In announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”
Ryan is right about sharpening the contrast. But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.
The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.
The money would come out of programs for the elderly, lower-middle families, and the poor.
Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.
Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.
The plan also calls for repealing Obama’s health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.
The plan would carve an additional $19 billion out of next year’s “discretionary” spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.
“Imagine a world without Medicare.” That’s the rallying cry of a new grassroots campaign being unveiled today by the giant seniors group AARP that will include town hall meetings in 50 states and national television ads.
Against a backdrop of proposals to overhaul the popular social insurance program and a presidential campaign likely to address entitlement spending, AARP is launching “probably the biggest outreach effort we’ve ever done on any issue” to activate its 37 million members, said Nancy LeaMond, AARP’s executive vice president.
The group will gather seniors at town hall meetings today in four cities – Richmond, Va.; Columbus, Ohio; Denver, Colo.; and Miami, Fla. – to start a conversation about the program’s future entitled, “You’ve Earned A Say.” It is also releasing a survey showing that less than half of adults ages 18 to 49 are confident Medicare will be there when they’re ready to retire.
In coming weeks, the group will hold town hall meetings in every state, and also conduct large-scale forums by phone. It recently sent members a survey to assess their views about potential Medicare and Social Security changes.
Groups on the other side of the political spectrum are also galvanizing. This week, a conservative seniors group called the 60 Plus Association put out television ads that targeted five Democratic senators and asked supporters to press them about their support for the Medicare provisions in the 2010 federal health law.
House Budget Chair Paul Ryan (R-WI) and Senator Ron Wyden (D-OR) have embraced a Medicare reform plan that in concept borrows heavily from one championed by former New Mexico Senator Pete Domenici and former Clinton budget chief Alice Rivlin.
Specifically, Wyden and Ryan are proposing to alter the earlier Ryan Medicare plan by:
- Continuing to offer the traditional Medicare plan—Ryan would have eliminated it—in addition to a range of private Medicare plans offered by health insurers.
- Tying federal Medicare premium support to an amount equal to the second lowest cost Medicare plan—public or private—available to seniors in each market. Ryan would have set a flat premium support amount in year-one and increased that only at the rate of inflation.
- Instituting a series of consumer protections and medical underwriting rules designed to protect seniors.
- Instituting an annual cap on what the federal government could pay for Medicare at an amount equal to the increase in the nation’s GDP + 1%—Ryan would have capped annual increases in the federal premium support amount at the increase in the consumer price index.
On this blog I have been arguing that the risk for health care costs rising too quickly should not be borne entirely by seniors–that the stakeholders who really run the system should be most accountable. And, that is what the Wyden-Ryan plan would do: “Any increase over that cap will be reflected in reduced support for the sectors most responsible for cost growth, including providers, drug companies, and means-tested premiums,” their plan states.
Presidential candidate Mitt Romney’s reform plan for Medicare is just as cautious―and carefully vague on some key details―as might be expected from an politician famously sensitive to the winds of public opinion.
Romney’s proposal looks a lot like those offered by last year’s Rivlin-Domenici Debt Reduction Task Force and the 1999 National Bipartisan Commission on the Future of Medicare. Like those proposals, and also the plan offered by House Budget Chair Paul Ryan, Romney’s would convert Medicare into a premium support program in which beneficiaries would receive a fixed contribution towards the cost of coverage. However, unlike Ryan’s plan―received so negatively by seniors that it cost Republicans a House seat―beneficiaries would still have traditional fee-for-service Medicare as an option.
Under the Romney proposal, commercial insurers would compete with traditional Medicare in offering a basic set of benefits. Beneficiaries would choose from a “menu” of plans, paying out-of-pocket for any difference between the premium and the federal support contribution. Lower-income individuals would receive larger premium support amounts, while beneficiaries selecting options with premiums below the support amount would keep the savings. Also, as with the other similar proposals, there would be a gradual increase in the Medicare eligibility age from today’s 65 years.
Although it was immediately attacked by various liberal commentators, the Romney proposal seems on the surface to be a reasonable approach to a program that otherwise is headed for bankruptcy. How reasonable, however, will depend on numerous details that have been carefully left vague. (Interestingly, the proposal is nowhere mentioned on candidate Romney’s campaign web site.)
Having cost the Republican Party a Congressional seat earlier this year with his plan to turn Medicare into a voucher program, House Budget Committee Chair Paul Ryan is back with an even more sweeping health care proposal.
Ryan’s latest offering, unveiled in a speech a week ago at Stanford University’s conservative Hoover Institution, is nothing less than a blueprint for replacing the Affordable Care Act with a consumer-driven model that would eliminate the current tax-exempt treatment of employer-paid health insurance.
Is Ryan right? Or wrong?
Ryan believes that exempting health care benefits from employee income tax leads to insurance choices that are unnecessarily costly (since they are effectively subsidized), insufficiently tailored to employee needs (since few choices are offered), inadequately valued (since the employee isn’t paying), and unreasonably tie employees to their jobs (since they may not be able to move without switching insurance). He also believes the present system is unfair: higher-paid employees get a greater tax advantage, while employees of smaller businesses have fewer (or no) options at higher prices than their peers in larger corporations.
He’s right! Common sense says that people are likely to choose the most generous coverage available if it is free or offered at a very low price, while employers—especially those who must negotiate union contracts—see tax-subsidized health insurance as a “better buy” than salary payments.
In a speech at the Hoover Institution today, Representative Paul Ryan (R-WI) argued again that his proposal to reform Medicare, and now his tax credit proposal for replacing the Democratic health care law for those under-age 65, would guarantee to citizens “options like the ones members of Congress enjoy.”
His proposals would not give people the guarantees members of Congress, and all other federal employees for that matter, now enjoy.
This is not a small point.
Previously on this blog, I have argued that many of the defined contribution reform proposals, Ryan’s included, should be faulted for putting all of the future risk of health care costs on beneficiaries.
Ryan’s Medicare plan would create a premium support system for seniors. The premium support amount would increase each year by the rate of basic inflation, even though health care costs have historically increased much faster. Seniors would then take this premium support payment to the market and buy their own private health insurance policy. Another recent Medicare reform proposal by the health care industry would increase a similar health care premium support payment each year by the rate of increase in the gross domestic product (GDP) +1%.
In both cases, neither insurers nor health care providers would have any of the risk, and therefore responsibility, for keeping costs under control. The entire burden for the adequacy of these premium support payments would be with the beneficiary. If health care costs rose faster than these premium supports, tied to these indexes that have always trailed health care inflation, too bad for the beneficiary. Any excess cost is borne by the individual.
The outrageous distortions about the Ryan Medicare reform plan are coming from people who are accelerating the program’s path to insolvency.
Medicare is being used as a piggy bank by Democrats, with $575 billion in payment cuts used to finance two massive new entitlement programs in Obamacare. And this April, the president proposed taking another $480 billion out of the program to lower the deficit.
Payments to providers will be cut so deeply that seniors will find it harder and harder to get care. Doctors will stop taking Medicare or go bankrupt. A whopping 87 percent of doctors say they will stop seeing or will restrict the number of Medicare patients they see, further shrinking the pool of providers and further restricting access to care.
The powerful, 15-member Independent Payment Advisory Board will use price controls to meet ever-elusive spending targets. Rationing is inevitable, especially of newer medicines and technologies.
House Energy and Commerce chairman Fred Upton explained, “Last year, Medicare expenditures reached $523 billion, but the income was only $486 billion — leaving a $37 billion deficit in just one year. And with 10,000 new individuals becoming eligible each day, it’s only going to get worse.”
Medicare is $38 trillion in the red, and it accelerated five years toward insolvency in just the last year, according to the Medicare Trustees’ latest report.
Republican House Budget chief Paul Ryan still doesn’t get it. He blames Tuesday’s upset victory of Democrat Kathy Hochul over Republican Jane Corwin to represent New York’s 26th congressional district on Democratic scare tactics.
Hochul had focused like a laser on the Republican plan to turn Medicare into vouchers that would funnel the money to private health insurers. Republicans didn’t exactly take it lying down. The National Republican Congressional Committee poured over $400,000 into the race, and Karl Rove’s American Crossroads provided Corwin an additional $700,000 of support. But the money didn’t work. Even in this traditionally Republican district – represented in the past by such GOP notables as Jack Kemp and William Miller, both of whom would become vice presidential candidates – Hochul’s message hit home.
Ryan calls it “demagoguery,” accusing Hochul and her fellow Democrats of trying to “scare seniors into thinking that their current benefits are being affected.”
Scare tactics? Seniors have every right to be scared. His plan would eviscerate Medicare by privatizing it with vouchers that would fall further and further behind the rising cost of health insurance. And Ryan and the Republicans offer no means of slowing rising health-care costs. To the contrary, they want to repeal every cost-containment measure enacted in last year’s health-reform legislation. The inevitable result: More and more seniors would be priced out of the market for health care.Continue reading…
How to slow Medicare’s escalating costs has been the big health care policy issue this month, with Republicans and Democrats offering competing proposals, each part of broader plans for reducing the federal deficit—projected to be $1.5 trillion this year, with the government borrowing 40 cents for every dollar it spends.
Unfortunately, neither the Medicare proposal of Representative Paul Ryan’s House Budget Committee, nor that offered in response by President Obama, can be considered realistic.
Both proposals do have some merits. Representative Ryan’s plan for switching Medicare to a quasi-voucher premium support program in which beneficiaries would pay part of the premium for their choice of health plan could make seniors more cost conscious and introduce more competition among insurers. President Obama’s proposed strengthening of the Independent Payment Advisory Board provision of the ACA by lowering the trigger point for IPAB action would force further efforts to reduce costs, while doing much to remove Medicare policy from lobbyist-vulnerable political considerations. Both, if implemented, would effectively guarantee that federal Medicare expenditures would drop dramatically from current projections.
Neither, however, has any chance of enactment. The Congressional Budget Office’s projection of the average 65-year-old paying more than two-thirds of the cost of Medicare coverage by 2030—and more than twice as much as under the present program—almost certainly dooms Representative Ryan’s proposal. (The CBO’s assumption of the continuation of the differential between traditional Medicare and insurers’ equivalent offerings can be questioned, but it’s the forecast of the unfortunate 65-year-old’s 68 percent share of the tab that will resonate for seniors, their lobbyists, and their political supporters.)Continue reading…
There is a dangerous but beguiling econometric logic behind the idea that turning Medicare over to the insurance industry will lower health care costs. It’s an idea that could catch on if the general public became convinced that there is nothing we can do acting together as a society to lower the cost of care. Only the market can do it, the Republicans claim. Force seniors (or the poor or anyone, for that matter) to have more skin in the game, and they’ll use their clout as consumers to separate the wheat from chaff in modern medicine. Expensive, wasteful tests, procedures, and drugs will wither for lack of customers.
Democrats, in attacking the Republican plan that passed the House yesterday, relentlessly hammered away at the cost to future seniors of having “more skin in the game.” Two-thirds of the cost of care within a decade of Medicare privatization in 2023 will fall on them. But the 2030s must seem very far away to people in their 40s and 50s. Isn’t it likely that they won’t think about that far-off time, but instead grab on to the promise of future lower costs, which, let’s be frank, the Affordable Care Act (health care reform) may not be able to achieve.
So here’s the real argument young and middle-aged people need to hear, and the real reason why the “more skin in the game” argument can never work for seniors or other vulnerable populations, including them when they reach that age. Seniors and the poor account for over half of health care spending. Within those groups, 5 percent of the population accounts for 50 percent of health care costs; and 20 percent of the population accounts for about 80 percent. These costs come for the most part at times when economic incentives have no influence at all on medical decision-making: in medical crises; in treating chronic conditions; and, for most Medicare patients, in the last six months of life.
That’s why a voucher program for Medicare, which will shift an increasing share of those inevitable costs onto the elderly themselves, can fairly be categorized as a 100 percent estate tax or death tax. People under 55 need to know that if the plan crafted by Rep. Paul Ryan were passed, most of them will never have a cent to leave to their children. It will all go to the health care industry to support the American way of dying.
Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, Financial Times, The American Prospect and The Washington Post. You can read more pieces by Merrill at GoozNews, where this post first appeared.