Ignore the Fiery Rhetoric: Obama and Romney Have Essentially the Same Plan for Medicare

Commentary about business and finance.
Aug. 22 2012 4:20 PM

Obama and Romney Agree on Medicare

If you ignore the fiery campaign rhetoric, you’ll see an astonishing level of consensus.

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Both Ryan and Obama want to give Medicare a finite growth target, they just diagree on how to implement these cuts

Photograph by Marc Serota.

Democrats have been salivating over the chance to hit Republicans as Medicare-cutters ever since Rep. Paul Ryan turned his budget into holy writ for the House GOP. And Republicans have been deriding Obama as a Medicare-cutter ever since the Affordable Care Act derived some of its savings from rollbacks of subsidies designed to induce private insurance plans to bid for the right to cover senior citizens. Meanwhile on the elite level, a different—indeed completely contrary—debate is taking place, in which pundits argue about who’ll do a better job of cutting Medicare. David Brooks says it’s Ryan and Mitt Romney who are really serious about axing the program, while former Obama OMB Director Peter Orszag denounces Ryan/Romney as relying on an unworkable “private-market tooth fairy.”

For my part, I think it’s perverse that the substantive focus of the campaign has shifted away from the more pressing subject of mass unemployment. But as long as we’re talking long-term entitlement policies, it’s worth noting that on Medicare, Obama and Romney actually agree about almost everything.

In fact, if you consider it at a sufficient level of abstraction, they have essentially the same plan to control Medicare spending. And it’s a pretty good one.

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To see why, you have to understand why Medicare spending—almost uniquely—is truly “out of control.” The way most programs work is that Congress appropriates some money for them, and then the money gets spent. If spending is going up on something you don’t approve of, you might say it’s “out of control,” but in fact it’s being very precisely controlled by Congress. Social Security and a few other smaller programs are known as “entitlements” because they’re exempt from the annual appropriations process. You automatically get a certain Social Security check each month based on a fixed benefits formula. But the way the formula is written still ensures that this is a finite expense.

Medicare is different. It’s an open-ended promise to pay the bills for most of the health care services consumed by the elderly. It’s almost as if the government had a program that just gave senior citizens free shoes in unlimited quantities. The main difference is that undergoing medical treatment is generally unpleasant and it has no real resale value, so in practice people only want to consume so much of it.

Still, this is an open-ended commitment, meaning that when new health care services are invented or existing services become more expensive, the program’s budget expands potentially without limits.

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