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The Problems with the Ryan-Wyden Medicare Proposal

March 19, 2012 at 2:51 PM
BY
Paul N. Van de Water

The budget that House Budget Committee Chairman Paul Ryan (R-WI) will unveil tomorrow is expected to include a Medicare "premium support" proposal that he and Senator Ron Wyden (D-OR) announced last year. Our new paper explains the serious problems with the Ryan-Wyden plan.

Premium support would replace Medicare's guarantee of health coverage with a flat payment, or voucher, that beneficiaries would use to buy private health insurance or traditional Medicare. Although billed as a kinder, gentler form of premium support, the Ryan-Wyden plan has the same basic features as earlier proposals. It is similar to a 1995 proposal from then-House Speaker Newt Gingrich that Gingrich said would have caused traditional Medicare to "wither on the vine."

The Ryan-Wyden proposal would:

  • Shift substantial costs to Medicare beneficiaries rather than protect them from cost increases -- in part because the value of the voucher would likely fail to keep pace with health care costs.
  • Likely lead to the gradual demise of traditional Medicare by making the pool of Medicare beneficiaries smaller, older, and sicker -- and increasingly costly to cover.
  • Produce few budgetary savings beyond those that the health reform law already calls for, since both plans have the same target growth rate for Medicare costs.

Some advocates of premium support falsely claim that it is necessary to keep Medicare from going bankrupt. In reality, health reform has significantly improved Medicare's long-term financial outlook, and the program is not on the verge of shutting down. Medicare's trustees estimate that, even without any changes to the program, Medicare's Hospital Insurance trust fund can pay 100 percent of the program's hospital insurance costs through 2024; at that point, the payroll taxes and other revenue deposited in the trust fund will be sufficient to pay 90 percent of those costs.

The American people -- a large majority of whom oppose premium support, according to a recent Kaiser Family Foundation poll -- shouldn't let scare tactics frighten them into supporting radical and harmful Medicare changes.


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