Here’s a Question to Ask Romney or Ryan

Last week, I noted the significant differences between Paul Ryan’s proposals, from his 2012 budget to Ryan-Wyden to his 2013 budget. I also noted that while it would be tempting to campaign against the 2012 budget, which massively shifted costs onto seniors, his later proposals did that to a far lesser extent.

Or did they?

Governor Romney has endorsed Paul Ryan’s latest plan, which is specific in that it will reduce future Medicare spending by unleashing the power of the free market through competitive bidding. But what if that doesn’t happen? Well, just like the ACA, his law backstops the growth of Medicare spending at GDP + 0.5%.

The ACA is explicit about what will happens if growth goes above that amount. The IPAB will make recommendations on how to cut it. Congress will have to override those recommendations to stop them, and have their own ideas that save just as much. It’s likely those recommendations would involve reducing provider payments. But it’s the hope of those who support the ACA that other provider-based changes, like ACO’s and the excise tax, will keep the IPAB from having to act.

Gov. Romney’s plan repeals all of these interventions. There’s only competitive bidding. In a must-read post yesterday, Kevin Drum makes the case that competitive bidding won’t work. When it doesn’t, he further makes the case that cost-shifting will once again rear its ugly head:

So again the question is: what happens if health providers bid for Medicare contracts but the bids all come in higher than Ryan’s growth cap? Do premiums go up for seniors? Ryan doesn’t say so, but then again, he also refuses to say what would happen. But there’s no fairy dust here. If costs under the Ryan plan go up more quickly than his growth cap — and they almost certainly will — then someone has to pay the difference. And that someone is either beneficiaries or taxpayers or healthcare providers. There aren’t any other choices.

But it can’t be taxpayers, because that undermines the whole point of the plan. And it can’t be providers, because Ryan’s plan has no mechanism for cutting payments to providers. In fact, he and Mitt Romney have recently abandoned even the existing provider cuts contained in Obamacare. So all that’s left is seniors. Every year their voucher will cover less and less of the cost of the cheapest plan, and seniors will have to pay more and more out of their own pocket. By refusing to address this issue, Ryan has successfully kept things vague enough that no one can produce hard numbers about how much more seniors would end up paying. But it would be a lot.

I have to agree. This is likely worth a question to Gov. Romney or Rep. Ryan. Will seniors be on the hook? If not, what’s the alternative?

[Cross-posted at The Incidental Economist]