Editorial: Health care for needy, elderly is on the block

President Lyndon B. Johnson signed Medicare and Medicaid into law on July 30, 1965, establishing health insurance programs for the elderly and needy – a key to reducing old-age dependency and inordinate burdens on younger generations.

With the retirement of the baby boomers and the "oldest old" (over age 85), now the fastest-growing segment of our population, these essential health care programs have come under financial stress.

In this election cycle, voters face a clear choice on the future of health care for the elderly – and the issue should be front and center in Thursday's vice presidential debate.

Should Medicare and Medicaid be maintained largely as is, with tweaks to assure long-term solvency? Or should the two programs be transformed into something entirely different for the future?

President Barack Obama and congressional Democrats offer the former; Republican presidential nominee Mitt Romney and congressional Republicans – led by Rep. Paul Ryan of Wisconsin, Romney's vice presidential pick – offer the latter.

Ryan's blueprint would convert Medicaid from its traditional state-federal partnership to a block grant; the federal government would provide a fixed lump-sum annual payment to each state.

Today, Medicaid covers seven of every 10 nursing home residents, because few individuals (even upper middle-income folks) can afford to pay for long-term care on their own for any length of time. While elderly and disabled people make up only 25 percent of Medicaid beneficiaries, they account for 64 percent of Medicaid expenditures, according to the Kaiser Commission on Medicaid and the Uninsured.

Sixteen governors, including Gov. Jerry Brown, signed a letter strongly opposing Ryan's block grant approach: "States would be forced to bear all costs after hitting the annual cap just as the 'baby boom' generation is entering their retirement years with a likely steep increase in their health care and long-term care costs over the next few decades."

In contrast, Obamacare expands Medicaid to cover more uninsured Americans. The extra cost is made up elsewhere in the health system, so the Congressional Budget Office estimates that spending and revenue provisions taken together should reduce budget deficits.

Romney, Ryan and House Republicans also would end Medicare as we know it for those born after 1956 by turning it into a voucher program.

Starting in 2023, seniors would use a voucher to buy private insurance or a plan that acts like traditional Medicare. This would reduce costs by capping the amount of care paid for by vouchers, shifting more costs to seniors themselves.

Obama would eke out $716 billion in savings over 10 years to keep the existing Medicare program solvent.

First, he would reduce payment levels for Medicare Advantage, private insurance plans that have participated in Medicare since 1985. These plans currently receive higher payments from the government on average than traditional Medicare – 9 percent higher in 2010. Obama eliminates this subsidy.

Some, including Rep. Dan Lungren, R-Gold River, say this will lead to cuts in services to seniors. But insurers could take the cuts out of profits and administrative costs – or by developing innovative approaches to provider payment and care management.

Second, Obama gets big savings from hospitals, which agreed to cuts because they knew they would see fewer uninsured and more paying patients with Obamacare's insurance expansion.

In sum, Romney would shift more costs to individuals and the states; Obama would build on the federal, state, individual partnership established in 1965. Voters have their choice.

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