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A Project of The Annenberg Public Policy Center

Medicare Ghost Stories

Ghost stories are fanciful, frightening tales told to children. But the claim that Republicans would increase Medicare costs by $6,000 per beneficiary is a story Democrats use to scare senior citizens — and it’s just as false.

The fact is, the current Republican proposal is modeled on a plan that would lower seniors’ Medicare premiums and total medical costs by 6 percent, according to the nonpartisan Congressional Budget Office. And past and present GOP “premium support” proposals wouldn’t have applied to anyone already getting Medicare.

Furthermore, CBO has now effectively retracted the $6,000 figure on which Democrats have always tried to base their claim.

Republicans have their own fairy tale about Medicare — the claim that Democrats are paying for Obamacare “on the backs” of seniors by cutting $700 billion in benefits. Both of these distortions are currently on display in a high-profile Senate race in Kentucky.

The latest example of Democrats’ spooky tale shows up in a TV ad by Alison Lundergan Grimes, the Democratic opponent of Republican Sen. Mitch McConnell of Kentucky.

The Grimes TV spot first appeared July 8. In it, she sits next to an older man, Don Disney of Cloverlick, Kentucky, who puts the old Democratic ghost story in the form of a question for McConnell: “Senator, I’m a retired coal miner and I want to know how you could have voted to raise my Medicare costs by $6,000.”

The answer is, McConnell did no such thing. Nor did any other Republican.

The 2011 GOP Plan

The Grimes ad cites McConnell’s 2011 vote in favor of considering the nonbinding budget resolution that had been drafted by Rep. Paul Ryan and passed by the Republican-controlled House. That budget called for phasing out traditional, government-administered Medicare and replacing it gradually with a “premium support” system of government-subsidized private insurance (similar to the current Medicare Advantage plans already preferred by 30 percent of today’s seniors).

It’s true that CBO’s analysis of that plan estimated that anyone enrolled in the “premium support” plans would pay $6,000 more in 2020 than under traditional Medicare. But the retired coal miner in Grimes’ ad would not have been among them — nor would anyone already on Medicare. The original Ryan plan proposed to phase in the new system only for those younger than 55, as they reached age 65.

In the past we’ve repeatedly called out Democrats for stating or implying that the 2011 plan would have cost $6,000 more for current Medicare recipients. In this case, the claim is stated plainly. Disney’s reference to “my Medicare costs” leads us to assume — as any viewer surely would — that he is already on Medicare. Seniors generally qualify for Medicare at age 65. When we spoke to Disney by phone, he would not give his age, and neither would the Grimes campaign. The McConnell campaign puts Disney’s age at 75.

CBO’s Retracted Figure

It’s also now clear that the CBO’s $6,000 estimate was wrong to begin with, and CBO has effectively retracted it. CBO now says its 2011 report was a “rough analysis” based on assumptions that have proven invalid.

In a report issued Sept. 18, it says the earlier figure was based on assumptions that have turned out to be incorrect. “CBO projected for that earlier report that health care spending covered by private plans would be much higher initially and would grow faster than the agency currently estimates,” CBO said. The same goes for premiums charged by private health plans, which have turned out to be lower than CBO estimated in 2011.

Also, CBO said that “there [have] been substantial improvements in CBO’s modeling of the behavior of beneficiaries and insurers” since the original estimate. It said the earlier estimate failed to capture “the full effects of a competitive system on federal spending or payments by beneficiaries.”

CBO did not give a new figure. But it said that the 2011 estimate was “substantially higher” than it is currently estimating for either of two “premium support” options covered by the Sept. 18 report.

One of those “premium support” options, in fact, would produce a 6 percent savings in total health costs — counting both premiums and out-of-pocket payments for deductibles, copayments and coinsurance. And in fact, that’s the model for the current GOP proposal.

To be sure, CBO noted that Ryan’s 2011 plan differed from the options it was evaluating. For one, the old Ryan plan did not include traditional Medicare as a premium-support option, which would have put pressure on private insurers to keep payment rates to providers low. But the current GOP plan keeps traditional Medicare as an option.

The 2014 GOP Plan

As we have noted before, the plan Ryan proposed in 2011 was a work in progress. His budget plans in subsequent years have been more generous in regard to Medicare spending. His latest is modeled on the more generous of the two options that CBO studied.

The key change in the 2014 Ryan plan is to base the amount the federal government would pay for each beneficiary on the average of all bids submitted by private insurance companies plus traditional Medicare, rather than on the second-lowest bid as earlier Ryan plans had done. The 2011 plan was even less generous than that, tying the growth of premium-support payments to inflation.

CBO found that if the average-bid method is implemented in 2018, beneficiaries would pay in 2020 an average of 6 percent less in total costs — for Medicare Part A (hospitalization) and Part B (physician services) combined — than under the current system.

On the other hand, if the government sets the amount it will pay based on the second-lowest bid from insurers, then total costs to beneficiaries would go up — by 11 percent.

CBO did not give a dollar amount of the change in beneficiary costs for either option — except to say both were much lower than its 2011 estimate for Ryan’s old plan. It also estimated that taxpayers would see a savings of 4 percent in 2020 under the average-bid option, and 11 percent under the less generous second-lowest-bid option.

The latest Ryan budget changes to the more generous average-bid method, according to Derrick Dockery, a spokesman for the House Budget Committee. He confirmed to us by email: “The most recent budget (for fiscal year 2015) referenced CBO’s report and moved to an average-bid model.” The House Budget Committee’s latest budget report notes (on page 59) that CBO “found that a program in which the premium support payment was based on the average bid of participating plans would result in savings for affected beneficiaries as well as the federal government.”

Ryan’s most recent budget plan also scrapped a cap on Medicare spending contained in earlier versions.

The latest GOP plan differs from the CBO “average bid” proposal in a couple of ways. CBO’s plan would begin in 2018, but Ryan’s latest plan would start in 2024. Also, Ryan’s plan would keep those who were age 55 or older in 2013 in traditional Medicare, while the CBO plan would give everybody the choice of traditional Medicare or a subsidized private plan. Thus, the potential savings to the government and beneficiaries would be less under Ryan’s latest plan than under CBO’s.

Campaign Responses

In defense of its ad, the Grimes campaign cites a potential cost to retired coal miner Disney (and other seniors) from the repeal of the Affordable Care Act, which the 2011 Ryan plan also proposed. Obamacare provides no-cost preventive care, such as cancer screenings, and slowly closes the so-called “doughnut hole” gap in Medicare prescription drug coverage. Those benefits would have been scrapped under Ryan’s 2011 budget, as well as the most recent one.

So the Grimes ad might have been right if Disney had just said McConnell voted to cut his benefits — without any reference to a $6,000 figure. But how much would depend heavily on whether or not Disney is enrolled in Medicare’s Part D, which provides prescription drug coverage, and on whether he is among the relative few who have drug costs high enough to place them in the “doughnut hole” coverage gap.

Under the doughnut hole this year, Medicare Part D covers prescription costs, minus a deductible and copays, up to $2,850 in total costs for a beneficiary. Coverage doesn’t pick back up again until a beneficiary reaches $4,550 in total out-of-pocket expenses, or $6,691 in total drug costs. The ACA began offering discounts on drugs purchased in the gap in 2011 and slowly closes the gap by 2020.

But the odds are, Disney isn’t among those affected. Of the more than 49.4 million covered by Medicare, about 7.9 million saved money on prescription drugs because of the ACA, according to the Department of Health and Human Services. That’s roughly 16 percent. In Kentucky, in 2013, the ACA discounts saved 82,261 beneficiaries an average of $985, HHS said. That’s way short of $6,000, even assuming Disney was among those beneficiaries.

As we’ve noted, McConnell’s 2011 vote was on a motion to proceed to consider the Ryan budget. The motion failed on a mostly party-line vote, so there was no Senate vote on the Ryan budget itself. The McConnell campaign said, “There is no way to speculate if [McConnell] would have voted for final passage without having debated amendments.”

That’s true enough, and we won’t speculate how McConnell might have voted, or what amendments he might have supported, if any. We’ll just note that his campaign isn’t saying anything about those matters, one way or the other.

McConnell’s Equally Misleading Claim

Proving that Democrats aren’t the only ones with years-old senior-scare tactics, the McConnell campaign launched a response ad that makes its own misleading claim about Medicare. It says that Obamacare “cuts $700 billion from seniors’ Medicare,” a tired line that we deemed a whopper in 2012, and before.

The GOP talking point is misleading for several reasons: The Affordable Care Act doesn’t slash $700 billion from the current Medicare budget; instead, this is a cut in the future growth of spending over a decade. Furthermore, the reductions apply to payments made to hospitals and other non-physician providers, and it remains to be seen whether those would translate into reduced services. Finally — and most ironic — that same $700 billion in “cuts” is part of the Ryan budget plan that McConnell voted to consider.

The McConnell camp launched the ad just one day after the Grimes ad aired. Citing an Associated Press fact-check of Grimes’ TV spot, the McConnell response says that news media said Grimes was using “shaky claims to mischaracterize Mitch McConnell’s record.” On screen, we see “shaky claims” and “mischaracterizing Sen. Mitch McConnell’s voting record,” two accurate quotes from the AP’s July 8 article, with the latter quote coming from the photo caption. The ad also says the media called the Medicare claim “laughable,” an accurate quote from a June Washington Post fact-check of the same $6,000 claim from Democratic Rep. Nick Rahall. The Post‘s Fact Checker, Glenn Kessler, wrote that the old chestnut was “so out of date as to be laughable.”

So far so good for the McConnell response, but the Kentucky senator couldn’t leave well enough alone. The ad continues: “The truth? Grimes supports Obamacare, which cuts 700 billion from seniors’ Medicare. That’s how Obama and Grimes will pay for Obamacare.” On screen, we see the false line that “Obama and Grimes will pay for Obamacare on the backs of Kentucky seniors.”

Grimes hasn’t said she supports the Medicare financing provision of the ACA, and it remains to be seen whether seniors in Kentucky or anywhere else will feel any effect from those reductions in the growth of future payments to hospitals and insurance companies.

Grimes hasn’t said whether or not she would have voted for the Affordable Care Act, but instead has supported working to “fix” the law and has criticized McConnell’s call for a full repeal. According to the Courier-Journal, she issued a statement in the spring saying that the ACA “is not perfect,” adding: “We must investigate and address the botched national roll-out, offer relief to small businesses, make sure individuals can keep their current plans, and address affordability issues.”

The more glaring problem with McConnell’s claim about Medicare “cuts” is that the money isn’t being taken away from seniors. By reducing the future growth of a decade of Medicare spending by $700 billion, the ACA — and, also, Ryan’s GOP budget — stretches out Medicare financing so it lasts longer than was previously expected. Most of the savings come from reducing the growth of payments to hospitals, which are paid by Medicare Part A, funded by payroll taxes.

Ryan’s budget keeps the ACA’s cuts, because — confusing campaign rhetoric to the contrary — both parties want to slow the growth of Medicare spending, as we’ve explained in detail before.

We called the 2012 presidential election “a campaign full of Mediscare.” The 2014 midterms are no different.

— Brooks Jackson, Robert Farley and Lori Robertson

Correction, Aug. 28: We originally wrote that the no-cost preventive care for Medicare beneficiaries under the Affordable Care Act included flu shots. The ACA requires private plans on the individual and small-group markets to cover flu shots without cost-sharing, but Medicare already had done so since 1993. More information on the changes in Medicare preventive services can be found here.