Fact Checking the President

In a campaign stop in Florida this weekend, the President discussed Medicare reform, or at least the Republican version of it.  Citing a new study from the progressive Center for American Progress Action Fund, tied closely to the administration, the President claimed that the Romney-Ryan reform proposal “would mean as much as $16-26 billion in new profits for insurance companies.” Continuing his criticism he said: “Your costs would rise by the thousands and the insurance companies’ profits would rise by the billions.” Just how accurate is this study cited by the President? 

First of all the authors (well at least one of them) are heavyweights in the health policy debate.  David Cutler, Harvard economist and former Obama adviser, is the lead author in this Internet hit piece.  Second, the study purports to analyze the Romney-Ryan plan using data from several reports provided by the Congressional Budget Office (CBO) examining the impact of Ryan’s 2011 budget plan as it pertains to Medicare and Medicaid (without its most recent revisions).  In other words, Cutler’s analysis does not take into consideration of recent changes in the Ryan approach. 

Cutler’s angst is primarily focused on Romney’s promise to repeal the Affordable Care Act and not the long-term sustainability of traditional Medicare.  (In all but one week since passage of the ACA, Rasmussen’s tracking poll reports that at least 50% of those surveyed favor repeal of the legislation.)  There are several obvious omissions in Cutler’s analysis.  Looking at the reference section of the report, there are two obvious omissions that stand out.  He cites several points made in a paper by Ezekiel Emanuel in the August 2012 New England Journal of Medicine (“A systemic approach to containing health care spending”) without citing the counterpoint paper in the same publication by Antos, Pauly, and Wilensky (“Bending the cost curve through market-based incentives”).  In addition he failed to cite his own paper in the August 1, 2012, Journal of the American Medical Association (“Potential consequences of reforming Medicare into a competitive bidding system”).  I guess Cutler doesn’t like alternative views, even if they are his own. 

The viability and acceptance of any premium support plan depends critically on the type of coverage available in the plans offered and the adjustments to the premium support levels.  Ryan’s most recent plan requires that a traditional Medicare option is always offered and that at least one of the plans available at the benchmark premium has traditional Medicare benefits.  The target for spending growth is set at the growth in GDP plus 0.5% and not the CPI as reported by Cutler.  In fact, if spending exceeds the target, Congress is required to act in much the same way that the Independent Payment Advisory Board does to curb spending growth.  To date I haven’t seen Cutler lashing out at the IPAB. 

The basis of the CBO report on the Ryan plan are simply too pessimistic.  Self admittedly “CBO does not have the capability at this time to estimate such effects [of a competitive bidding process] for the specified path of Medicare spending”(CBO, “The long-term budgetary impact of paths for federal revenues and spending specified by Chairman Ryan,” March 2012).

I’m currently working on a more detailed critique of the Cutler report and hope to have it available shortly.

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