Republican Chip Cravaack and Democrat Rick Nolan are battling over Medicare in their campaigns for the 8th District congressional seat.
Both candidates have aired new TV ads on the subject earlier this week to criticize the other over who would better protect health care for seniors.
Cravaack started the Medicare campaign war this week with a television spot criticizing Nolan for supporting a proposal to cut the Medicare spending growth by nearly three-quarters of a billion dollars.
In the television ad Cravaack says, "My opponent believes cutting $700 billion from Medicare won't have an impact on seniors. I disagree. I approve this message because Medicare is a commitment we made to our parents. It's a promise I plan to keep,"
The problem with Cravaack's ad is that he voted twice for Republican Rep. Paul Ryan's budget plan, which included the same level of cuts to Medicare spending growth.
Nolan responded with his own ad accusing Cravaack of running a "desperate" campaign.
"The truth — Cravaack's radical budget would undermine Medicare. Cravaack voted to essentially end it raising costs over $6,000 a year. Rick Nolan has a better way," Nolan's ad says.
Medicare is a big deal because about 10,000 baby boomers are expected to retire every day for the next 20 years or so. That means enrollment in Medicare will nearly double, as will the cost, and there will be fewer people working to support those getting the benefits.
The GOP Medicare plan Cravaack supports would apply only to people who are 55 or younger today. Medicare would remain unchanged for Americans currently in the program or quickly approaching it.
SEMANTICS: 'VOUCHER' VS. 'PREMIUM SUPPORT'
Under the plan, private health care insurers would bid on the cost of providing a baseline of care. The second-least expensive bid would set the price for a voucher that the government would give to people to buy their health care plan.
Among the options would be a plan Ryan and other supporters say would be like traditional Medicare. But, if in the bidding, the Medicare option came in more expensive than the second-least expensive plan, people who want to stick with Medicare would have to pay extra.
The first Ryan proposal didn't include a Medicare-administered plan. The Congressional Budget Office determined that first plan would have cost future seniors $6,400 more annually than they otherwise would pay.
Harvard University Professor David Cutler, who has consulted for the Obama administration and campaign, analyzed Ryan's most recent proposal that includes the Medicare option.
Cutler said it would cost future seniors even more than the first Ryan plan — about $6,800 more annually. Cutler said Democrats like Nolan are correct in claiming that the GOP plan would end up costing future Medicare recipients a lot more money.
“In this case premium support is a voucher plan with certain bells and whistles.”Henry Aaron, the Brookings Institution
"The Ryan proposal gives seniors a voucher that's expected to be significantly less than what Medicare costs, and the voucher increases at a significantly lower rate than what medical costs are expected to increase by," Cutler said. "The net effect is it has to cost people more. It's just shifting costs to people, and the only question is how much that is?"
But University of Minnesota professor Roger Feldman said competition among health insurance companies at the heart of the Ryan plan stands to drive down costs.
And Feldman, who specializes in health economics, said what Republicans propose for Medicare is remarkably similar to the direction Democrats went for the rest of the population with the Affordable Care Act. "Obamacare," as many call it, sets a price for the cost of a defined health care plan through an almost identical competitive bidding process.
"The Affordable Care Act uses exchanges and bidding for the under-65 group, Republicans say they hate it. The Romney-Ryan plan, I'll use your words, proposes the same thing for the over-65 group. The president says he hates it," Feldman said. "Now if they could both drop half of what they're saying and get together, we would have competitive bidding for the whole population."
Feldman dislikes the term "voucher" and instead says "premium support" more accurately characterizes the proposed government payment to individuals to help them buy insurance. Cravaack doesn't like the word "voucher" either.
Henry Aaron of the Brookings Institution helped coin the phrase "premium support" to counter negative connotations associated with using "voucher" when Bill Clinton was president.
"Back in 1996 there a lot of voucher proposals floating around and they were getting a bad name," he said.
Aaron said what's proposed in the Ryan plan is absolutely a voucher because the increase in the payment for insurance would be tied to the growth of the U.S. economy, not the cost of health care.
"In this case premium support is a voucher plan with certain bells and whistles," Aaron said.
Cravaack said he is not worried Democrats will able to scare voters into thinking he and other Republicans want to dismantle Medicare with what he insists is a premium support.
"I'm looking forward to the debates and I'm looking forward to discussing the issues about Medicare," Cravaack said.
He said at least Republicans are proposing something to address future Medicare insolvency. Like Feldman, Cravaack notes this is not the first time such a proposal has come up.
"We have a plan that saves Medicare and it's a very viable plan and again, this plan comes from Alice Rivlin under the Clinton administration," Cravaack said. "I mean, this is actually a Democrat plan. I mean how come they were for it then but they're not for it now?"
But Nolan and other many other Democrats say converting Medicare into a voucher system would be a boon for the insurance industry at the expense of seniors.
"Cravaack would turn Medicare over to the insurance industry and I oppose that," Nolan said.
Referring to Medicare's low administrative costs relative to what private insurers spend on overhead, Nolan said, "It costs roughly 3 or 4 percent to administer Medicare. Private insurance on average runs somewhere between 27 and 30 percent administrative costs. So once you turn Medicare back over to the insurance industry, you know, right out of the chute you are dramatically increasing the administrative costs."
While it is clear private insurance companies spend much more on overhead than Medicare, analysts say it is difficult determine exactly how much more.
Nolan and Cravaack meet for their first debate next week in Duluth. If their ad campaigns are any indication, expect a vigorous discussion of the GOP Medicare voucher plan and whether Democrats have any alternative to addressing the explosive growth and cost of Medicare.