Now that the first flush of excitement over Paul Ryan’s vice presidential bid has died down, attention has turned to the House Budget Chair’s policies, particularly his proposal to dramatically overhaul Medicare. Ryan’s plans to reform the nation’s government-run health care program for seniors is widely believed to be the Wisconsin Congressman’s biggest political liability. Medicare is a third rail in U.S. politics, especially in the senior-heavy battleground state of Florida, where Mitt Romney is campaigning on Monday.
Democrats have already pounced on the issue, accusing Ryan — and by proxy, Romney — of wanting to “change Medicare as we know it.” On the Sunday news talk shows, Obama senior strategist David Axelrod went so far as to claim that Ryan “doesn’t believe in Medicare” at all.
The reality, of course, is a lot more complicated.
Below, we’ve broken down Ryan’s plan for Medicare, based on his most recent proposals, as laid out in the bipartisan Ryan-Wyden bill and Ryan’s 2013 budget, The Path To Prosperity: A Blueprint for American Renewal. Mitt Romney’s Medicare reform plan is basically the same as the Ryan-Wyden plan, absent many of the details. However, there are key differences between these proposals, and the Medicare reform outlined in Ryan’s first budget plan, The Path To Prosperity: Restoring America’s Promise, which we note at the bottom.
Who would be affected by Ryan’s Medicare plan?
Under Ryan’s plan, everyone who is eligible for Medicare now, or is within 10 years of eligibility, will be allowed to stay remain in the current program. The plan would go into effect for everyone under age 55.
What would change under Ryan’s plan?
For those who become eligible after 2023, Ryan’s plan would make two major changes:
- The age of eligibility for Medicare would increase by two months every year until it reached 67 in 2033.
- Medicare beneficiaries would get voucher payments to buy private insurance plans. Medicare enrollees would choose among competing private insurance plans, offered on a new Medicare Exchange similar to the insurance exchange now offered to federal workers, including members of Congress. The plans offered through the exchange would be required to cover everyone, regardless of pre-existing conditions, and would be prohibited from charging discriminatory rates based on age and health condition. They would also be required to meet a minimum standard of coverage. The vouchers would go directly from the government to the insurance company.
Under the Ryan-Wyden plan, seniors could also opt for the traditional “fee-for-service” Medicare plan, in which healthcare coverage is administered by the government, rather than a private insurer. But the amount that government pays for healthcare — whether in the form of vouchers or fee-for-service payments — remains the same.
How much would the voucher be for?
Under the Ryan-Wyden plan, the cost of the voucher would be determined by a competitive bidding process. The amount the government pays would be decided based on the second-least expensive plan or fee-for service option. If individuals opt for a more expensive plan, they would have to pay the difference in premiums out of pocket. Alternatively, individuals who opt for a cheaper plan would get a rebate.
The individual vouchers would also be adjusted to account for the health and income status of the beneficiary (i.e. sicker, poorer Medicare recipients get more money).
As a failsafe, Ryan’s plan would also impose a spending cap requiring that per capita growth not exceed nominal GDP growth plus 0.5%
How much would the plan save?
According to a CBO analysis of Ryan’s 2013 budget, average Medicare spending for new enrollees in 2050 would be between 35% and 45% below what it would be under the current program. The analysis found that possible consequences of the dramatically lower spending could include higher out-of-pocket healthcare costs for seniors; reduced access to health care; diminished quality of care; increased efficiency of health care delivery; and less investment in new, high-cost technologies.
But there’s a caveat:
Ryan’s initial Medicare plans differ from the current plans in two important ways:
- Democratic attacks on Ryan’s Medicare proposals are also likely to focus on his initial budget plan, Ryan’s first plan did not include a traditional “fee-for-service” option, justifying Democrats’ claim that Ryan’s plan wants to “end Medicare as we know it.” But the addition of a “fee-for-service” option is nominal — both of Ryan’s proposals would change how much the government pays for senior healthcare.
- Under Ryan’s first plans, voucher payments increased based on changes in the consumer-price-index, which accounts for general inflation, rather than healthcare inflation, which is higher. What that means is that, over time, seniors would end up paying more out of pocket for healthcare.
So far, Democrats have mostly preferred to attack Ryan based on these proposals, rather than on the newer, and more politically palatable, reforms he has proposed.
This post was updated at 9:25 a.m.
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