The Agenda Project Action Fund, a progressive public policy group, is still touting its misleading “Throw Granny from the Cliff” ads, purporting to show that GOP vice presidential candidate Paul Ryan seeks to end Medicare as we know it. 

It's all misleading and false.

The Ryan plan does not get rid of Medicare. People now and in the future can choose to stay in it. Ryan does propose new Medicare enrollees age 65 would get to pick between private insurance plans offered in a new Medicare exchange in 2023, where Medicare would compete with private insurers for their business.

The insurance must cover a base level of benefits, must cover pre-existing conditions, can’t charge higher rates based on health condition or age, plus it must offer a minimum threshold of coverage. The federal Centers for Medicare and Medicaid Services would regulate the plans.

The federal government would pick up the tab for premium support, and pay that subsidy directly to the insurer of their choice, with seniors paying the difference. If the plan is cheaper than Medicare, seniors get a rebate check.

And the more ill or poor the Medicare enrollee is, the more government insurance support they get in the Ryan plan.

The real story flying under the radar is the huge cuts to Medicare from the president’s health- reform law. The annual report in August 2010 from the Medicare Board of Trustees showing health reform’s dramatic $1.05 trillion in cuts in Medicare over the first decade. For more, see this.

The analysis was also flagged in The Wall Street Journal by Peter Ferrara at the Institute for Policy Innovation and Larry Hunter, president of the Social Security Institute.

The health-reform law enacted Medicare payment cuts amounting to $818 billion out of hospital insurance, called Medicare Part A, from 2014-2023, totaling an estimated $3.2 trillion over the first two decades, by 2033.

Factor in cuts in doctor fees for Medicare (Part B), as well as other services, and the grand total amounts to $1.05 trillion over the first decade, or $4.95 trillion over the first 20 years.  

This is how the president and Democrats touted the health-reform law as cutting the federal deficit, though they played down the reality in cuts to Medicare, which covers 48.7 million Americans. Health reform has roughly 165 provisions affecting the Medicare program by reducing costs, among other things, the trustee report says, adding the trust fund is on schedule to be exhausted by 2024. Medicare spent $549.1 billion in fiscal 2011.

In the first three years of the law, doctors and hospitals will see their Medicare payments cut by 30% under health reform, the report says, though Congress could revoke them as it has every year since 2003, the report adds.

The cuts seek to make Medicare payment rates lower than Medicaid by 2019. A 75-year projection in the Annual Medicare Trustees Report shows Medicare payment rates half of Medicaid’s rates, and a third of sums covered by private insurers.    

And the Granny ad ignores the fact that President Barack Obama’s health-reform law enacts an unaccountable “independent payment advisory board," where Congress and the courts cannot review their decisions to deny coverage under Medicare. It will take new legislation from Congress to stop this board. Watch whether the board cuts Medicare coverage for hip and knee replacements, as well as MRI and CT scans, Ferrara and Hunter note.

Add to this the fact that the President seeks entitlement reform if he wins a second term, including Medicare.

To date, there have been no Dems throwing Granny off a cliff ads just yet.

Deputy campaign manager Stephanie Cutter admitted health reform’s deep cuts to Medicare: "You know I heard Mitt Romney deride the $700 billion cuts in Medicare that the president achieved through health care reform.” 

Meanwhile, the law gutted Medicare’s successful free market, private option program, Medicare Advantage, which about a quarter of senior citizens picked because they liked the insurance coverage and the good deals.

The Medicare actuary has projected about half of all Medicare Advantage enrollees will see their coverage dropped due to ObamaCare cuts.  So what happened to President Obama's promise that "If you like your health plan, you will be able to keep it”?   

The way the Ryan plan works would cap the federal government’s subsidy at the cost of the second least-expensive plan in the exchange.

The premium subsidy is capped at the growth in U.S. GDP plus a half a percentage point. Congress would be forced to stop any faster increases—which would likely happen given medical inflation.

Seniors could still choose the traditional "fee-for-service" Medicare plan the federal government now offers, with the dollar amounts the federal government pays for insurance staying the same under the Ryan-Wyden plan.

Senior citizens may see better, more efficient health-care delivery. But it’s unclear how the plan deals with prescription drug costs. It appears for now Medicare coverage would stay the same.
A similar plan was co-sponsored by Oregon Democrat Ron Wyden, and Democrats like Bob Kerrey endorsed such plans previously in President Bill Clinton’s Medicare entitlement reform in 1999, which everyone ignored due to the Monica Lewinsky scandal.     

Eligibility would increase two months annually until it reaches the age of 67 in the year 2033.  

Ryan’s proposed new Medicare Exchange is similar to the health insurance exchanges under health reform as well as the federal health insurance exchanges for federal workers.

Where do the 40% savings by 2050 come in? A report from the nonpartisan Congressional Budget Office says that seniors on the private plans “might face higher costs,” but noted uncertainty in such forecasts. The link to GDP is one way costs of coverage diminish.   
Costs could also decrease by having private insurers bid against each other in the Medicare exchange, with the government paying for the second-cheapest plans.

Today, Medicare is rife with fraud and abuse. Taxpayers lose an estimated $60 billion to Medicare fraud annually, not including the billions of taxpayer dollars spent to catch the fraudsters.

Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007.
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.