’ve seen before. The Ryan Medicare plan has been a hot topic for Democratic attacks for several years running.

  • Both ads claim seniors would pay “thousands” more each year under Ryan’s plan. The claim relies on the assumptions of liberal analyses. The nonpartisan Congressional Budget Office said the plan could lead to higher costs to beneficiaries, but it didn’t offer an estimate.
  • One ad claims the increased costs would affect “every senior in Arkansas.” Not so. Ryan’s plan would not pertain to those 55 and over, and another plan Cotton supported (an alternative offered by the Republican Study Committee) would not pertain to those 60 and older.
  • One ad says Ryan’s plan would allow insurers to “cut benefits.” But the plan requires that policies sold on a Medicare exchange include a minimum level of benefits, the actuarial equivalent of traditional Medicare.

One Pryor ad features a woman named Courtney, who says that Cotton “voted in Congress to change Medicare into a voucher system that will increase out of pocket expenses for every senior in Arkansas. Thousands of dollars every year.” She says, “My grandma and grandpa can’t afford” to pay thousands more per year, and “neither can my parents.”

In another ad, a woman named Linda, who says she and her husband are nearing retirement, claims, “Cotton’s plan would allow insurance companies to increase rates, cut benefits and cost seniors thousands more each year.”

Cotton did support the plan referenced in the ads. He voted for the Republican House budget resolution in 2013, which included an overhaul of Medicare, and he voted for a Republican Study Committee budget plan that would have fast-tracked the Medicare changes, implementing them five years earlier than the House budget plan put forth by Ryan.

Opponents of Ryan’s plan like to call it a “voucher system,” as Pryor’s ads say, but the Ryan plan wouldn’t distribute checks, or “vouchers,” to seniors and leave them to find their own insurance. Instead, Ryan calls it a “premium-support” system that would:

  • Set up a Medicare exchange, where seniors would choose from private plans, or traditional Medicare, with a premium-support check, like a subsidy, being sent to the policy of choice;
  • Tie the premium-support payment to the full cost of the second-cheapest private plan or traditional Medicare, whichever is less;
  • Cap the growth rate on that second-cheapest plan at gross domestic product plus 0.5 percentage points. If competition doesn’t keep the growth rate down, as Ryan envisions, the government would offset additional out-of-pocket costs for “low-income Americans.” High-income beneficiaries would pay a greater share of premiums.

Ryan’s plan wouldn’t have included those 55 and older — they stay in the traditional Medicare system. The Republican Study Committee plan moved the starting point up by five years, meaning those 60 and older wouldn’t have been affected, but those 59 and younger would enter the new Medicare exchange. Ryan’s plan slowly increases the age for new beneficiaries to 67; the RSC plan increases the minimum age to 70.

Critics argue the plan doesn’t adequately account for the growth of health care costs, and that eventually, the premium support wouldn’t be sufficient, leaving beneficiaries to pay more out of pocket for their health care. But that’s speculation on what could happen. The nonpartisan Congressional Budget Office says only that “beneficiaries might face higher costs.”

To be sure, the Ryan plan would be a major change for Medicare. The proposal has its critics and its supporters, and it has been the focus of many misleading and false attacks in political races. The 2014 Senate race is shaping up to be no different.

Every Senior Pays Thousands More?

Both ads claim that under the plan Cotton supported seniors would pay “thousands” more each year, and one ad claims the increased costs would affect “every senior in Arkansas.” The Pryor campaign’s support for the ads point to articles by the Center on Budget and Policy Priorities and the Center for American Progress, both liberal-leaning groups.

CBPP’s Paul N. Van de Water writes that the cap on the growth of the premium-support payments “will likely fall short of the actual growth of health care costs.” And, he says, since “Medicare would no longer make payments to health care providers such as doctors and hospitals, the only way to keep Medicare cost growth within the target of GDP growth plus one-half percentage point would be to limit the annual increase in the amount of the premium-support vouchers.” That would mean higher out-of-pocket costs for beneficiaries over time.

Similarly, the Center for American Progress wrote in 2012 that “since it’s unclear how this cap would be enforced, it’s likely that the cap would limit the amount of the vouchers provided to beneficiaries.” But when we spoke with Ryan spokesman Conor Sweeney about these concerns — back in 2012 — he told us competition between private plans trying to attract seniors would keep cost growth below the cap. But if not, Sweeney said Congress could take such measures as changing provider reimbursements, means testing premiums, or cutting administrative costs — measures, we noted, that the Affordable Care Act’s Independent Payment Advisory Board might also recommend in its effort to keep the growth of Medicare down. Ryan’s updated plan in 2013 said the plan would “make sure low-income Americans don’t fall through the cracks” by having the government cover their out-of-pocket expenses if health care costs rose above his cap.

Both sides of this debate can cite research that bolsters their points: A study by three Harvard researchers, and published in 2012 in the Journal of the American Medical Association, concluded that private insurance companies already offered cheaper plans to seniors than traditional Medicare, while a 2012 report in the New England Journal of Medicine by Brown University researchers said that Medicare Advantage plans (that’s private insurance) attracted healthier beneficiaries by offering gym memberships. That lends support to critics’ concerns that traditional Medicare, while an option under the Ryan plan, would become filled with older, sicker seniors, becoming more and more expensive. Ryan plan supporters counter that the proposal includes risk-adjustment measures to halt that. Critics say risk-adjustment won’t be enough. And, they say, seniors who prefer traditional Medicare might not be able to afford to choose that option if it’s not one of the cheaper plans in their geographical area.

As we’ve said before, both Democrats and Republicans want to reduce Medicare spending, but they disagree on how best to do that. (President Obama’s 2013 budget also called for capping the growth at GDP plus 0.5 percent.) It’s all a very interesting policy debate on how to cut the growth of Medicare spending. The Pryor ads, however, don’t allude to that. Instead, they peddle critical opinion on what could happen under the plan Cotton supported as clear-cut facts.

The CBO looked at the Ryan plan in 2012 and said it could lead to higher costs to beneficiaries, but it didn’t offer a more definitive projection. That doesn’t support the Pryor ad claims that seniors would pay “thousands” more each year.

The Center for American Progress claimed that CBO “estimates that new beneficiaries could pay more than $1,200 more by 2030 and more than $5,900 more by 2050.” But that’s not what CBO said. Instead, it said the average per enrollee Medicare spending would be lower under the Ryan plan than under current law in the future. That’s not the same as saying beneficiaries would pick up the difference in spending.

CBO noted that the cut in future Medicare spending would be significant: By 2050, spending for new enrollees would be 35 percent lower under the Ryan plan than under current law, and 42 percent below the “alternative fiscal scenario,” which includes actions CBO expects Congress to take. But, it said: “The implications of that substantial cut in spending relative to the other policy scenarios are unclear, because they would depend on both the specific policies that were implemented to generate that spending amount and the ways in which the nation’s health care and health insurance systems reacted to those policies.”

CBO also said that possible effects, such as diminished quality of care and access to care, were possible under current law, too.

CBO, March 2012: Possible consequences include the same kinds of effects noted for the baseline and alternative fiscal scenarios — reduced access to health care; diminished quality of care; increased efficiency of health care delivery; less investment in new, high-cost technologies; or some combination of those outcomes. In addition, beneficiaries might face higher costs, which could in turn reinforce some of the other effects. At least some of those effects would of necessity be a great deal stronger than under the baseline scenario or alternative fiscal scenario because spending would be so much lower. However, as with the other scenarios, CBO does not have the capability at this time to estimate such effects for the specified path of Medicare spending.

The Center for American Progress piece also misquotes CBO as concluding “that premium support would achieve much of its savings from ‘increases in the premiums paid by beneficiaries, not from increases in the efficiency of health care delivery.’ ” We found that quote in a 2006 CBO report on premium support. It actually said: “Opponents also maintain that much of the federal savings from premium support would come from increases in the premiums paid by beneficiaries, not from increases in the efficiency of health care delivery.”

In the one Pryor ad, Courtney says, “My grandma and grandpa can’t afford” to pay thousands more per year, “and neither can my parents.” We see no concrete evidence that Courtney’s parents would pay “thousands more” under the plan Cotton supported. And her grandma and grandpa aren’t subject to the premium-support system; they would stay on traditional Medicare, a fact Courtney fails to share with viewers.

In the second ad, Linda claims that “Cotton’s plan would allow insurance companies to increase rates, cut benefits.” They certainly could increase rates, though traditional Medicare would be an option and plan supporters argue competition would keep rates low. As for cutting benefits, the plan does require that policies sold on the Medicare exchange include a minimum level of benefits, the actuarial equivalent of traditional Medicare. Critics say seniors may have to settle for fewer benefits if the premium-support subsidies don’t keep up with health care costs. But, again, that’s speculation.

Keeping the Doughnut Hole

The plan Cotton supported would increase costs for some — but not all — Arkansas seniors in one way: It would do away with a provision of the Affordable Care Act that lowered prescription drug costs for some seniors. The ACA slowly closes what’s known as the “doughnut hole” in Medicare Part D prescription drug coverage, but the Republican House budget called for nixing that provision.

Under the doughnut hole, Medicare covers prescription drugs costs, minus a deductible and co-pays, until total costs reach $2,850 for the year for a beneficiary, in 2014. It then doesn’t cover drug costs until a beneficiary reaches $4,550 in total out-of-pocket expenses, or $6,691 in total drug costs. The ACA offers discounts on drugs purchased in that gap and  slowly closes that gap, until all drug costs are covered in 2020.

According to the Department of Health and Human Services, the ACA saved Arkansas seniors $41.7 million in drug costs as of September 2012, with 19,496 seniors in the state benefiting in 2012 and saving an average of $592 on drug costs per person. They wouldn’t get these prescription savings under the Ryan plan. Nationally, HHS said in July 2013 that more than 6.6 million on Medicare had saved more than $7 billion on prescription drugs, with an average savings of $1,061 per beneficiary in the doughnut hole. In 2012, there were a total of 49.4 million Medicare beneficiaries, including 552,375 in Arkansas.

So, re-opening the doughnut hole will cost some seniors more than they would pay otherwise, but it won’t cost “every senior in Arkansas … thousands more” per year. The ads, meanwhile, don’t mention prescription drugs costs, instead criticizing the so-called “voucher system” Democrats have been attacking, misleadingly, for years.

— Lori Robertson