Ryan's plan includes $700 billion in Medicare "cuts," says Stephanie Cutter

Mitt Romney’s pick of U.S. Rep. Paul Ryan as his running mate has rekindled a heated debate over Medicare.

Ryan, R-Wis., is the head of the Budget Committee in the U.S. House of Representatives and the architect of a plan to dramatically restructure Medicare.

Today, Medicare operates as a government-run health insurance plan for Americans over age 65.

Ryan’s idea is to eventually move Medicare toward private insurance companies by giving people a set amount to buy their own health insurance plans. The new system would be for people who are under age 55 now, and it would give them voucher-like credits to buy traditional fee-for-service Medicare or competing private insurance plans. (The credits are sometimes called "premium support.")

Though House Republicans voted overwhelmingly for Ryan’s plan, polling shows public opinion is mixed, with older voters the most wary of the plan.

The Republican response to attacks on the Ryan plan has been to attack back, saying President Barack Obama has cut "$700 billion" out of Medicare. And the Democratic response to that: Well, Paul Ryan cuts that amount, too!

For this check, we’re looking specifically at what Obama campaign spokeswoman Stephanie Cutter said on Face the Nation when debating Romney spokesman Eric Fehrnstrom.

"You know, I heard Mitt Romney deride the $700 billion cuts in Medicare that the president achieved through health care reform," Cutter said. "You know what those cuts are? It’s taking subsidies away from insurance companies, taking rebates away from prescription drug company. Is that what Mitt Romney wants to protect? And interestingly enough Paul Ryan protected those cuts in his budget."

It’s a lot to digest if you’re not already a Medicare policy wonk, so let us sort it out for you. For now, we are going to put aside the question of whether it is accurate to call them "cuts" -- a claim we're checking in another item -- and focus on the question of whether Cutter is correct that Ryan relies on those same reductions in his budget.

$700 billion in Medicare cuts?

Because we’re wonks ourselves at PolitiFact, our ears pricked up at the claim in recent days that Obama cut $700 billion out of Medicare. Just a few weeks ago, the oft-cited number was $500 billion. How did he manage to cut another $200 billion when no one was looking?

Well, there are cuts and then there are CUTS. Neither Obama nor his health care law literally "cut" a dollar from the Medicare program’s budget.

Rather, the health care law instituted a number of changes to reduce the growth of Medicare costs. At the time the law was passed, those reductions amounted to $500 billion over the next 10 years.

What kind of spending reductions are we talking about? They were mainly aimed at insurance companies and hospitals, not beneficiaries. The law makes significant reductions to Medicare Advantage, a subset of Medicare plans run by private insurers. Medicare Advantage was started under President George W. Bush, and the idea was that competition among the private insurers would reduce costs. But in recent years the plans have actually cost more than traditional Medicare. So the health care law scales back the payments to private insurers.

Hospitals, too, will be paid less if they have too many re-admissions, or if they fail to meet other new benchmarks for patient care.

Still, the overall Medicare budget is projected to go up for the foreseeable future. The health care law tries to limit that growth, making it less than it would have been without the law, but not reducing its overall budget. So claims that Obama would "cut" Medicare need more explanation to be fully accurate. In the past, we’ve rated similar statements Half True or Mostly False, depending on the wording and context.

Because Medicare spending gets bigger every year, the cost-saving mechanisms in the health care law also get bigger. Also, it takes a few years for the health care law’s savings mechanisms to kick in. In fact, the effects of time are the main reason the $500 billion number has turned into $700 billion.

The CBO determined in 2011 that the federal health care law would reduce Medicare outlays by $507 billion between 2012 and 2021. In a more recent estimate released this year, the CBO looked at the years 2013 to 2022 and determined the health care law affected Medicare outlays by $716 billion.

So it’s timing that’s making the "cuts" bigger, not changes to Medicare.

Does the Ryan budget ‘protect those cuts’?

Now onto our second question: Does Ryan’s budget keep the reductions in Medicare spending? The short answer is yes.

Here’s what Ryan said in an interview with George Stephanopolous of ABC News in June, before his selection as Romney’s running mate:

Stephanopoulos: "You know, several independent fact-checkers have taken a look at that claim, the $500 billion in Medicare cuts, and said that it's misleading. And in fact, by that accounting, your budget, your own budget, which Gov. Romney has endorsed, would also have $500 billion in Medicare cuts.

Ryan: "Well, our budget keeps that money for Medicare to extend its solvency. What Obamacare does is it takes that money from Medicare to spend on Obamacare. ..." (Read the full exchange.)

So Ryan has confirmed his budget includes the Medicare savings.

The Romney campaign got questions on this point the day after Cutter’s remarks, and issued a statement saying that Romney intended to fully repeal the federal law, including the savings for Medicare.

"Mitt Romney and Paul Ryan have always been fully committed to repealing Obamacare, ending President Obama’s $716 billion raid on Medicare, and tackling the serious fiscal challenges our country faces," said Lanhee Chen, Romney’s policy director, in a statement reported by NBC News. "A Romney-Ryan administration will restore the funding to Medicare, ensure that no changes are made to the program for those 55 or older, and implement the reforms that they have proposed to strengthen it for future generations."

Cutter, though, was talking about the Ryan budget. We should point out that the Ryan budget is a congressional resolution that doesn’t have the force of law. And its plan for Medicare hasn’t been turned into legislation that could be analyzed in detail by the Congressional Budget Office.

Still, Ryan himself said his plan did include the reductions in future spending that were part of the federal health care law.

That’s because both sides agree on one point: Medicare spending is growing too rapidly, and it needs to reined in.

Our ruling

Cutter said that Romney attacked Obama for cutting $700 billion out of Medicare, but "Paul Ryan protected those cuts in his budget." Again, with this item we are not addressing whether they are cuts, but simply whether she is correctly characterizing Ryan's plan.

Featured Fact-check

Rick Santorum

stated on May 5, 2011 in a debate in South Carolina

The Medicare drug program "resulted in the program coming in 40 percent under budget. ... And the reason it was, is because the design was right." 

Cutter is correct that the Ryan budget plan included cost savings that were part of the future health care law. Just recently, the Romney campaign backed away from that play, saying Romney’s plan would restore the spending that the health law is set to curtail, such as extra funding for private insurers under the Medicare Advantage plan.

Still, Cutter was right about the Ryan plan. We rate her statement True.