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Budget Expert: Don't Expect Medicare Cuts In Debt Deal - The KHN Interview

Jul 14, 2011

As President Barack Obama holds daily meetings with congressional leaders in a so far futile attempt to raise the U.S. debt ceiling, Stan Collender, a partner at Qorvis Communications, says that even recent proposals highlight the continuing partisan divide. The former congressional budget staffer and author of The Guide to the Federal Budget believes that President Barack Obama's push for a "grand" package of entitlement spending reductions and new revenue that would total $4 trillion in savings over 10 years; and Senate Majority Leader Mitch McConnell's "last-choice option," which would empower the president to raise the government's borrowing limit without addressing Medicare, Medicaid or other entitlement program spending, are more a matter of politics than policy. In fact, addressing spending issues is not necessary to raise the debt ceiling. It has, though, become a political imperative for some lawmakers who have made the goal of finding significant savings from these programs a condition of their vote.

Debt Talks

Listen to KHN's Mary Agnes Carey talk about the latest in debt talks in Washington:

KHN's Stephanie Stapleton recently spoke with Collender about current debt-ceiling negotiations and their long-term impact on the broader debate surrounding efforts to rein in Medicare spending. Edited excerpts follow.

Q: In your view, how do the recent proposals by Obama and McConnell affect the ongoing negotiations?

A: Look, clearly neither one of those proposals has moved the needle very much. Neither was designed to be a serious proposal as much as it was to put the proposal offerer in a better position, strategically and politically. So the major purpose was more to box the other side in as opposed to move the discussions forward. And obviously, neither one has moved the discussions forward.

Q: Do you think cuts to Medicaid and Medicare, as well as other deficit reduction proposals, will find a place in a final deal?

A: No. I never thought they would.

I don't think it is inconceivable that we're going to end up on Aug. 2 with no deal of any kind -- no increase in the debt ceiling. We're going to have at least a couple of days of market gyrations because the market's not happy. That may be the only thing that kicks these politicians in the seat enough to change where they are coming from on this stuff.

Q: Is it fair to say, though, that, even if these Medicare and Medicaid changes are left on the table, they will continue to be a part of budget discussions – that they could even change the parameters of future budget debates?

A: No, definitely not. First of all, you cannot automatically translate a proposal offered in one context into [something] that will be on the table in all other contexts. And I know Republicans are going to say, "Oh… the president agreed to Medicare cuts."

Obviously, the president has talked about reducing payments to [hospitals and doctors]; maybe a change in the eligibility age; and perhaps means-testing for upper-income individuals. The thing is, none of those is real. Maybe the president proposed it. Maybe he didn't. There's not a piece of paper from the White House showing it -- no one's got a piece of paper that proves it.

So I know Republicans will try to say he was supporting cuts in Medicare, too, but compared with the (Rep. Paul) Ryan plan, it's not even close. And the Ryan plan with its extreme Medicare changes is so dead that it has probably killed the chances of doing anything that significant [to Medicare] for another decade -- if not longer.

Q: In terms of some of these ideas, how real are the savings or is the proposal simply a cost shift? For instance, raising the age to 67?

A: Well, it's a shift 10 years down the road, but to the extent that it is not matched by people living two years longer on the other end. … People will be paying in a little bit longer, and if life expectancy isn't going up as fast, that should at least on an actuarial level have some positive impact. But shifting costs into the future is not a bad strategy for a politician who doesn't think that he or she will be in office when the problem is two years further down the road.

Q: What about the payment cuts to providers?

A: Any time you [propose] a major change like this you don't know all the consequences. It's possible that some docs or companies decide to drop out of the system and not participate, in which case seniors might not get the same benefit they were expecting. Chances are they will stay and chances are these cost changes will not simply be shifts, that is, they won't simply be collected on the other side from the patient.

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