Suggestions For Obama's Medicare Counterproposal

[ Posted Monday, April 11th, 2011 – 17:21 PDT ]

President Obama has now called a "do-over" on his 2012 budget proposal. This news broke on the Sunday morning political television chat circuit, as the dust was settling on the government shutdown standoff for the remainder of the 2011 budget. Obama's move was prompted by the budget proposal put on the table by Republican numbers guru Paul Ryan, which seeks to "reform entitlements" by turning Medicare into a voucher system. Obama's new proposal will reportedly also offer "entitlement reform," although no specifics have leaked out yet. What the president should realize at this point, though, is that Ryan has just put him in the driver's seat. Ryan's proposal is so radical that it's going to be very easy for Democrats to present themselves as a more humane alternative to the Republican agenda, and it's going to be very easy for whatever Obama comes up with to look a lot better than just handing seniors a voucher and saying: "Good luck with that medical insurance marketplace."

Ryan's plan, no matter what you think about it, is being hailed as "bold," because it is the first time in a very long time that Republicans have actually put numbers on paper when talking about their budget priorities. Ryan's plan isn't all that new, actually, but when he introduced a similar plan last year, he only got about a dozen or so Republicans to sign on to it. Now that they're in the majority in the House, everyone is taking Ryan's plan a lot more seriously, it seems. Which is forcing the president's hand.

Obama was criticized for his initial budget proposal for not taking on the entitlement question at all. So he's going back to the drawing board and is expected to release his "2.0" plan later this week. It was leaked today that the White House is indeed going to include some entitlement reforms, and will also be raising taxes on the wealthy.

No word yet on exactly what all of this means, but since they seem to be open-minded about such things, I thought I'd offer up a few suggestions, on Medicare in particular. Social Security wasn't addressed in Ryan's budget, and Obama has been downplaying talk of a "crisis" in Social Security, so I'm assuming he won't be addressing this in his budget, either. The "fix" for Social Security is pathetically easy to come up with, even if the mainstream media never even brings it up -- remove the cap on earnings for contributions to the system. The media's only three acceptable solutions are "raise the retirement age", "reduce benefits", or "raise everyone's taxes." There's a third way, which would solve the problem overnight, but somehow they never get around to mentioning it.

But back to Medicare. Republicans are -- quite laughably -- pleading for Democrats not to "demagogue" and "lie" about the issue of health reform. It's as if the past two years had just been erased from their collective memory. Here is Ryan himself, on Fox News Sunday recently:

We are giving them a political weapon to go against us, but they will have to lie and demagogue to make that a political weapon. They are going to demagogue us, but it's that demagoguery that has always prevented political leaders in the past from trying to fix the problem. ... we will be giving [our] political adversaries things to use against us in the next election, and shame on them if they do that.

Shame on them. I mean, really. Let me just Google "death panels" here for a moment... whoops! My browser just crashed, with what it called a "hypocrisy overload." I mean, seriously... cry me a river, Paul.

Getting beyond the irony of Republicans complaining about demagoguing this particular issue, Obama's going to have to put something on the table by way of reforming Medicare. Here are three quick ideas which should at least be considered. The first two are basic Democratic ideas that have been around for a while, and the third is one where the president could actually agree with one of Ryan's ideas.


Allow prescription drug price bargaining

When the prescription drug benefit ("Medicare Part D") was created by President George W. Bush and a Republican Congress, there was absolutely no effort made to pay for it. But there was a strong Republican push to make it permanently more expensive than it needs to be. The prescription drug business is like most businesses in that discounts are available when you buy larger quantities of what's being sold. Other federal agencies (the Veterans Administration, for instance) are allowed to use this to bargain for better prices for prescription drugs (e.g., there are a lot of V.A. hospitals, therefore they can buy in bulk and save money). It would have been eminently sensible for Medicare to be allowed to strike similar deals with the drug companies, but Republicans refused to allow it -- to protect corporate profits for those drug companies. This is nothing more than naked corporate welfare.

The biggest selling point of allowing Medicare to bulk-purchase drugs at a discount is that it will save a whale of a lot of money -- and reduce the deficit, and help shrink Medicare's ballooning costs. It's a purely fiscal argument, in other words. A fiscally conservative argument. There is, quite simply, no argument to be made for blocking Medicare from saving money in this fashion -- except to line the pockets of Big Pharma. Obama should point this out, and challenge Republicans to defend the fiscally indefensible.


Remove the "donut hole" immediately

I fully admit that I'm no economist, budget analyst, or actuary. I have no idea as to how much money each of these suggestions would cost, or save, in other words. I'm offering them up on political grounds, and (quite lazily) leaving it for others to compute the bottom line.

Having admitted all of that, I would immediately take some of the savings from allowing Medicare to purchase drugs in bulk and accelerate one aspect of the Democratic health reform law passed last year -- by removing the entire "donut hole" immediately. This year.

When the prescription drug benefit was passed, one of the compromises struck in Congress was to leave this "donut hole" for seniors purchasing drugs. Up to a certain dollar amount per year, drugs are covered by the plan. Above that, seniors have to pay the full cost, until a second ceiling is met. When this is hit, drugs become free. Low costs are covered, high costs are covered, and the folks in the middle pay full price.

When Democrats reformed healthcare last year, a "donut hole fix" was included. The first year, seniors would get a check for a few hundred dollars to cover part of their "donut hole" costs. This amount would go up over time, until finally the donut hole would be closed and all senior drug costs would be covered equally.

Ryan's plan -- because it singles out anything even remotely connected to "Obamacare" (as he calls it) for the budgetary axe -- completely repeals the donut hole fix. Leaving President Obama a huge (and juicy) political target to shoot down. Because, unlike other Ryan "reforms" which are limited to those currently under the age of 55, this would affect actual seniors and it would affect them immediately. Obama should call Ryan's bluff on this one -- and counter-propose that the entire donut hole would disappear this year.

This would cost some money, of course. But, if coupled with the savings from allowing bulk purchasing, perhaps it would be offset. In a 10-year budget, the savings from bulk-purchasing would accrue every single year; whereas moving up the closing of the donut hole a few years would only impact those few years -- since Obama's budget already has the donut hole fix in the longer-term numbers.

Politically, this would be a very strong bargaining position for Obama. The difference between Democrats and Republicans would be crystal clear: "Republicans want to bring back the Medicare donut hole, meaning some seniors would pay more than $1,700 per year. Last year, Democrats began closing that donut hole with a $250 check. Democrats are now saying we should entirely eliminate the donut hole this year. Seniors have a choice -- pay up to $1,700 for their prescriptions under the Ryan plan, or pay zero under the Democratic plan. Which choice do you think seniors are going to get behind?"


Means-test Medicare

But while Obama should indeed draw stark lines with Ryan's Medicare plan -- especially the "voucher" idea, which should be mentioned as frequently as possible by every Democrat, to inform the public exactly what Ryan's up to -- the president can also adopt one idea from Ryan, in a show of bipartisanship. This idea is means-testing Medicare.

This is not a new idea, I should mention. It's been kicked around for decades, for several federal programs. Some programs are means-tested already (Medicaid, food stamps), for instance. Others (Social Security, Medicare) are not. It's mostly been a Republican idea, although at times in the past some Democrats have supported it.

It's a philosophical argument, to be sure, but it seems to be one of the only ones where Republicans are on the side of making the wealthy pay more. Democrats argue for the sanctity of Social Security and Medicare as something that everyone is entitled to (hence the "entitlement" -- the Republicans won this "framing" battle long ago). But by doing so, they are arguing that the Paris Hiltons of the world deserve government help when they retire, even if they're still making millions (or billions) of dollars a year in income after they do retire.

Democrats argue against any sort of means-testing, because they fear that once instituted, the cutoff point for those who get the full benefit would get lower and lower over time. Ryan's budget, for instance, would reportedly begin cutting off full Medicare benefits (in other words, making seniors pay more) starting at an income of $80,000 -- which is way too low. But President Obama could easily tie this to his long-standing pledge to the middle class and start charging seniors more for Medicare at the $250,000 yearly income level. Reduce benefits up to an even-larger income ($500,000 per year, perhaps), where people wouldn't get any Medicare at all.

The public thinks of Social Security and Medicare in "savings account" terms. In other words: you pay your money in, it sits there building up for you, and then you get it when you retire. This is a false analogy. It's really insurance: you pay in, and your money goes out the same year to cover other people who need it.

It's actually (little-"P") progressive to means-test government benefits. In a "progressive income tax" system (as opposed to a "flat tax"), those with more money pay a higher rate. Those with less money pay a lower rate. Those with very little money pay nothing.

Medicare, unlike Social Security, simply can't be put on a sustainable fiscal path for the future with a quick fix (raising the cap, in other words). It might not be all that good an idea to means-test Medicare, but it is starting to look like the best idea anyone's proposed so far. The other options include raising the age at which you receive Medicare, and Paul Ryan's voucher-based system. Medicare is already a "single-payer" plan, so no costs can be saved there (except on prescription drugs, of course).

President Obama could both reach out to the Republicans on one of their budget proposals, and at the same time keep his campaign promise not to "raise taxes" on anyone making $250,000 or less, by proposing a much more lenient version of means-testing Medicare. To his critics on the Left, he could say all he's doing is making the wealthy pay more -- which is a core Lefty tenet, right? To his critics on the Right, Obama could say: "Hey, it's your idea, how can you be against it?"



I have no idea what will be in President Obama's reboot of his budget proposal. I've tried, here, to suggest a few things for Medicare reform that could help him politically, and help him appear to be seriously working to solve the problem. Obama could present the plan as a mix of ideas from across the political spectrum. For the Left, there is the Medicare bulk discount on prescription drugs. For the seniors themselves, a much-more rapid solution to the donut hole problem -- as contrasted with Ryan's plan to reinstate the full donut hole. And for the Right, he's agreeing with one of their proposals, while tempering it so the only people affected by it are the truly wealthy.

There may be other, better ideas for Obama on Medicare reform, I'll fully admit. But by combining these three, Obama could be seen offering a compromise that gives all sides something they want, while also denying all sides something they don't want to give up. Which is exactly where Obama seems to want to position himself politically these days.


-- Chris Weigant


Cross-posted at Business Insider
Cross-posted at The Huffington Post

Follow Chris on Twitter: @ChrisWeigant


17 Comments on “Suggestions For Obama's Medicare Counterproposal”

  1. [1] 
    tommymccarthy wrote:

    What Goldwater could not do...
    What Nixon could not do......
    What Reagan could not do.....

    Gore Vidal was right....

    It no longer makes the slightest difference who the President is....

    They own us now

  2. [2] 
    tommymccarthy wrote:

    I couldn't quite bring myself to add:
    "Somehow... IMPOSSIBLY...Obama has done..."

    But it seems I have

  3. [3] 
    Michale wrote:

    President Obama has now called a "do-over" on his 2012 budget proposal.

    I bet Obama would like a DO OVER on a LOT of things he has said and done, eh? :D


  4. [4] 
    Osborne Ink wrote:

    Means-testing Medicare? I'd oppose that for the same reason it was removed from Medicaid in the health care bill.

    Got two pennies to rub together? Then you're not poor enough for Medicaid in Alabama. Own a car? Too rich, sorry. Own a house, even one that's underwater? Never mind the wet, your investment in the American dream is now a cross to bear.

    This is Alabama, where your right to life ends at birth. We've stripped Darwin from the textbooks so we could enforce Darwin on your health care. They do it to everyone under 65; they'll do it to grandma, too.

  5. [5] 
    Michale wrote:


    So, we should just write off all the Americans in Alabama, is that what yer saying???

    You would make a great Republican... :^/

    They do it to everyone under 65; they'll do it to grandma, too.

    Yea, and the Republicans want to kill all women and make Seniors eat cat food...

    Seriously, you don't actually BELIEVE that utter felgercarb, do you???


  6. [6] 
    akadjian wrote:

    Paul Ryan reminds me of the old Monty Python skit about Dennis Moore: "He steals from the poor and gives to the rich ..."

    The point I would hammer over and over with Ryan is that he is "redistributing wealth".


    A great term for this would be "reverse socialism".

    Its obvious to even the casual observer.

    Because of this, his budget should be a gift from the gods as you argue, Chris.

    However ... we have a conservative President. So it will be interesting to see where he starts in the negotiations.


    p.s. @Michale- Speaking of Alabama, did you know that the people in states which are most Republican typically receive the most in welfare?

    "Consider the state of Alaska. In 2004, the average Alaskan received $1.84 in federal benefits for each $1.00 he or she paid in federal taxes. The Republican presidential candidate, George W. Bush, received 62 percent of the vote.

    Now consider the state of Massachusetts. In 2004, the average resident received only $0.82 in federal benefits for each $1.00 paid in federal taxes. Yet less than 38 percent of all voters pulled the lever marked George W. Bush. "

    - Gary Richardson, "The Truth about Redistribution: Republicans Receive, Democrats Disburse"

  7. [7] 
    nypoet22 wrote:

    Yea, and the Republicans want to kill all women and make Seniors eat cat food...

    no, they don't necessarily want it to happen (at least not to anyone they know), but if it must, it must, y'know, for the sake of the free market and all...

  8. [8] 
    nypoet22 wrote:

    i should say, if it happens to all those lazy, liberal socialist union thugs, well that's just the free market at work.

  9. [9] 
    Michale wrote:

    If re-distribution of wealth to the poor is so important to Democrats, then I say let's do it..

    We'll start with President Obama..

    He has a reported net worth of 10.5 million.. Since everything is taken care of FOR a US President, there shouldn't be ANY problem with the President giving away all of his millions to charities..

    Next, let's look at Harry Reid.. He has a reported Net Worth of approx 4.5 million. Once again, since the US taxpayer foots a lot of his bills, he can afford to give the majority of his money to charities..

    Now, my favorite. Nancy Pelosi has a net worth of between 25 million and 92 million. To be fair, lets just go with the low figure... Pelosi also has the majority of her needs taken care of by taxpayers, so she has absolutely NO EXCUSE for not redistributing her wealth to the poor and middle class..

    What about George Soros? An estimated net worth of 14.2 BILLION dollars!! Why doesn't Soros re-distribute all his wealth and live in a mobile home in a trailer park in Podunk, Kentucky???

    You see, that's the problem with Democrats and their "re-distribute wealth" credo...

    They are all about re-distributing OTHER people's wealth. They want to hold onto their OWN for their OWN purposes..

    That's why it's impossible to take the Democratic Party seriously most of the time..

    They are the Party of "Do as I say, not as I do"...


  10. [10] 
    akadjian wrote:

    They are all about re-distributing OTHER people's wealth.

    Huh? This doesn't make sense.

    We're fighting for fairer rules. Rules which have been rigged by the wealthy to benefit the wealthy.

    For example, let's get rid of the tax breaks and loopholes that allow companies like GE to pay $0 in income taxes.

    These fairer rules would apply to everyone equally. George Soros and Nancy Pelosi included :)

    What the Republicans are fighting for is to rearrange the rules to even further benefit the wealthy. More tax breaks for the rich. More deregulation. More trickle down. More costs shifted onto the middle class and poor.

    Basically, their vision of America looks a lot like a 3rd-world country. That's not an America I think is worth fighting for.

    But they've got great marketing :).


  11. [11] 
    Michale wrote:

    Huh? This doesn't make sense.

    It makes perfect sense..

    If Pelosi and Soros are truly sincere about wealth redistribution, then let them put their money where their mouths are...

    Literally... :D

    For example, let's get rid of the tax breaks and loopholes that allow companies like GE to pay $0 in income taxes.

    Is that the same GE that is the Obama Administration's pet corporation?? Whose CEO is running Obama's new "Job Focus" panel?? Who donated almost half a million dollars to the Obama campaign?

    That GE??? :D

    These fairer rules would apply to everyone equally. George Soros and Nancy Pelosi included :)

    I seem to recall people around here castigating the GOP for taking advantage of parts of the Stimulus while savaging it at the same time..

    So, it seems to me that if Democrats want fairer rules then they should lead by example and follow the rules that they want everyone else to follow.

    N'est pa??

    You don't think that Pelosi and Soros et al are using loopholes to escape taxes??

    What the Republicans are fighting for is to rearrange the rules to even further benefit the wealthy. More tax breaks for the rich. More deregulation. More trickle down. More costs shifted onto the middle class and poor.

    So let the people who allegedly are against such practices lead by example and follow the set of rules that THEY want to see implemented...

    In short, let them re-distribute THEIR wealth first...

    Then, and only then, will they have a truly sturdy soapbox to stand on and preach to the masses...


  12. [12] 
    akadjian wrote:

    So let the people who allegedly are against such practices lead by example and follow the set of rules that THEY want to see implemented.

    So let those who don't want to pay taxes or follow the laws the rest of us follow do as they please?

    When did anarchy become your official platform? :)

    How about this? I'm ok with your modest proposal so long as we own the military, all the roads, air traffic control, all the parks, the social safety net, the schools, a clean water supply, and everything else brought to you by government.

    Perhaps, those who hate government so much should follow your advice, "lead by example," and not rely on any of the benefits of our socialist society.

    If everyone shares in the benefits, everyone should share in the cost. Equally. Or, let us own the benefits of government as per my proposal. We'll pay the higher taxes and we'll figure out a fair way to charge you tax evaders for their use.


  13. [13] 
    akadjian wrote:

    BTW- Any first takes on Obama's speech. It bugs me that he again seems to be starting with the compromise. But on the positive side, I was impressed that he staked out some territory and offered a different math than Republicans (where reverse socialism seems to rule the day).

  14. [14] 
    Michale wrote:


    Yer preaching to the choir with regards to the faults of the GOP...

    But I somehow get the impression that the Democratic Party think that it is BETTER than the GOP, despite all evidence to the contrary.. :D


  15. [15] 
    akadjian wrote:

    But I somehow get the impression that the Democratic Party think that it is BETTER than the GOP, despite all evidence to the contrary.. :D

    Not quite sure what you mean by "better than the GOP". Is it the attitude I've seen from some on the left that if you don't agree with us than you must be stupid?

    I think that impression may just come from a lot of party members, liberals and such, who fall back on that tired old chestnut of trying to tell adults how wrong they are.

    I wish I could say I haven't seen it, Michale, but I see it on many of the local blogs here that I read. Of course, you'll see it from both sides. But it really grates me to see folks who I would tend to agree with be so unlikable. Often I'll say something and try and help them understand how they sound.

    To make your case is one thing. But to be an ass about it is another.

    Or were you talking more in a political sense?


  16. [16] 
    Chris Weigant wrote:

    tommymccarthy -

    "Only Nixon could go to China."

    No, wait, that can't be right...


    Michale [3] -

    Yeah, but isn't that true of every one of us?

    Osborne -

    Yeah, this is why Progressives have been against what would normally be a progressive position, I think -- because once the idea is in place, it would be oh, so easy to just move the goalposts a little bit.

    But I think means-testing Medicare, if it ever happens, will happen before means-testing Social Security. Medicaid is already means-tested.

    And there's means-testing and means-testing. One is means-testing your total assets, which I know of because a disabled friend had to go through it. It is truly bureaucratic evil personified. But means-testing income is an easier thing to do -- just show last year's tax return: how much did you make? If it's over a million bucks (say), then you pay for your own healthcare.

    Michale [5] -

    Republicans want to kill all women?!? Oh, wait, you were being sarcastic. I thought I had a scoop on my hands there...


    David [6] -

    Bernie Sanders is already calling it "reverse Robin Hood", which is pretty good, too...

    Michale [9] -

    There's an article today (HuffPost, I think) about a group of millionaires calling for higher taxes on millionaires. Sorry, don't have the link handy, but people like that do actually exist.

    David [10] -

    Yeah, they do have great marketing, I agree. I keep trying, though, to level this particular playing field. Join us here every Friday! Heh...

    Michale [11] -

    Democrats aren't pushing for redistributing assets, just income, to be clear. And it's not like Republicans don't put their money where their mouth is, either. When John McCain was pushing vouchers for health care, I dared him to take his $7K and go buy insurance on the open market, as I thought it'd be a good way to wake him up to the reality outside the government "socialist" health insurance he has had HIS ENTIRE ADULT LIFE.

    Oh, and it's "n'est pas?" Otherwise, you are saying "Is it not Pa?" (perhaps a question Yoda would ask if transported to the world of "The Waltons"... heh.... couldn't resist.)

    David [13] -

    I'm still digesting Obama's speech. I had another column lined up for Wednesday, so maybe I'll write about it tomorrow...

    Michale [14] -

    Is that anything like "where all the children are above average..."?

    Whew! Done answering for now...


  17. [17] 
    akadjian wrote:

    Join us here every Friday! Heh...


    p.s. I heard this last night on the radio and its pretty durn funny.

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