Ryan’s Medicare Proposals: the Latest

House Budget Committee Chairman Paul Ryan’s Medicare proposals — summarized in a new CBPP analysis — have evolved since Ryan issued his Roadmap for America’s Future in 2010, but much is still the same in the budget plan he released last week.

The centerpiece of Ryan’s Medicare plan remains premium support — replacing Medicare’s guarantee of health coverage with a flat payment, or voucher, that beneficiaries would use to purchase coverage.  But the details have changed significantly over the years.

• Ryan now retains a form of traditional fee-for-service Medicare as an option.  His earliest proposals would have phased out traditional Medicare, which would have substantially increased health care costs, since traditional Medicare has lower administrative expenses and payment rates than private insurance plans.
• Ryan now bases the amount of the premium-support payment on a weighted average of bids by private plans and traditional Medicare.  In last year’s proposal, the payment would have been set below the average bid.
• Ryan no longer mentions a limit on the annual growth of the premium-support voucher, as did his previous proposals.

Even with these modifications, Ryan’s premium-support proposal would disadvantage beneficiaries in at least two ways.  First, in many regions, traditional Medicare would cost more than the premium-support voucher, and, in these regions, beneficiaries who chose to enroll in traditional Medicare would have to pay higher premiums than under current law.  Second, beneficiaries who enrolled in a private plan would not receive the federally subsidized supplemental benefits that enrollees in private Medicare Advantage plans receive under current law.

Moreover, premium support could cause traditional Medicare to unravel — not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a consequence.

The Ryan budget again proposes to raise Medicare’s eligibility age — now 65 — by two months per year, starting in 2024, until it reaches age 67 in 2035.   (Ryan’s Roadmap proposed raising the eligibility age to 69½.)  At the same time, the plan would repeal health reform’s coverage provisions.  Consequently, 65- and 66-year-olds would have neither Medicare nor access to health insurance marketplaces in which they could buy coverage at an affordable price and receive subsidies to help them secure coverage if their incomes are low.  Many would end up uninsured.

Finally, the Ryan budget includes other Medicare proposals from past years — increases in income-tested premiums, a cap on medical malpractice awards, and repeal of the benefit improvements in health reform (including closure of the prescription drug “donut hole”) — as well as a new proposal to increase Medicare cost sharing.  For more details, see our new paper.