While it's fairly clear that Republicans are aiming to introduce market forces and turn Medicare into a defined-contribution system, what's the Democrats' platform on the reforming the system?

While political platforms are notorious for their vagueness and often contentious election-year rhetoric, the Democratic National Platform makes it clear that the president and his party “adamantly oppose any efforts to ‘privatize’ or ‘voucherize’ Medicare; unlike our opponents we will not ask seniors to pay thousands of dollars every year while they watch the value of their Medicare benefits evaporate.”

Although the Democrats have not released an official document outlining their agenda for Medicare reform, some insight into their guiding philosophy can be found in the Affordable Care Act (ACA) and budget documents.

President Obama gave a rhetorical clue on his reform stance in Golden, CO., on September 13, when he said "the right way to cut Medicare spending is by making health care `smarter'—not by shifting costs to seniors." By "smart-sizing" Medicare, the president is placing an emphasis on transforming the program into a more efficient, outcomes-oriented system. 

The White House is using the ACA, which contains numerous Medicare provisions, as its main tool in protecting and incrementally changing the health care program while reducing costs. The Democrat's platform, echoing the administration's multiple defenses of the embattled law, credits the ACA with savings of $4,200 for the average Medicare beneficiary over the next 10 years; the closing of the “donut hole” in the Prescription Drug Plan (Part D) and recovering $10 billion from Medicare scams.

What the platform doesn't discuss are Medicare proposals contained in the White House's proposed fiscal year 2013 budget, which contains several more detailed cost-savings proposals – many that could directly impact beneficiaries.

Much of what the administration proposes is based on estimates that are optimistic at best, because they have yet to see Congressional action—and most likely will not see passage this year, if at all.

Perhaps the most difficult item is physician payments. Using a formula called the Sustainable Growth Rate created in 1997, Medicare sought to adjust physician reimbursements to prevent spending from growing faster than the general economy. The hope was that spending can be slowed so that Medicare does not consume an ever-growing share of the federal budget. But the controversial formula has met with resistance from the medical lobby year after year, and Congress invariably postpones the cuts each year, at a growing financial cost.

The administration penciled in some $429 billion in savings over 10 years in its 2013 budget for providing a permanent fix to the sustainable growth rate, a number that may not be realistic. This nearly half-trillion figure is important since it's a linchpin for the administration's policy of preserving and enhancing benefits. Without the savings from fixing the SGR, it may have to cut elsewhere to make the arithematic work.

There are other sections in the budget proposal, however, that more directly impact beneficiaries.

One provision calls for raising the Medicare Medical Insurance (Part B) premium surcharge for purchasing first-dollar Medicare Supplement Insurance. Also known as "Medigap," this privately offered insurance covers out-of-pocket expenses, such as co-payments and premiums. The surcharge would be approximately 15 percent of the average Medigap premium. This measure, effective in 2017 if approved, is designed to cover more of the cost of Part B services and certainly affects the "value of Medicare benefits," despite what the platform statement declares.

Note: As with nearly all of the budget proposals, most of these extra charges would go into effect in 2017, a year after the end of (a potential) second term for President Obama. 

Other cost-sharing measures that would dilute benefit levels include a $25 increase in the Part B deductible for new beneficiaries, and $100 co-payments for new home health recipients.  Both would start in 2017. 

Means testing would be expanded under the administration's proposal. Upper-income beneficiaries—those earning more than $85,000 annually—already pay higher premiums for Parts B and D. Premiums would be raised by 15 percent for this group starting in 2017.

Other than these proposals, the Democratic view on Medicare hews to the idea of "program integrity." This is a veiled way of saying that the program's fee-for-service structure will be preserved for now, although some beneficiaries will be asked to dig into their pockets for slightly higher out-of-pocket expenses. This is a direct contrast to the Republican "premium-support" plan, which would give beneficiaries an annual lump sum to buy private insurance.

Unanswered Questions

Where does this leave the Democratic strategy on Medicare in the larger picture? It's more of a status quo plan to reap internal savings that won’t necessarily make the program fiscally sustainable over the next few decades. It buys time and avoids the politically unpalatable approach of directly cutting benefits, provider payments or radically raising premiums while only modestly broadening coverage.

What happens when most of the ACA provisions are firmly in place by 2018? Will the administration, if it stays in place, move to restructure Medicare Advantage Plans (Part C) and Part D to permit more competitive bidding? Will some cost-saving benefits such as home and hospice care be expanded while others are pared?

The Obama administration's minor cost-sharing provisions do not equate with the radical overhaul proposed by the Romney-Ryan campaign. Yet that doesn't mean that beneficiaries will be entirely sanguine with the White House's plan. According to the Center for Medicare Advocacy, a pro-beneficiary group:

"The President has demonstrated a commitment to preserve and strengthen the Medicare program, including preventing this public benefit from being turned into a private voucher program. The Administration's FY 2013 Budget contains proposals that further improve the program and keep it healthy for current and future enrollees. However, the provisions outlined above would increase out-of-pocket costs for certain beneficiaries, and would not achieve the stated goal of creating incentives for beneficiaries to seek high-value services."

It's unlikely that the Obama campaign will advocate anything like scrapping the fee-for-service program before the election. In the language of the advocacy group, “creating incentives for beneficiaries to seek high value services" is a call to give patients more freedom to choose providers who will not be incentivized by the current system to over-treat, overbill and overtest Medicare patients. 

The larger debate on Medicare, of course, will commence after the November election, when myriad proposals will be put on the table. Until then, it will be an all-out rhetorical war on who will be the true defender of Medicare when so much needs to be done to save the system.  

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