A Congressional proposal to reform Medicare will transfer a significant share of the cost to the nation’s senior citizens – a constituency that is known for high voter turnout in elections. The Congressional Budget Office (CBO) added fodder for critics, concluding that the majority of future retirees would pay considerably more for healthcare under the “Path to Prosperity” approach — which turns Medicare into a voucher-like plan for Americans who are currently 54 and younger. Representative Paul Ryan
(R-WI), who introduced the plan, said “We don’t want to turn the safety net into a hammock that lulls people to lives of complacencies and dependencies, into a permanent condition where they never get on their feet.” Instead of coverage for a set of prescribed benefits, Americans in their mid-50s and younger would receive a federal payment to purchase private insurance from a choice of government-regulated plans. If the proposal becomes law, beginning in 2022, Americans would have a vastly different experience when they became eligible for Medicare. The age for eligibility would rise from 65 to 67, according to the CBO.
Ryan’s proposal slashes $1.4 trillion from Medicaid over the next decade. He proposes to cut $630 billion off the budget by more or less repealing the Patient Protection and Affordable Care Act’s provisions that extend coverage to include anyone living on less than 133 percent of the poverty rate — just under $30,000 for a family of four. Additionally, Ryan’s plan eliminates subsidies for private insurance premiums for those just above the poverty line. According to CBO estimates, nearly 17 million people without insurance would have been covered by the Medicaid expansion.
Representative Chris Van Hollen (D-MD), the ranking Budget Committee Democrat, said Republicans are protecting tax breaks for corporations and the wealthy to the detriment of the middle class and the poor. “It doesn’t reform Medicare, it deforms and dismantles it,” Van Hollen said. As for Medicaid, Ryan’s proposal “rips apart the safety net” for poor and older people. “A typical beneficiary would spend more for healthcare under the proposal,” according to the CBO analysis. “Although the uncertainty in future federal spending on healthcare would decrease under the proposal, that uncertainty would be transferred to future beneficiaries,” the CBO analysis said. “If the volume, complexity, and costs of medical services turned out to be greater than expected, future beneficiaries would pay higher premiums and cost-sharing amount than are currently projected.”
Ryan’s budget resolution would improve the nation’s overall fiscal health, cutting projected deficits in President Obama‘s budget and moving the federal government towards a surplus by 2040, according to the non-partisan CBO. Ryan believes that the cuts are necessary to save the programs. “This is not a budget. This is a cause,” he said. “The social safety net is fraying at the seams.” Chip Kahn, president of the Federation of American Hospitals, said that Ryan’s proposal would “result in the loss of health coverage for millions of low-income Americans, reduce critical benefits for others, and make it more difficult for hospitals, clinicians and other healthcare providers to deliver the care so many need.” Other critics maintain that Ryan’s approach will shift the higher costs to individuals, much as the change from defined-benefit pensions to 401(k) plans has increased retirement risk. Senior citizens, the disabled and the poor likely will pay more for healthcare, even as Washington pays less. Additionally, Ryan’s plan would permanently extend George W. Bush’s tax cuts.
“The idealized notion that older consumers would be making these annual choices may have some merit as an idea, but it doesn’t seem to be taking place in practice,” said Patricia Neuman, director of the Medicare Policy Project at the non-partisan Kaiser Family Foundation. Picking the right health plan could become even more critical if premiums outpace federal subsidies. In 2010, 50 percent of the nation’s Medicare recipients reported incomes of less than $21,000 a year, according to a Kaiser Family Foundation analysis.
In an opinion piece in the Seattle Post-Intelligencer, the “Monday Morning Economist” Stephen Herrington writes “The tax cut proposal is not getting the attention it deserves. If it shapes up to be anything like was described in Ryan’s Road Map, it will create massive dislocations and disruptions in the economy. Ryan’s plan was/is to cut the top tax bracket from 35 percent to 25 percent with the promise/expectation that this would not impact revenues. In a departure from the standard ‘trickle down’ excuse for tax cuts, Ryan meant/means to offset the admitted loss in revenues by eliminating all manner of deductions. The deductions in our current tax code, such as medical, mortgage and state income tax expense are there for a purpose. Eliminating them will introduce wild distortions in markets and effectively push the tax cuts for the rich onto the other 98 percent of us. Elimination of the medical expense deduction will intensify the impact of the Medicare/Medicaid part of the plan. It is as if Ryan thinks the magic of the free market can absorb any shock in real time. No more mortgage deduction? No problem, I just won’t buy a house at all until the lack of the mortgage deduction causes prices to fall by half.”