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2012 Medicare debate is all about the baby boomers

Both parties calling to limit overall growth of medicare spending

Published: Sunday, Jan. 1 2012 10:32 p.m. MST

FILE - In this Dec. 23, 2011 file photo, President Barack Obama speaks at the White House in Washington. Baby boomers take note: Medicare as your parents have known it is headed for big changes no matter who wins the White House in 2012.

Associated Press

WASHINGTON — Baby boomers take note: Medicare as your parents have known it is headed for big changes no matter who wins the White House in 2012. You may not like it, but you might have to accept it.

Dial down the partisan rhetoric and surprising similarities emerge from competing policy prescriptions by President Barack Obama and leading Republicans such as Wisconsin Rep. Paul Ryan.

Limit the overall growth of Medicare spending? It's in both approaches.

Squeeze more money from upper-income retirees and some in the middle-class? Ditto.

Raise the eligibility age? That too, if the deal is right.

With more than 1.5 million baby boomers a year signing up for Medicare, the program's future is one of the most important economic issues for anyone now 50 or older. Health care costs are the most unpredictable part of retirement, and Medicare remains an exceptional deal for retirees, who can reap benefits worth far more than the payroll taxes they paid in during their careers.

"People would like to have what they used to have. What they don't seem to understand is that it's already changed," said Gail Wilensky, a former Medicare administrator and adviser to Republicans. "Medicare as we have known it is not part of our future."

Two sets of numbers underscore that point.

First, Medicare's giant trust fund for inpatient care is projected to run out of money in 2024. At that point, the program will collect only enough payroll taxes to pay 90 percent of benefits.

Second, researchers estimate that 20 to 30 percent of the more than $500 billion that Medicare now spends annually is wasted on treatments and procedures of little or no benefit to patients.

Taken together, that means policymakers can't let Medicare keep running on autopilot and they'll look for cuts before any payroll tax increases.

Privatization is the biggest divide between Democrats and Republicans.

Currently about 75 percent of Medicare recipients are in the traditional government-run, fee-for-service program and 25 percent are in private insurance plans known as Medicare Advantage.

Ryan's original approach, part of a budget plan the House passed in the spring, would have put 100 percent of future retirees into private insurance. His latest plan, developed with Sen. Ron Wyden, D-Ore., would keep traditional Medicare as an option, competing with private plans.

Older people would get a fixed payment they could use for private health insurance or traditional Medicare. Proponents call it "premium support." To foes, it's a voucher.

Under both of Ryan's versions, people now 55 or older would not have to make any changes. GOP presidential candidates Mitt Romney and Newt Gingrich praise his latest plan.

How would it work? Would it save taxpayers money? Would it shift costs to retirees as Ryan's earlier plan did? Would Congress later phase out traditional Medicare? Those and other questions must still be answered.

"I'm not sure anybody has come up with a formula on this that makes people comfortable," said health economist Marilyn Moon, who formerly served as a trustee helping to oversee Medicare finances.

White House spokesman Jay Carney says the Wyden-Ryan plan "would end Medicare as we know it for millions of seniors," causing the traditional program to "wither on the vine."

But what administration officials don't say is that Obama's health care law already puts in place one of Ryan's main goals by limiting future increases in Medicare spending.

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