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A number to note: $342

Posted by John McDonough  September 5, 2012 10:18 PM

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As the national debate on Medicare bounces back and forth, there is one number that sticks with me and that I hear no one talking about.

It's $342.

What's that? It's the average annual cost by which Medicare premiums will rise over the next 10 years if Mitt Romney and Paul Ryan win and get to implement their plan to repeal the entire Affordable Care Act.

How can that be?

Like this: about half the cost of the ACA is financed by reducing Medicare spending by $716 billion between 2013 and 2022. Those savings are mostly achieved by cutting the rate of payments to private health insurers, hospitals, and home health agencies (not physicians, by the way).

The premiums that Medicare's 47 million senior and disabled enrollees pay are directly tied to the cost of the Medicare program. When costs go down, premiums go down. When costs go up, premiums go up. Since passage of the ACA, Medicare enrollee premiums have been dropping, as projected.  If we put back the $716 billion, Medicare premiums will go up -- like night turns to day. Most folks don't understand it -- but this is how it works. No fooling. No BS.

How much will premiums rise? In an August 21st New York Times article by Jackie Calmes, respected Medicare policy expert Marilyn Moon estimated an average premium hike over ten years of $342, and a projected increase in 2022 of $577. I was curious where Marilyn got those two numbers so I reached out and asked her. Lovely person, as she always is, she got back right away with an explanation. Here it is, in toto:

"The estimate comes from an extrapolation of calculations from two different sources. The $716 billion figure comes from a CBO letter to Speaker Boehner on July 24 and represents the period between 2013 and 2022. A February 2, 2012 issue from HHS ASPE calculated the savings per fee for service Medicare beneficiary over the period 2011 to 2021 that results from the Medicare changes in the ACA. In that case, the average annual savings was $229 per beneficiary for a lower Part B premium, lower Parts A and B coinsurance, and a higher Part D premium (from Table 2 of the ASPE brief). This amount did not include the effects of closing the donut hole. If the $716 billion is restored, these reductions in premiums and cost sharing would be lost. But the ASPE study refers to a slightly different period of time. To develop a comparable estimate for the 2013 to 2022 period, I dropped the first two years of the ASPE analysis and extrapolated an estimate of the 2022 per capita number. My estimate for 2022 is $577 -- a 7% increase over the $539 estimate for 2021. The 7% comes from the change in savings estimated in the Boehner letter between 2012 and 2022 converted to a per capita amount. The 10 year average is thus $342. Although the numbers from two different sources, I believe that the methodology is sufficiently robust in each to justify this extrapolation."

Question -- why aren't the Democrats running ads and letting everyone in sight know that Mitt Romney and Paul Ryan want to increase Medicare premiums by $342 per Medicare enrollee on average, starting next year? Put it before the Fact Checkers first and get them to pre-certify -- include "pre-Fact Checked" in the ad. Marilyn has the goods.

Here's the other thing: to my not-too-shabby knowledge, Mitt Romney and Paul Ryan are the first-ever major political leaders in the 47 year history of the Medicare program to propose to SHRINK the solvency and life of the Medicare Trust Fund -- by eight years! By 2016.

No one else has ever proposed to speed up a Medicare financial crisis before Mitt and Paul.

A $342 Medicare premium hike, a Medicare financial crisis by 2016, and the cancellation of current Medicare benefits such as free preventive care benefits and the closing of the prescription drug donut hole.

It's all real, and it's part of Mitt and Paul's plan for Medicare.

Is this complicated?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »


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