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Q:  Romney and other Republicans have accused Obama of trying to end Medicare as we know it by slashing $716 Billion in Medicare funding in order to pay for the Affordable Care Act (“ACA”).  This sounds strange.  What is the truth?

A:  Romney is actually accusing Obama of trying to end Medicare as we know it, something the Republicans are often in favor of, but not always.  We have all heard of the Tea Party member who said, “Keep your government hands off of my Medicare.”

The truth is that Democrats are typically defenders of Medicare, one of the most successful and beloved government funded and managed programs in history.  So why would Obama be trying to slash Medicare funding? 

The truth is that what Obama has slashed as part of the Affordable Care Act (“ACA”) is extra government subsidies for the Medicare Advantage program that was initiated by President George W. Bush as a way of privatizing Medicare.  

With Medicare advantage, a senior eligible for Medicare turns over their Medicare management to a private insurance company and the government pays these private companies a premium (between 14% and as much as a 19%) to manage the patient’s health care.  So much for private industry being more cost effective!  Some seniors bought into this system on the premise that private insurance companies could offer very low cost plans that would cover the gaps in traditional Medicare. Those on traditional Medicare often buy private “Medigap” insurance to cover that same gap.

Medicare Advantage plans offer low cost to the individual, but a high cost to the government and taxpayers.  People on Medicare Advantage programs might have thought that they were getting a good deal, but what they were really doing was having the rest of us subsidize their essentially low Medigap payments with our taxes.

What Obama did as part of the funding for the ACA was to cut the extra 14 to 19% subsidy of Medicare Advantage programs.  This provided most all of the $500 Billion savings over 10 years needed to pay for the ACA.  Seems like cutting $500 Billion dollars in cost from a program would be something Republicans would like, but it also seems that they would rather distort the truth and scare seniors about the ACA.

Now if private insurance companies can provide the same coverage for the same cost or less, fine, let them do it.  (They were actually having trouble controlling expenses as it was.) The important thing is that with the ACA, we as taxpayers no longer have to pay private insurance companies a premium to run a program that competes with Medicare, but provides the same service at a higher cost. Medicare Advantage was an attempt by Bush to privatize Medicare and end traditional Medicare as we know it. 

The other factor in the ACA cost savings, is that in return for having fewer uninsured patients to treat, heath care providers have agreed to lower payments for treating Medicare patients.  This is a win-win situation that does not cut Medicare benefits, only Medicare costs. The Congressional Budget Office (CBO) has estimated that the ACA extends Medicare solvency by 8 years, not the other way around as the untrue accusations would imply. Kudos to Obama for cutting down on wasteful spending and saving Medicare as we know it!

Since the Romney/Ryan campaign is currently and often repeating this untrue claim, we prepared the following comparison of the two parties' approaches to cutting Medicare Spending for use at our 2012 County Fair Booth.

Medicare Spending Cuts

For more information on the ACA visit this site.