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4 Clarifications Between Obama vs. Ryan Medicare Spending Plans

It turns out they do agree on something – in the economic plans set forth by both current President Barack Obama and Vice Presidential candidate Paul Ryan, the parties have pushed for the same target rate for controlling federal spending on Medicare.  Where they differ is the path to achieving this target rate and with all the campaign jargon being thrown around during this election time, it’s hard to get a clear view on what each plan actually entails so we’ve clarified 4 main sub-issues within the Medicare debate.

Here are our 4 clarifications:

1.) Hard Cap (Ryan) vs. Soft Cap (Obama) – in cutting costs to get down to their target rate, Paul Ryan’s plan would use a hard cap, or a set spending limit, to cut costs which would only affect those currently under 55 years old.  Obama’s spending cuts on the other hand, would be based on a cost-per-user rate which, if this rate goes over a certain amount (as determined by a Mediare actuary), would trigger cuts across the board.  Obama’s cuts would come as a percentage cut of Medicare’s overall spending and some critics argue it wouldn’t be enough to reach the desired target rate.

2.) What Would Seniors Pay Under the Ryan Plan? – Democrats have argued that seniors will pay more under Ryan’s plan while the Republican camp has stated that seniors could choose some plans and not pay anything at all.  So who’s telling the truth?  Well according to HealthCare Finance News, Ryan’s plan states that all plans would submit bids for how much they would charge to cover a beneficiary’s health care costs and each of these plans would be required to provide a minimum set of benefits equal to the value of those in the traditional program.  The government would pay the premium for the private plan with the second lowest bid, or for traditional Medicare, whichever is lower. Beneficiaries would get a rebate if they chose the lowest-cost plan, but would have to pay the difference if they chose a plan that set premiums higher than the second-lowest.  So basically, the most basic plans for seniors would be what some would consider to be ‘no cost’ but if they wanted to upgrade the plans, the seniors would be responsible for the difference in cost.

3.) What is this $716 billion Medicare cut both sides keep rumbling about? – Well in our opinion this is a bit of a moot point.  In both parties’ plans, $716 billion will be removed from Medicare funding over the next 10 years but this money will be put right back into fixing various inefficiencies in the healthcare system.  From our view, the parties are using this big number as ammunition to attack the other side when it reality they’re both planning to do simliar things with it.

4.) All in all, what is the main difference between the Ryan and Obama spending cuts? – In short, the Obama cuts would depend more heavily on the discretion of various government decision-makers determining the most effective way to cut costs while the Ryan plan would depend more on competition between both private and public healthcare entities to drive down the costs.  Obama’s cuts would be administered on a percentage basis by the government while Ryan’s plan would allow normal competition to drive the costs down and if they do not go below a certain point, would then require government intervention to get the program under the hard cap limit (although he has not stated what parts of the health care program would be cut first)

Any actual movement on this issue is unlikely until a new congress is seated in 2013.  Until then, it remains a hot campaign issue which both parties are trying to spin to their advantage to gain the coveted senior vote.

Article references: HealthCare Finance News

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