The Blog

How Paul Ryan Would Reform Medicare for Americans Under the Age of 55

5:59 PM, Aug 12, 2012 • By JOHN MCCORMACK
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

The Bipartisan Policy Center helpfully explains how Paul Ryan's Medicare reform, which Mitt Romney has embraced, would change the program for Americans who are 54-years-old and younger (via Reihan Salam): 

Ryan’s budget introduces a competitive bidding system, backstopped by a cap on per beneficiary growth of 0.5 percentage points faster than the economy (GDP+0.5%). This reform is very similar to the proposal that he advanced in December 2011 with Senator Ron Wyden (D-OR), except that the annual growth cap is now set at GDP+0.5% instead of GDP+1%.

Seniors would be able to choose between traditional fee-for-service Medicare (FFS) and various private healthcare plans on a newly established, regulated Medicare Exchange, similar in structure to those created by the ACA. In each region, healthcare plans would be paid based on the cost of the second-least expensive approved private plan or FFS, whichever is less costly, risk-adjusted for the health status of their enrollees. The cost of this plan would establish the “benchmark” government payment in each locality. Therefore, the amount that the government contributes would be tied to the cost of health care in a given area.

Beneficiaries who choose to enroll in a plan that is more expensive than the benchmark – even if that plan is FFS – would be required to pay the incremental additional cost. A beneficiary who enrolls in the least-expensive approved plan would be rebated the full difference in cost from the benchmark.

Additionally, if costs per enrollee continued to grow faster than the cap of GDP+0.5%, seniors would have to pay an additional premium to make up the difference. For reference, CBO projects Medicare to grow at GDP+0.8% per beneficiary from 2023-2032 and GDP+1.7% thereafter under current law, which assumes that the cuts from the ACA remain in place and are effective.

The GDP + 0.5 percent backstop is the exact same cap in the Obama budget. "If you look at the numbers, then Medicare in particular will run out of money and we will not be able to sustain that program no matter how much taxes go up," President Obama said during a July 2011 news conference. But as Yuval Levin notes, "the president has chosen to do nothing, and indeed to stand firmly in the way of doing anything meaningful to solve the problem."

Obamacare’s Medicare cuts and its board of price controllers aren’t a solution — the CBO debt and Medicare growth numbers cited above already include them, and the agency (along with Medicare’s actuary, who works for the president) has said they are very unlikely to work. What is needed is a structural reform of the program, to enable it to deliver coverage to seniors far more efficiently by driving more efficient delivery of care. But seniors who are now in the program don’t want to hear that it’s going bankrupt, and don’t want to think about changes to it, so the politics of Medicare argue strongly against any kind of solution. The president and his party have chosen to make the most of that political reality, quietly raiding Medicare to fund Obamacare but otherwise leaving the program to its sorry fate. They have denied the need for reform. It would take real political courage to do otherwise.

Read the rest of Levin's piece here.

Recent Blog Posts