Government Watch

In the First Presidential Debate, Mitt Romney Told the Truth on Health Care and Obama Tried Not To

by Avik Roy – This article first appeared on –

The first presidential debate between Mitt Romney and President Obama was easily the wonkiest such debate I can recall in my lifetime. That’s great for the country. But even better was the fact that Mitt Romney was able to correct a number of the misleading statements that President Obama has been making about Romney’s plans for health care and entitlement reform. Let’s review the details.

(DISCLOSURE: I am an outside adviser to the Romney campaign on health care issues. The opinions contained herein are mine alone, and do not necessarily correspond to those of the campaign.)

1. Obamacare’s $716 billion in Medicare cuts reduce benefits

Here’s what President Obama said about the $716 billion in Medicare cuts enacted within Obamacare: “$716 billion we were able to save from the Medicare program by no longer overpaying insurance companies by making sure that we weren’t overpaying providers. And using that money, we were actually able to lower prescription drug costs for seniors by an average of $600, and we were also able to make a—make a significant dent in providing them the kind of preventive care that will ultimately save money throughout the system.”

Um, no. As I discussed on Tuesday, the “donut hole” closure imposed by Obamacare only affects 6 percent of seniors. Furthermore, Obamacare’s new spending on prescription drugs and preventive care is offset by a far greater amount of cuts. The cuts outweigh the new spending by a ratio of fifteen to one.

Romney hit that point. “That’s $1 for every $15 you’ve cut. They’re smart enough to know that’s not a good trade. I want to take that $716 billion you’ve cut and put it back into Medicare. By the way, we can include a prescription program if we need to improve it. But the idea of cutting $716 billion from Medicare to be able to balance the additional cost of Obamacare is, in my opinion, a mistake.”

2. Romney’s Medicare plan doesn’t expose seniors to higher costs

President Obama tried, once again, to mislead voters about Romney’s Medicare plan. “The idea, which was originally presented by Congressman Ryan, your running mate, is that we would give a voucher to seniors and they could go out in the private marketplace and buy their own health insurance. The problem is that because the voucher wouldn’t necessarily keep up with health care inflation, it was estimated that this would cost the average senior about $6,000 a year.”

That’s an improvement from what Obama has said on the campaign trail, when he has claimed that Romney’s plan would cost seniors $6,000 a year. Indeed, Obama anticipated that he would get push-back on this point: “Now, in fairness,” he said, “what Governor Romney has now said is he’ll maintain traditional Medicare alongside it. But there’s still a problem, because what happens is, those insurance companies are pretty clever at figuring out who are the younger and healthier seniors. They recruit them, leaving the older, sicker seniors in Medicare. And every health care economist that looks at it says, over time, what’ll happen is the traditional Medicare system will collapse.”

No. That isn’t what “every health care economist” has said. Democrat-aligned health economists who support the President, like David Cutler, have argued that Romney’s plan would incentivize insurers to cherry-pick healthier seniors. But right-of-center economists, such as James Capretta, Steve Parente, and Douglas Holtz-Eakin, disagree.

But it’s not just right-of-center economists who disagree. David Cutler himself has argued in favor of Romney’s approach to Medicare reform, according to White House e-mails unearthed by Meghan McCarthy of National Journal. And there’s another irony: if Obama thinks risk-adjustment and premium support is so horrible for seniors, why did he impose it on 25 million low-income Americans through Obamacare?

3. Medicare is less efficient than private insurance

President Obama delivered this whopper regarding Medicare: “Every study has shown that Medicare has lower administrative costs than private insurance does, which is why seniors are generally pretty happy with it. And private insurers have to make a profit. Nothing wrong with that. That’s what they do. And so you’ve got higher administrative costs, plus profit on top of that. And if you are going to save any money through what Governor Romney’s proposing, what has to happen is, is that the money has to come from somewhere.”

False. Indeed, the most persuasive research on Medicare’s administrative costs comes from my Apothecary colleague Robert Book, who notes that (1) half of Medicare’s administrative costs are booked by other federal agencies; and (2) On a per-beneficiary basis, despite this advantage, Medicare spends more on administrative costs than private plans do.

Obama continued: “And when you move to a voucher system, you are putting seniors at the mercy of those insurance companies. And over time, if traditional Medicare has decayed or fallen apart, then they’re stuck. And this is the reason why AARP has said that your plan would weaken Medicare substantially. And that’s why they were supportive of the approach that we took.”

Well. As I note above, the “voucher system” that Obama decries for seniors is precisely what he imposed on 25 million low-income Americans. As to the AARP, the AARP has made $2.8 billion in extra profits due to Obama’s back-room dealings with AARP. So it’s not surprising that AARP supports Obamacare.

Most importantly, as Romney pointed out, if government-run Medicare is indeed more efficient than privately-administered Medicare, then the “public option” would win out under Romney’s competitive bidding system. “The President said that the government can provide the service at lower cost and without a profit,” said Romney. “If that’s the case then it will always be the best product that people can purchase.” Exactly. Under a competitive bidding system, if the public option is more efficient, that’s the plan that most seniors will choose. If not, not.

4. Obamacare increases insurance premiums

Romney pointed out: “And as a matter of fact, when the president ran for office, he said that, by this year, he would have brought down the cost of insurance for each family by $2,500 a family. Instead, it’s gone up by that amount. So it’s expensive. Expensive things hurt families. So that’s one reason I don’t want it.”

5. Romneycare was bipartisan; Obamacare passed on a party-line vote

Obama praised Romney for his health-reform plan in Massachusetts. “The irony is that we’ve seen this model work really well in Massachusetts, because Governor Romney did a good thing, working with Democrats in the state to set up what is essentially the identical model and as a consequence people are covered there. It hasn’t destroyed jobs. And as a consequence, we now have a system in which we have the opportunity to start bringing down costs, as opposed to just leaving millions of people out in the cold.”

Romney, accurately, made the following points differentiating Romneycare from Obamacare:

First of all, I like the way we did it in Massachusetts. I like the fact that in my state, we had Republicans and Democrats come together and work together. What you did instead was to push through a plan without a single Republican vote. As a matter of fact, when Massachusetts did something quite extraordinary—elected a Republican senator to stop Obamacare, you pushed it through anyway.

So entirely on a partisan basis, instead of bringing America together and having a discussion on this important topic, you pushed through something that you and Nancy Pelosi and Harry Reid thought was the best answer and drove it through. What we did in a legislature 87 percent Democrat, we worked together; 200 legislators in my legislature, only two voted against the plan by the time we were finished.

What were some differences? We didn’t raise taxes. You’ve raised them by $1 trillion under Obamacare. We didn’t cut Medicare. Of course, we don’t have Medicare, but we didn’t cut Medicare by $716 billion.

Romney could have been even more aggressive in describing the differences between Obamacare and Romneycare in Massachusetts, but he only had so much time to go into every detail.

“Governor Romney at the beginning of this debate wrote and said what we did in Massachusetts could be a model for the nation,” said Obama. But Romney correctly pointed out that he didn’t mean that Romneycare was a one-size-fits-all plan for the country, but could be a model for other states. “What we did in Massachusetts is a model for the nation state by state,” said Romney. “And I said that at that time.” That is accurate. In April 2006, here’s what Romney said: “It was designed for one state. We’re going to have an experiment the other 49 states can look at, elements they can adopt.”

6. Obamacare will cause employer dumping

Romney highlighted the fact that, contrary to Obama’s promise that “if you like your plan, you can keep it,” many employers under Obamacare will be incentivized to drop health coverage in order to take advantage of Obamacare’s subsidies. “Right now, the CBO says up to 20 million people will lose their insurance as Obamacare goes into effect next year. And likewise, a study by McKinsey & Co. of American businesses said 30 percent of them are anticipating dropping people from coverage.”

Now, I don’t have a problem with people voluntarily moving away from employer-sponsored insurance toward individually-purchased insurance. But insofar as Obama sold his health-care plan on the basis that people’s employer-sponsored coverage wouldn’t be disrupted, he has broken this promise.

7. Medicaid

Obama claimed that block-granting Medicaid would mean “a 30 percent cut in the primary program we help for seniors who are in nursing homes, for kids who are with disabilities.” Romney correctly pointed out that that is only true if you believe that block grants create zero efficiencies—something that defies historical experience:

I’m not quite sure where that came in, except this, which is, I would like to take the Medicaid dollars that go to states and say to a state, you’re going to get what you got last year, plus inflation, plus 1 percent, and then you’re going to manage your care for your poor in the way you think best.

And I remember, as a governor, when this idea was floated by Tommy Thompson, the governors—Republican and Democrats—said, please let us do that. We can care for our own poor in so much better and more effective a way than having the federal government tell us how to care for our poor.

So let’s state—one of the magnificent things about this country is the whole idea that states are the laboratories of democracy. Don’t have the federal government tell everybody what kind of training programs they have to have and what kind of Medicaid they have to have. Let states do this.

Romney noted that the federal government could step in with additional assistance on a case-by-case basis, where needed: “And, by the way, if a state gets in trouble, well, we can step in and see if we can find a way to help them.”

8. Miscellany

Romney almost made a mistake, when he said that both he and Obama made no changes in Medicare to current retirees.  He quickly caught himself, however, and pointed out that Obamacare cuts Medicare by $716 billion.

Romney pointed out that he has a plan for dealing with people with pre-existing conditions. Obama pushed back on that plan, arguing that Romney’s plan wasn’t that different from current law. For more on how to address pre-existing conditions, see this piece by Jim Capretta and Tom Miller in National Affairs.

Romney raised the point that Obamacare’s key “cost control” reform was instituting the Independent Payment Advisory Board, an unelected board of 15 government officials “telling us what kind of treatments we should have.” Obama correctly pointed out that the panel is barred by law from changing Medicare’s benefits; but he and everyone else knows that the point of IPAB is to ultimately have that power at some later point.

Romney won hands down. Will it affect the polls?

I have no idea how this debate will affect the polls, or the election. But I do know that Romney made nearly every appropriate counterpoint when Obama talked health-care and entitlements. It couldn’t have been much better. On the contrary, Obama regurgitated familiar talking points, and didn’t seem to anticipate the critiques that have been so common in these pages and elsewhere.

It’s good for America that we were treated to such a detailed debate on the issues. Hopefully we have three similar ones to go.


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