Everyone knows, Paul Ryan’s Medicare Reform proposal will throw grandma over the cliff. New York Magazine ran the headline Monday, “Medicare Reform Ryan’s Least Terrible Idea.” Progressive talk shows are boldly proclaiming that Ryan’s reform plans will end Medicare as we know it.
Unfortunately, in 2012 Medicare’s trustees reported to the president and Congress that funding for the plan will start to run short. The trustees of Medicare have sent us a message, If reform is not enacted, grandma is heading to the cliff with or without Ryan’s assistance.
So let me attempt to briefly summarize the latest revision to Ryan’s Medicare reform proposal:
First the good news:
1) If you are currently 55 or older, Ryan’s Medicare reform changes nothing.
2) Traditional Medicare fee-for-service would remain available for all. “Premium support”—that is, government funding of private insurance plans chosen by individuals—is an option for those who choose it. No senior would be forced out of the traditional Medicare program against his will.
3) Overall funding for Medicare under the Ryan-Wyden plan is scheduled to grow at the same rate as under President Obama’s proposals.
The big change for younger Americans under Ryan’s Medicare reform comes from limiting benefits to a fixed amount per year and privatizing future health care coverage. The proposed plan seeks to lower costs to taxpayers by using a system of payments given indirectly to seniors, who would in turn use the money to buy health insurance. Seniors would take their Medicare annual premium support payments, often called vouchers, into the health care market to purchase private coverage.
If eligible seniors beginning in 2022 pick a plan more expensive than the government premium payment they receive, the consumer must pay the difference out of pocket. If the consumer picks a cheaper plan, they pocket the difference in the form of a rebate check. The Ryan plan set the premium payment to consumers at the cost of the second-least expensive government-approved plan. After 2022, seniors are guaranteed they can enroll in any plan offered by the new exchanges and Medicare despite their health status or age.
The plan picks up out-of-pocket costs for seniors who qualify for both Medicare and Medicaid. Other seniors who don’t qualify for Medicaid also will have their out-of-pocket costs covered, based on their income level.
The Ryan plan also would gradually raise the eligibility age to 67 by 2034 and return the Medicaid program to the control of states, through the administration of block grants.
If this doesn’t sound like the ending of Medicare to you, it isn’t.
But then again, Ryan’s current Medicare Reform proposal has changed greatly over since 2008 as J. Rago of the Wall Street Journal recently noted.
Rago traced the evolution of the Ryan plan writing, “Under the 2008 roadmap, seniors would get a straight cash voucher for $9,500 a year (the amount Medicare then spent per person), indexed to a blended measure of general inflation and the rise of health costs. The poorest and the sickest would get more, the wealthiest seniors less. Nothing would change for people older than 55.”
He continued noting its current revision developed with the support of Democrat senator of Oregon, Ron Wyden, “… the 2012 Path to Prosperity budget, indexed the payments to general inflation, starting at $15,000 (the amount Medicare now spends per person). Unlike the earlier roadmap, the payments would only flow to government-approved coverage options. Mr. Ryan joined with liberal budget expert Alice Rivlin to link the payments to the growth of the economy plus 1%.
"The 2013 House iteration uses a competitive-bidding formula worked out with Oregon Democratic Sen. Ron Wyden. Insurers and traditional Medicare, which would remain as is, would essentially participate in a reverse auction to price the coverage in a given region. The annual premium-support payment would be set at the second-lowest bid, and seniors who chose the cheapest plan would keep the difference.”
There is a down-side to the 2012 version of Ryan’s reform to Medicare. CBO's analysis of the plan, projects a minority of seniors would probably have to purchase less extensive coverage or pay higher premiums than they would under current law.
Medicare’s trustees claim cliff is eroding under grandma and all Medicare even as you read this. The choices America must face can no longer be put off without threatening to further erosion to the very cliff, we all deem necessary to uphold for those benefiting from our entitlement programs.
Now you must decide, is it time for reform, or do we allow Medicare to collapse?