Paul Ryan’s plan to reshape Medicare

WASHINGTON -- One of the most contested ideas from Rep. Paul D. Ryan’s budget blueprint is revamping Medicare, the nation’s healthcare program for seniors.

Ryan’s approach would not end or change Medicare immediately.

Rather, for the next generation of seniors, those now 55 or younger, the system would change from one in which everyone gets the same set of benefits, for which the government pays, to one in which the government would give each senior citizen a fixed amount of money.

PHOTOS: Mitt Romney names Paul Ryan to ticket

Seniors would be given the option of using that “premium support” payment to buy private insurance policies or pay part of the cost of enrolling in traditional Medicare.


Ryan has not specified how much the premium support payment would be. But he would limit the annual growth rate of the support to no more than half a percentage point above the overall growth rate of the economy. Healthcare costs have risen substantially faster than that for years.

Ryan would also gradually lift the Medicare eligibility age to 67, from 65 now, by 2034.

Supporters of the Ryan blueprint, which was approved overwhelmingly by his Republican colleagues in the House in the spring and won GOP support in the Senate, say this approach would hold down healthcare costs that are fueling federal budget deficits -- a problem that is worsening with the retiring baby boomers and aging population. They argue that seniors would have an incentive to shop for the cheapest plans and that the competition among private health plans would push costs down.

Detractors say the premium support probably would not be enough for most seniors to buy decent private health insurance policies. The difference, critics of the Ryan approach say, would need to be made up out of seniors’ pockets.

“The proposal is likely to simply increase costs for beneficiaries while removing Medicare’s promise of secure health coverage,” wrote the AARP’s chief executive, Barry Rand, in a letter to lawmakers as they voted in the spring, now posted at the office of Minority Leader Nancy Pelosi (D-San Francisco).

Critics also question the underlying idea that competition would hold down prices. Elderly sick people aren’t likely to be good negotiators and could easily be prey to insurance companies, those critics argue.

Ryan’s ideas have been politically difficult. In February, the Kaiser Family Foundation polled Americans on competing ideas about Medicare. The poll found 70% agreed that “Medicare should continue as it is today, with the government guaranteeing seniors health insurance and making sure that everyone gets the same defined set of benefits.”

Only 25% agreed that “Medicare should be changed to a system in which the government would guarantee each senior a fixed amount of money to put toward health insurance. Seniors would purchase that coverage either from traditional Medicare or from a list of private health plans.”

Even among Republicans, 53% said they would prefer to keep Medicare as it is currently structured, rather than move toward a defined contribution model.

The poll also showed, however, that arguments about the possibility that Medicare would go bankrupt without substantial changes did prompt about one-third of those surveyed to say they would at least consider the idea, although they still did not necessarily agree with it.

Ryan’s current plan represents a significant tweak. His past proposals, including the one the GOP-led House approved in 2011, had the voucher-like system replacing Medicare entirely while the new plan would continue to allow seniors to buy into Medicare – if they could afford it.

The change was an attempt to deflect criticism from an idea that had drawn heated debate. And Republicans also sought, mostly without success, to attract Democrats -- since the idea for an optional voucher-like system had the backing of a leading Democrat, Sen. Ron Wyden of Oregon. Wyden has since said he opposed the overall Ryan budget.

PHOTOS: Paul Ryan’s past

Medicare is a mainstay for seniors who, on average, have incomes of $20,000 a year, according to AARP.

The concern that seniors could lose Medicare’s guaranteed health coverage -- or be forced to shell out more money -- has been backed up by certain nonpartisan analysts.

The Congressional Budget Office said that the federal government’s per capita healthcare spending for Medicare beneficiaries was $5,500 in 2011. That federal outlay is projected to rise to between $8,600 and $9,600 by 2030. Under Ryan’s plan, spending is projected to be $7,400 per senior, meaning that unless costs grow much more slowly than expected, seniors would be picking up at least an additional $1,200 a year in costs.

By 2050, the difference between the approaches could be more stark. Medicare spending under Ryan would cap at $11,100, (in 2011 dollars), compared with as much at least $17,000 under existing government scenarios -- a difference of nearly $6,000 that would have to be paid by seniors unless the plan succeeds in greatly reducing the growth in health care costs.

Follow Politics Now on Twitter

Twitter: @LisaMascaroinDC