Obama raided $716 billion from Medicare. Ryan and Romney will end Medicare as we know it. These are the statements dominating the headlines and Twitter feeds as the presidential race stretches into its final weeks.

The candidates and their supporters have hurled accusations back and forth concerning each side’s plans to make the Medicare program financially sustainable.

Behind all of the harsh political rhetoric, though, how would GOP presidential candidate Mitt Romney’s plan and President Obama’s Medicare reform plan actually impact the program? The quality and accessibility of health care for millions of beneficiaries depends on the federal government finding a way to successfully solve Medicare’s financial crisis.

Politicians and policy specialists alike are debating whether instituting a premium support system (Romney’s plan) or maintaining the current system and finding other ways to reduce costs and make health care delivery more efficient (Obama’s plan) would be more advantageous for the economy and beneficiaries.

However, health care experts seem to agree that the political debate is clouding the issue at best.

“The rhetoric of both campaigns is far removed from the actuality of the differences,” said Robert Kaestner, an economics professor at the University of Illinois Institute of Government and Public Affairs. “Both the Romney camp and President Obama’s campaign strategists are being more deceptive than honest in the argument.”

Health policy expert and University of Wisconsin-Madison Professor Tim McBride said figuring out the candidates’ actual Medicare reform views are confusing in the midst of the current heated discussion between the two parties.

“It’s hard to sort out right now,” McBride said. “They’re a moving target.”

Beyond the political campaigns, academia and some think tanks, however, the health care industry has declined to issue formal statements supporting one reform option or the other, although their positions can be gleaned from stances taken in the past. 

One of the criticisms popping up again and again in headlines, on social media sites like Twitter and elsewhere in mainstream media, is that President Obama is gutting Medicare by cutting $716 billion from the program. 

Repealing the Affordable Care Act (ACA) would increase Medicare spending by roughly $716 billion from 2013 to 2022, according to a July 2012 estimate from the Congressional Budget Office (CBO). So, it’s true that Obama decreases Medicare spending over the next decade. But where exactly does that $716 billion come from?

The Medicare provisions in the ACA curb spending through strategies such as reducing annual payment increases for particular providers, lowering payments to Medicare Advantage Plan (Part C) providers, fighting fraud and waste in the program and creating a cost-cutting Independent Payment Advisory Board (IPAB) to recommend changes in reimbursement rates.

The health reform law’s economic provisions change provider payments by tying reimbursements to quality and productivity, reducing annual pay increases for Medicare Hospital Insurance (Part A) providers, decreasing payments to home health agencies and skilled nursing facilities and other adjustments.

Obama said in his proposed fiscal year 2013 budget that the ultimate goal of these reform measures is to make the Medicare program more efficient and effective while encouraging quality improvements. He sets a growth rate limit on Medicare spending at half a percentage point higher than the gross domestic product (GDP).

In order to enforce that spending limit, Obama’s health reform law created IPAB, a panel of 15 members that would submit recommendations to Congress for reducing Medicare costs if they exceed their target growth rate. The board has been hugely controversial and repeatedly slammed by Romney and others from both sides of the aisle. During the first presidential debate, Romney resurrected the “death-panel” scare tactic, saying IPAB is “an unelected board, appointed board, who are going to decide what kind of treatment you ought to have.”

Additionally, Obama has said he would support means-testing Medicare, or requiring beneficiaries with high incomes to pay higher premiums to help offset the program’s growing cost to the government. This would impact individual beneficiaries with incomes of more than $85,000 and couples making upwards of $170,000.

The president also wrote that he does not support changing the fundamental structure of the program by turning it into a premium support, or voucher system. Implementing a premium support system would weaken the program and break the government’s promise to Medicare beneficiaries, he has said.

Ryan, Romney and Containing Medicare Costs

Ryan’s Path to Prosperity

Ryan’s political opponents have alleged that he will “end Medicare as we know it.” In some sense, that’s true: He does propose changing the fundamental structure of the program.

Ryan has introduced various Medicare reform proposals over the past few years. His latest—included in the fiscal year 2013 GOP budget resolution, “The Path to Prosperity: A Blueprint for American Renewal”—transforms Medicare into a premium support system starting in 2023, giving beneficiaries a choice between purchasing traditional fee-for-service Medicare coverage or a private plan.

His current plan does involve keeping traditional Medicare as an option for seniors, and his plan would only change the program for those currently aged 55 and younger; older citizens won’t see any changes in their health care. But President Obama has said that insurers will figure out a way to cherry-pick the healthiest and wealthiest seniors, leaving the sickest and poorest in traditional Medicare. This, he said, would cause traditional Medicare to decay or die.

Under Ryan’s plan, premium support payments would also be adjusted so that lower-income beneficiaries would receive more support than others and wealthier beneficiaries would receive less.

Ryan would also gradually increase the Medicare eligibility age to 67 by 2034.

Additionally, despite his and Romney’s criticism of Obama’s Medicare spending reductions, Ryan maintained those same cost-cutting measures in his fiscal year 2012 budget proposal, “The Path to Prosperity: Restoring America's Promise,” (which Romney endorsed) and its 2013 version “The Path to Prosperity: A Blueprint for American Renewal,” according to the Kaiser Family Foundation and the CBO. 

Although he leaves most of Obama’s spending reductions in place, Ryan does plan to repeal the sections of the ACA that created IPAB and closes the Medicare Prescription Drug Plans (Part D) coverage gap, or the “donut hole.”

Ryan also sets a target rate for annual Medicare spending at half a percentage point higher than the GDP. 

Romney’s Medicare Reform Plan

Romney’s Medicare reform plan would restructure the program in a way that is basically identical to what Ryan aims to achieve.

The bipartisan proposal Ryan crafted with Sen. Ron Wyden (D-Ore.) that maintains traditional Medicare as an option while also implementing a premium support system “almost precisely mirrors” Romney’s reform ideas, according to Romney’s campaign website.

Romney has said that his Medicare plan is “very similar” to Ryan’s proposal but failed to elaborate on the specific distinctions between the proposals.

His proposal wouldn’t alter the program for current beneficiaries or those now nearing retirement; however, it would eventually turn Medicare into a premium support system under which each senior would receive a fixed-benefit amount with which they could choose to purchase either traditional Medicare coverage or a health care plan from a private insurer.

Romney would require that all insurance plan options available to beneficiaries provide coverage that at least equals what Medicare currently offers. Seniors would also receive varying degrees of support depending on their income levels.

Additionally, Romney supports gradually raising the Medicare eligibility age to account for increases in life expectancy.  

Although the proposal on his official website doesn’t reflect this statement, he has said he would repeal Obama’s $716 billion in spending reductions, according to Politico.

Which Proposal Holds More Promise for Medicare’s Future?

University of Illinois economics professor Kaestner said he feels that a premium support framework would increase efficiency and contain costs more effectively than Obama’s more administrative approach.

“From my perspective, there’s lots of evidence that markets deliver efficient products,” he said. “There’s lots of evidence that might be a very successful way to proceed.”

In a premium support system, market forces would likely drive providers to improve their quality of care, achieving the same goals Obama’s plan strives for with its payment system reforms, Kaestner said.

He said the big difference is that Obama’s approach would implement new efficiency and quality measures and require that providers follow these measures regardless of their effectiveness, whereas the drive to compete and turn a profit would weed out faulty innovations under a more market-based system.

“The ability to allow the market to create efficiencies and to innovate is clearly a strength of the Romney/Ryan plan,” he said.

There’s also the risk that relying too much on cutting provider payments to control costs will have a detrimental effect on the quality of care Medicare providers offer and ultimately drive them out of the program, he said.

“There’s no doubt that at some point payments—if they get low enough—will affect access to care,” Kaestner said.

The CBO has noted that restraints on Medicare spending could possibly lead to reduced access to health care, a decline in the quality of care and less investment in new and expensive technologies (although, on a more positive note, the restraints could also result in more effective health care service delivery).

However, Kaestner also said that Obama’s plan protects beneficiaries from feeling the consequences of excess Medicare cost growth in a way that a premium support system would not.

If spending growth exceeded its limit, beneficiaries dependent on a premium support system would see their government subsidies go down, forcing them to pay more out-of-pocket for their coverage, Kaestner said. Under Obama’s plan, providers—not patients—would see cuts if costs grew beyond their cap.

McBride also pointed out that beneficiaries could suffer if costs exceed their growth limit under the premium support system plan.

 “Essentially, the risk is passed to the consumers,” he said. “Obama’s approach is really not to take pay cuts from beneficiaries but to take them from providers. That’s one of the main ways to characterize the different approaches.”

A 2011 CBO analysis found that beneficiaries’ spending on premiums and out-of-pocket costs would increase to 68 percent of their total health care expenditures by 2030 under Ryan’s 2012 premium support system reform proposal, as opposed to about 30 percent under an unchanged Medicare system.

McBride also expressed doubts that subsidizing coverage for beneficiaries through private plans would actually lower costs. Medicare Advantage Medicare Advantage plans—an existing aspect of the system that allows beneficiaries to choose private insurance plans over original Medicare—generally cost the government more than traditional Medicare coverage, he said.

McBride doesn’t think that providers should be the sole bearers of the burden of out-of-control Medicare costs, however. Inevitably, if provider payments are cut enough, they will stop seeing Medicare patients or start offering lower-quality care, he said.

Health care provider groups including America’s Health Insurance Plans, the American Medical Association and the American Hospital Association declined to comment on the Medicare reform proposals up for debate prior to the election, but MNG has previously analyzed their positions on Medicare reform.

McBride suggested a hybrid reform approach, where providers and beneficiaries both see cuts to keep costs under control. Still, he said, providers should absorb about 90 percent of the financial blow.

“A lot of the elderly are just above the poverty level,” he said. “They won’t be able to afford it.”