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Romney Medicare plan: Key details still in flux
First Published Sep 24 2012 12:15 pm • Last Updated Sep 24 2012 12:21 pm

Washington • Medicare is the one health insurance plan that will cover virtually every American at some point in life, and Republican Mitt Romney is proposing the biggest changes since its creation nearly 50 years ago.

With important details still hazy, The Associated Press asked the Romney campaign five questions about how his Medicare plan would affect consumers on critical matters of costs and benefits.

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Some of the questions remained unresolved after the campaign’s responses. It may take electing Romney to find out how his plan would work. (The AP also sent President Barack Obama’s campaign a set of questions about his plans for Medicare, and those responses are the subject of a companion report.)

"One of the things that concerns me about both campaigns is that they tend to use jargon terms like ‘competition’ or ‘protection for benefits’ without spelling out how they would deal with the challenges that come up," said economist Marilyn Moon, a former trustee overseeing Medicare finances. "Their answer is to attack the other side, or simply reinforce the same jargon, rather than explaining how things would work."

Broadly speaking, Romney calls for shifting people now age 54 and younger into a different sort of Medicare. Once eligible, these people would get a fixed payment from the government, adjusted for inflation, to pay for either private insurance or a government plan modeled on Medicare. Current beneficiaries and those nearing retirement could stay in the traditional program.

Romney says it’s time for bold action because Medicare faces insolvency in 2024, the tip of its long-term financing woes. Private insurance plans would get waste out of the system while protecting quality and affordability, he says.

Some Medicare questions for consumers to keep in mind, along with answers from the Romney campaign and the views of several experts:

Q: What happens if Romney’s fixed health insurance payment for future retirees fails to keep up with rising medical costs?

A: Thousands of dollars in costs could get shifted to retirees, punching holes in household budgets. Health care inflation is now in a lull, but historically it has grown faster than the economy, overall inflation and workers’ wages.

Romney’s campaign says his goal is to avoid cost shifting and to secure for future Medicare beneficiaries affordable coverage options at least as good as what’s available for today’s seniors. Lower-income Medicare recipients would get more money from the government for their health insurance.

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Competition among insurers will keep costs in check, says the Romney campaign. The government payment will be based on competitive bids. "As plans compete with each other to provide better care more efficiently, the growth in (health) costs will slow dramatically and place Medicare on a sustainable long-term footing," writes Romney policy director Lanhee Chen.

Earlier this year, the nonpartisan Congressional Budget Office analyzed a similar Medicare plan by Romney’s running mate, Wisconsin Rep. Paul Ryan. It found that by 2030, seven years after the proposal would take effect, Medicare would be spending about $2,200 less on a typical 66-year-old than would be the case under current policies.

That may not be a problem if competition works. But Obama’s first Medicare administrator says the numbers are so big he doesn’t see how Romney can avoid cost shifting.

"I would hope through quality improvements we can mitigate rate increases. But Romney has not been clear about how he will cause improvements in care to happen," said Don Berwick. "I think the consequences will be that costs will continue to rise."

Tom Scully, Medicare administrator under President George W. Bush, says Congress would intervene to make up the difference. "The reality is if inflation outstrips that payment, Congress will probably make an adjustment," said Scully.

Q: Will there be a set of guaranteed benefits that private plans must cover in Romney’s revamped Medicare?

A: The question is important because having a basic set of benefits would allow consumers to make apples-to-apples comparisons among plans. The Medicare prescription drug program and private insurance plans currently available through Medicare Advantage have a floor of protection.

The Romney campaign website says, "All insurance plans must offer coverage at least comparable to what Medicare provides today."

Some experts say that’s too vague. "Comparable" can mean similar in dollar value, but quite different in terms of coverage. Insurance companies can design benefits to cherry-pick healthier customers. A high co-payment for home health care, for example, would discourage frail patients.

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