Clinton's Medicare Cuts

The conventional wisdom debunked.
Oct. 25 1996 3:30 AM

Clinton's Medicare Cuts

Bill in '93 = Bob in '96.

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D uring the first presidential and vice presidential debates, Bob Dole and Jack Kemp were hit by Medicare attacks from Bill Clinton and Al Gore some 22 times. That's an average of one Medicare attack every four minutes.

Dole's sins: Not only did he want to slash $270 billion from the program--more than needed to protect the Medicare "trust fund"--he wanted to hike premiums, force seniors to pay more out of pocket for care, and push them into managed care. Dole and House Speaker Newt Gingrich, the president and vice president said, wanted Medicare to "wither on the vine." All these were, as Gore put it on Meet the Press recently, "extremist measures that would have devastated Medicare."

Thank God Clinton was there to stop it.

Dole's limp response was that he would honor his mother's word not to cut Medicare. He needn't be so defensive. Three years ago Clinton himself proposed basically the same package of reforms for Medicare--a fact everyone seems to have forgotten since it was embedded in his massive, ill-fated Health Security Act. Here's the rundown.

Big Cuts vs. Slower Growth. Consider this exchange in the veep debate:

Jack Kemp: "The president himself suggested that the reduction in the growth of Medicare over the next five or six years ought to be held to 6 percent. Under the Republican plan, irrespective of the numbers, it will grow at 7 or even more percent."

Al Gore: "I think Mr. Kemp has unintentionally made a mistake in saying that President Clinton called for a reduction to 6 percent. ... It is not the president's position."

Nobody bothered to check out this one. But the fact is that in 1993 Clinton boasted he could cut Medicare growth to 6 percent while protecting the program.

Here's Clinton speaking to the American Association of Retired Persons in October that year: "Today, Medicaid and Medicare are going up at three times the rate of inflation. We propose to let it go up at two times the rate of inflation." Given that prices were expected to climb 3 percent a year, Clinton meant 6 percent growth for Medicare.

"That is not a Medicare or Medicaid cut," he reassured seniors. "So when you hear all this business about cuts, let me caution you that that is not what is going on. We are going to have increases in Medicare and Medicaid, and a reduction in the rate of growth."

A draft summary of the Health Security Act, released in September of 1993, contained a chart showing projected growth for Medicare slowing to less than 6 percent by 1997, and less than 5 percent by 1999. And in its independent review of the Clinton plan, health-care consulting firm Lewin-VHI noted that the act "attempts to slow the growth in public and private health spending to the rate of growth in the CPI plus an allowance for population growth." That puts Medicare growth at just over 4 percent a year.

Far from devastating, this slowdown was, the White House said at the time, good for seniors. Ira Magaziner told a press briefing that "slowing the rate of growth actually benefits beneficiaries considerably because it slows the rate of growth of the premiums they have to pay."

But looked at in the terms the White House uses today, Clinton was proposing cuts in Medicare spending beyond the $270 billion Republicans dared propose.

Like the GOP plan, Clinton wanted to take a big chunk of savings from Medicare providers--doctors and hospitals--by cutting back payments to them.

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M ore Cuts Than Needed. At one point, Clinton warned that the GOP cuts were "more than was necessary to repair the Medicare trust fund." The implied political point was that Medicare cuts were going to pay for tax cuts for the rich.

Clinton's Health Security Act, however, also cut Medicare more than was needed to repair the trust fund. Most of the savings from Medicare were to be plowed back into new federal health programs. As the Congressional Budget Office put it: "Reductions in Medicare spending would provide a major part of the funding for the Administration's proposal." More than a quarter of it, by White House calculations.

Raise Costs to Seniors. Several times during the debates, Clinton and Gore said that the Republicans' Medicare-reform plan would have boosted costs to seniors. "It would have charged seniors more for out-of-pocket costs as well as more in premiums," Clinton said at one point.

Under Clinton's Health Security Act, more than a quarter of the savings came out of the hides of seniors. They were to be charged higher premiums for Medicare Part B, the program that covers physician services. New copayments were to be added for some Medicare services that are now 100 percent covered. Over six years, those costs to seniors would have totaled $33 billion.

To be sure, Clinton concentrated the premium hikes for Part B on the well-to-do--those seniors earning $90,000 a year or more. The rest would pay only a quarter of the premium cost, with taxpayers picking up the rest. The GOP set the contribution rate at just under one-third of the full cost, but they also "means tested" the premiums so that seniors with incomes over $75,000 would pay a bigger chunk.

Push Seniors Into Managed Care. "Sen. Dole's Medicare plan ... would have forced a lot of seniors into managed care," Clinton said. That's something of a misrepresentation. The GOP plan would have expanded the managed-care options open to seniors, and encouraged them to take it. Today, seniors can stick with Medicare, or opt for Health Maintenance Organization (HMO) coverage, with the government ponying up the premiums. The GOP plan would have opened that door to the rest of the alphabet soup of private managed-care plans, such as preferred-provider organizations, point-of-service plans and physician hospital organizations.

So would Clinton's 1993 reforms, and even his more recent Medicare proposals. One section in his Health Security Act was titled "Encouraging Managed Care Under Medicare Program." Clinton's current reform proposal suggests expanding managed-care options for seniors. The only difference between the Republicans and Clinton on this score is that the GOP wanted to give seniors one extra option--to enroll in a "medical savings account" plan.

Both parties used basically the same regulatory machinery to try to make their plans work in the market without creating a huge "adverse selection" problem--healthier seniors opting into lower-cost plans. The Republicans' machinery, in fact, was borrowed almost verbatim from Clinton's plan--which, in a double twist, the GOP had previously attacked as unworkable.

Let Medicare Wither on the Vine. Clinton twice said that Medicare would "wither on the vine" under Republican reforms. The reference is to a comment by House Speaker Newt Gingrich, who said that the GOP wanted the Medicare bureaucracy to wither on the vine, as seniors opted for the private plans. But the quote has been misused by Democrats ever since.

In any case, Clinton also forecast the decline of the Medicare bureaucracy. New retirees under his Health Security Act would be able to stick with the plan they had when they worked. The government would pay the premiums instead of the employer. Current retirees could choose a private managed-care plan. According to the Congressional Budget Office, Clinton's plan would have moved nearly 3 million seniors from Medicare into private plans in 1998 alone.

To be fair, the White House wanted to sweeten the Medicare pot at the same time it was making these cuts by adding a prescription-drug benefit.

It has also claimed since that its proposed cuts in Medicare were acceptable because they were in the context of "universal health care reform." But that wasn't the argument it made at the time. Hillary Rodham Clinton told a Senate panel in 1993 that savings in Medicare were easy because "we have too many examples now of how it can be done better at lower costs with the same or better quality, and that's what we're counting on."

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