House Republican Budget Differs from Sperling’s Portrayal

White House Economist Distorts, Invents Facts About Ryan Budget

Gene Sperling, director of the National Economic Council at the Obama White House, said the House Republican budget for fiscal year 2013 creates a "two-tiered" system for Medicare beneficiaries that will result in seniors paying more for health coverage  in a Tuesday "Morning Joe" interview.

But Sperling’s claims are contradicted by a close reading of the latest version of the Path to Prosperity, which maintains fee-for-service Medicare as one option among many for which seniors will receive premium support.

The Ryan budget, Sperling said, "Takes a basic guarantee and turns it into an annualized voucher, making an overwhelming number of seniors pay more for Medicare."

The actual House proposal, however, features a competitive bidding system in which premium-support levels are set on an annual basis at the second-lowest bid. That would mean there always would be a plan that seniors could afford at no extra cost and a plan that would cost less than the premium-support benefit.

In a competitive bidding system, moreover, the various plans would be forced to compete to deliver a guaranteed package of benefits at lower cost. Competition would incentivize price reduction and begin to slow down Medicare spending, which is the driving force behind America’s long-term fiscal unsustainability.

Sperling also wrongly claimed that the House budget shifts costs to "those less healthy and older."

The budget proposal explicitly prevents such an outcome. The Medicare plan is risk-adjusted, so that insurance plans covering a higher-than-average number of low-risk seniors would pay a fee, and plans covering a higher-than average number of high-risk seniors would receive a benefit.

The House proposal, in addition to the premium-support system, also provides for fully funded Health Savings Accounts for low-income seniors to offset any out-of-pocket costs, such as copays, that a senior might incur.

Sperling also suggested that President Obama’s budget proposal contains a plan to save Medicare, amounting to "an additional $360 billion in specific health care savings."

However, those savings would come from proposed cuts in payments made to drug companies and other health providers rather than from an overhaul of the Medicare system that saves the program from long-term insolvency.