Jonathan Cohn

Second Opinions on Obama's Medicare Plans

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The numbers in President Obama's new plan for health care spending can be confusing, so how about a picture? Or, at least, a pie chart? The terrific one you see above (larger version here) comes from Igor Volsky, at Think Progress, and it breaks down the sources of Medicare savings in the deficit reduction package.

As Volsky summarizes: "Generally, the plan spreads the pain among all groups, but finds its greatest savings in drug rebates and modernizing provider payments to achieve greater efficiency." In other words, this is an carefully constructed effort to make Medicare provide better care for less money, rather than simply an effort to reduce benefits.

The plan does call for wealthier seniors to pay higher premiums for Part B, which is the portion of Medicare that covers physician services. When I mentioned this yesterday, I dismissed it as insignificant. But, as several (worried) advocates have pointed out to me, that means that 25 percemt of all Medicare beneficiaries would eventually be paying higher premiums than the rest. That 25 percent would include some seniors who are more middle class than wealthy.

Why might this be bad? In general, social insurance programs thrive when they are universal and suffer when they target the poor disproportionately. Asking the most affluent 25 percent of seniors to pay modestly higher premiums isn't the same as turning the whole program into welfare (or, to use the proper analogy, Medicaid). And it may well be the best alternative under these circumstances. But every time the program becomes less universal it also becomes more vulnerable politically.

In yesterday's rundown, I totally missed something else, although Sarah Kliff, thankfully, did not. The new Obama plan would take $3.5 billion away from the Prevention and Public Health Care Fund, which will fund everything from campaigns to promote vaccination to modernization of public health departments . Republicans and other critics have called the initiative an "Obamacare slush fund," among other things. Frequent TNR contributor Harold Pollack, who happens to be a leading researcher on public health and poverty, has called it the "most obviously justified and obviously under-funded component of the whole health care effort." You can guess whose argument I find more persuasive.

As Kliff notes, the administration justified that cut as a necessity, not a preference: "In tough times, we have to make decisions we might not otherwise make," a senior administration official said. The upside is that these choices, good and bad, would yield $320 billion in savings. And that's just in the first decade. According to the administration's projections, the plan would yield more than $1 trillion in health care savings in the second decade. Like the Affordable Care Act, these initiatives would save some money now but save a lot more later.  

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