In this post I explain in 7 easy steps the "Obamacare" side of how those $700 Billion in Medicare savings are attained. No old person dies, I promise (OR do they??).

This is a complicated issue and I have tried to boil it down to its bare bones so you can have some idea of what the debate over the dueling proposals for Medicare are.

First I will explain what the Affordable Care Act  ("Obama-Care") plan does for/to Medicare and then after studying up a little more on the Romney/Ryan plans I will try to break them down too.

I am just presenting the facts as I know them and I know there are a jillion interpretations and opinions.  KINDLY let me know where I am going wrong on the BASIC facts.  Don't stray too far into the weeds and argue the minutiae, please.

1.  Medicare is a Federal entitlement program that pays for the healthcare of its recipients---old people.  It is (mostly) financed by a 1.45% payroll tax on your earned income.

2.  Because of changing demographics, the US has and is about to get a whole heaping new batch of old people in the coming decades.

3.  Spending on these folks is expected to grow at a somewhat predictable and projectable (my made up word) amount for the next decade or two.  Lets call that amount "X".  Most people consider this amount unsustainable relative to the amount of money brought in through the above mentioned payroll tax.

4.  The Affordable Care Act ("Obamacare) has a provision for controlling that projected cost ("X") to the tune of approx $700 Billion dollars (the figure cited in the media at the moment). In other words over the next 10 years the ACTUAL amount spent relative to the projected amount  ("X") will be $700 Billion LESS--A "savings" of $700 Billion.  Got that?

5. How does this $700 B in savings from "X" occur? This is important, pay attention:  Reducing the amount paid/reimbursed to individual doctors and hospitals for the care they provide patients is the biggest part of the "savings". In other words, if a doctor was getting, say $100 to treat a patient today, under the new law that would be, say, $75.  I DO NOT KNOW the percentage change, BUT I have seen somewhere in the neighborhood of an average of  27% reduction in payments to doctors, so don't hold me to that number, please.  The rest comes from reducing payments to insurers.  This serves as an incentive for insurers to crack down on waste, fraud, abuse, over payments, etc---get  paid less, have to watch out for every dollar.  If you remember, insurance companies supported this because in return they would potentially get lots of new customers paying premiums as a result of the "Individual Mandate". 

6.  KEY POINT.  NO defined benefit to the "Olds" has been decreased by the ACA accounting. Please repeat that.  It is important to understanding this side of the argument.

7.  The ACA proposes to use that $700B in savings to (1) enhance benefits to Medicare recipients and (2) finance a large portion of the many provisions for expanded healthcare in the ACA.

Clear as mud??

I think Point 5 is the MOST important one to understand and the one I don't hear/see talked about much in the media---in regards to the ACA and Medicare.

Point 5 leads to a discussion as to whether it affects Point 6.  ACA says no.  I believe the Ryan plan says yes---I will try to explain that one next.

Some say the savings in Step 7 are an illusion.  Don' ask me---I dunno...

Let me know if this is helpful.  I tried to make it as easy to digest as possible.  :)

Thanks.