It's not surprising that Senate Republicans have chosen to distance themselves from the House Republican plan to convert Medicare into a defined-benefit voucher program.
It's also not surprising they decided to join their House colleagues in pressing to convert Medicaid into some type of a capped state block grant program and to repeal the Affordable Care Act.
The Senate Republicans' different approaches to Medicare, Medicaid, and the ACA may be because the first is a widely popular universal program that benefits all Americans regardless of income; if they try to restructure Medicare, they know they will be accused of seeking to “end Medicare as we know it.”
In contrast, Medicaid is a means-tested welfare program for lower-income people that sometimes is inaccurately characterized as a program for lazy slackers who don't want to work. In fact, most Medicaid beneficiaries are employed or live in households with a working member. The ACA's coverage expansions also are income-based and largely benefit working-class people.
With the 2016 elections looming and a number of senators thinking of running for president, Senate Republicans are acutely aware that people who benefit from Medicare vote at a high rate and often base their votes on Medicare. In contrast, those who benefit from Medicaid and the ACA vote at a lower rate and do not necessarily have as strong a commitment to those programs.
That doesn't mean Senate Republicans don't favor the House approach of transforming Medicare into a defined-benefit program, which they call premium support. Indeed, many—including GOP presidential hopeful Sen. Marco Rubio of Florida—have been strong advocates of the premium-support model.
But as Sen. Chuck Grassley said about the Senate's 2016 budget blueprint, “from the standpoint of a budget, the less words of the English language you use, the better off you are.” It's preferable to “just have figures in there” rather than spelling out specific changes in entitlement programs as the House did, Grassley added.
That said, Senate Republicans are much more willing to denounce Medicaid and, of course, the ACA. And that gets to why it could be risky for Congress to move Medicare more toward a means-tested program like Medicaid—which the current Medicare physician payment reform package would do by imposing higher premium contributions on higher-income seniors.
As Eduardo Porter recalled recently in the New York Times, in 1973 Wilbur Cohen, a key Democratic strategist behind both Social Security and Medicare, debated Nobel Prize-winning free-market economist Milton Friedman, who criticized Social Security by saying it offered overly generous benefits to wealthier Americans compared with its benefits to lower-income people. “You are right,” Cohen replied. “However, a program for poor people will be a poor program.”
Years later, Friedman acknowledged that Cohen was right. “Look at what has happened to public housing: It's a program designed for poor people—it's a poor program,” Friedman said in an interview in 1998. “Look at what happened to Aid to Families with Dependent Children: It was a program designed for poor people—it was a poor program.”
“Programs that are designed for the poor will be poor programs,” Friedman continued. “You need to have a universal program to have the backing of society as a whole, in order that it can really be a part of the structure of society.”
Hence the sharply different treatment of Medicare, Medicaid and the ACA in the current Republican budget proposals. Americans should keep Milton Friedman's words in mind as the future of these programs is debated.