Democrats Warn That Paul Ryan’s Medicare Plan Would Reduce Federal Health Care Spending

Rep. Paul Ryan, the top Republican on the House Budget Committee, has been pushing reforms of Medicare and Medicaid for a while now. With various versions of his Roadmap for America’s Future, as well the Medicare reform plan he put together with former Democratic budget chief Alice Rivlin, Ryan has been arguing that the key to bringing the nation’s long-term fiscal path under control is limiting the federal commitment to health care spending. 

Tomorrow, Ryan will put forward his most high-profile reform proposal yet. The GOP budget proposal, prepared under Ryan’s leadership, is expected to call for cutting $4 trillion from the budget over the next decade, block-granting Medicaid, and converting Medicare into a voucher system run through competing private plans. Here’s The Wall Street Journal with the basics:

Though Rep. Ryan based the Medicare portion of his budget on a previous plan created in collaboration with a Democrat, Alice Rivlin, a senior fellow at the Brookings Institution and long-time budget expert, the current plan isn't likely to get much Democratic support. Instead, it will set up a broad debate over spending and the role of government heading into the 2012 general election.

The plan would essentially end Medicare, which now pays most of the health-care bills for 48 million elderly and disabled Americans, as a program that directly pays those bills. Mr. Ryan and other conservatives say this is necessary because of the program's soaring costs. Medicare cost $396.5 billion in 2010 and is projected to rise to $502.8 billion in 2016. At that pace, spending on the program would have doubled between 2002 and 2016.

Mr. Ryan's proposal would apply to those currently under the age of 55, and for those Americans would convert Medicare into a "premium support" system. Participants from that group would choose from an array of private insurance plans when they reach 65 and become eligible, and the government would pay about the first $15,000 in premiums. Those who are poorer or less healthy would receive bigger payments than others.

Ryan told Politico that the entitlement reforms, along with the size of the cuts he's proposing, would give his political opponents a “weapon.” And sure enough, Democrats are already putting that weapon to use targeting GOP legislators. From the Journal, here's the basic talking point:

Democrats say the GOP plan will leave millions exposed to financial risks. The Medicare premium subsidies would grow more slowly than health costs, they say, so seniors would end up with less coverage.

"All this does is shift the risk and burden of rising health-care costs to seniors on Medicare," said Rep. Chris Van Hollen (D., Md.), the top Democrat on the House Budget Committee. "You're on your own with the insurance industry."

The plan's supporters say it would cut costs without sacrificing quality by introducing competition among insurers.

So Democrats are warning that voucherizing Medicare would mean that the federal government spends less money on health care. Federal spending on our most expensive health entitlement, they say, would no longer keep pace with inflation. Well...yes. That’s kind of the point.

As it stands, the federal government maintains what is effectively an unlimited commitment to health care spending for seniors. But given the current projected growth in health spending over the next several decades, that commitment simply isn’t sustainable. Even President Obama recognizes that the health entitlements are at the heart of our long-term fiscal problems: "Medicare and Medicaid are the single biggest drivers of the federal deficit and the federal debt by a huge margin," he said in 2009. 

That means that the federal government’s commitment to health care spending must be limited somehow. That’s the basic problem that Ryan is trying to address, and voucherizing the program is the way he's chosen to do that. Which means that Democrats are complaining, essentially, that Ryan is solving the problem he’s set out to solve.

But what about seniors? Would they be left behind as health inflation outpaced their vouchers? I think there are good reasons to believe that vouchers would help keep medical costs in check by introducing some much-needed price signals into the marketplace for medical care: Under the current state of affairs, neither health care consumers nor providers have any incentive to think about costs. In a voucher system, by contrast, individuals would shop for plans and services that fit their needs. Providers would factor cost into their service offerings. Competition would revolve around providing the best service for the least money. Insurers, meanwhile, would work with providers to build plans that remained affordable over the years—and would likely build their plans around the dollar amount provided by the voucher. If anything, this is a negative aspect of a voucher system: Health plan innovation would likely be driven by the politically determined value of the voucher.

It may not be ideal, but it would be a first step away from the federal government's decades of unchecked taxpayer-funded medical spending—and toward a world in which market pressure and individual decision-making would begin to restrain the growth of health care costs.

Naturally, long term spending and inflation trends—as well as behavioral uncertainties—make the long term effects difficult to predict. But we know from a variety of studies that individuals can and do act like rational consumers in the health care market when given incentives to do so, and that savings are the end result. Ryan’s plan, in a slow and imperfect way, would start the U.S. health care system on a path toward giving more individuals those sorts of incentives—and in the meantime would end the unlimited, unsustainable commitment to health spending that’s set to wreck the federal budget. 

Read my Reason feature on Paul Ryan and his budget plan here

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  • The Extispicator||

    This is awful. Everybody should always have all they want for free forever.

  • ||

    I know! I'm a human being, and thus by virtue of my existence, the other human beings who exist must provide things for me.

    Some sperms and eggs came together, and some people came out of wombs, and therefore TEH SOCIAL CONTRACT. QED!!!1!!

  • WTF||

    Tony? Is that you?

  • Stupid Left-Wing Jackass||

    That S.O.B. wants to kill gramma!!

  • Au H20||

    Sadly, it is quite likely that the Republicans will get bitten in the ass for touching the third rail of politics.

  • Au H20||

    Sadly, it is quite likely that the Republicans will get bitten in the ass for touching the third rail of politics.

  • Au H20||

    My point was so nice, the server squirrels decided I had to make it twice.

  • Restoras||

    I believe this is correct. I also believe this is the kind of plan that we are likley to end up with, though somewhat less generous as it will be forced on us by our creditors who won't give a hair about healthcare for seniors and the needy.

  • Au H20||

    Hey, I'm not saying the Republicans are wrong. I'm just saying that the AARP is going to be on this shit like Charlie Sheen on winning.

    ...And blow.

    ...And hookers.

  • skr||

    I see a potential backroom deal. The republicans are going after AARPs nonprofit status. If they have good evidence they have some leverage.

  • skr||

    Actually scratch that. The AARP is an insurance provider and will get a shit ton of money from a voucher system.

  • ||

    Bingo

  • Vermont Gun Owner||

    I just checked and am surprised to find that you can be 55 and an AARP member. The cutoff is only 50.

  • skr||

    And yet they keep sending my 30 year old GF recruitment material. WTF.

  • Vermont Gun Owner||

    Maybe you need a better looking girlfriend.

  • ||

    These cuts are extreme!

  • Tony||

    If Ryan's plan saves money it's because of cuts to benefits. It's not because "competition blah blah" will make private insurance cheaper than Medicare.

    The GOP is a machine designed to funnel as much money as it can get its hands on to the top 1% of earners. This plan is about cutting benefits. That's something cash-strapped seniors can tolerate more, evidently, than millionaires can tolerate the slightest tax increase.

    Surely libertarians can't go along with vouchers anyway (direct government subsidy to private businesses). Healthcare is a privilege for those who can afford it, right?

  • Au H20||

    Tony, even if I were to accept that taxes need to be increased and that doing so would also cause revenues to go up and not lead to any number of tax avoidance schemes by the ultra-rich, how do you propose we bring health care spending to heel without saying that we won't pay any more?

    Currently, the cost of health care is rising at a much higher rate than inflation. Even if we were to implement your beloved single payer, at a certain point we can not afford to pay for every new treatment and technology that comes along if we want to have any semblance of an economy. Hell, at the moment,health care threatens to grow to consume the entire economy of not just the United States, but most of the developed world. If you want to use your go to example of Europe, they too face rising health care costs. Hell, the Brits are having to make deeper cuts to other services, including education, because they refuse to take one dime from the NHS.

    So, what, exactly, is your plan, oh wise one?

  • Tony||

    Well, healthcare costs are probably rising due to more advanced technology and aging populations. This is not an argument for a private plan over a public one, however, as the US still has twice the per-capita healthcare costs as the next highest advanced country. Whatever the causes of increasing healthcare costs, the cheaper option is still single-payer.

  • Dr. Dave||

    Gee, Tony, now you're just making shit up. Do you understand one thing about economics??? Do you understand the laws of supply and demand?? Do you understand how competition increases quality while lowering costs??

    You obviously don't. So please educate yourself. You might start with Milton Friedman's essay on health care economics - just google it.

  • ||

    Can't stand that "Billy Barty" midget Freeman. He's an apologist for the super rich 1 per cent.

  • Dr. Dave||

    I neglected to mention the effect of third party payers - a result of government meddling in the health care market. Again, read up on this topic in Friedman's essay.

  • Au H20||

    I'll admit Tony- an entirely centralized healthcare system hypothetically can bring down costs much more effectively than a million small producers (please, fellow Reasonoids, pretend that the Invisible Hand doesn't exist here so that I can finish my point). But the question is will it?

    You talk down thread about how health care is fundamental right. But what level of care? An 88 year old man gets a gunshot wound to the chest. Treating him will cost X dollars, but given that he's 88, the chances of a full recovery are slim. Even if he fully recovers, how long does he get on his new lease on life? Most people don't keep living after 88.

    Now, in the case of a gunshot wound, the first instinct may be to say that all such basic, life threatening injuries should be saved, and in our current system they are.

    But what if that 88 year old needs a pacemaker? Now your talking about spending thousands for the last few years of the guys life.

    Hell, what if he's 38, taxpaying citizen, but just awful cholestorol that he refuses to do anything about. Should society pay the costs knowing that it will simply have to shoulder a greater burden later when his new ticker inevitably bursts? How many times do we save the guy before we call it quits?

    The problem, as I see it Tony, is that the only way to limit costs in centralized system is via straight up rationing and denial of treatment to certain patients who are deemed high risk, low reward cases. However, any politically controlled system will be inevitably subject to lobbying pressure, especially by the most active voting group, the elderly.

    So, how would your grand centralized system actually work, and how would you convince people that letting some die so the rest may live at a much lower cost is the moral choice?

  • ||

    Spot on.

    Western Europe at $3800 per human beats the hell out of us at $7700 per mainly because they fix fees for docs and deny exorbitant care to the hopelessly ill.

    We wouldn't waste thousands on a junkie either - not that their cost is that high anyway.

  • #||

    The other part of this is a cost shitfing between out sustem that rpovides the demand for new drugs and devices, so we pay for most of the R&D cost, and Europe that with price controls really onyl pay for marginal cost. They have been freeloading offf of our system for years. We go to a system like theirs, innovation comes to a standstill.

  • ||

    If health care is a fundamental right I'll have what Bill Gates and Warren Buffett are having, thank you very much.

  • Mr. FIFY||

    Okay, shrike... move to western Europe, then. We'll help you pack.

  • ||

    Tony, you do realize that the "best" health care systems in Europe are not single payer.

  • #||

    exactly... the better ones like switzerand have about 30% of healthcare costs paid for out of pocket by the consumer. Out national average is 10%. The key is getting patients to have more skin in the game, so competitive markets emerge.

  • ||

    Increased tax rates does not necessarily equal increased revenue. Reduced tax rates does not necessarily equal reduced revenue.

    While I would have favored a far more progressive tax cut than Bush enacted (phasing out the income tax for the lower middle class) the burden is on you to prove that revenue was reduced by cutting tax rates "for the wealthy". The numbers indicate the reduced rates increased revenue, but spending increases far surpassed this increase. Not that I expect you to have anything but a typically disingenous response filled with non sequiturs and no proof, Tony.

  • Tony||

    Here's a good resource I found, quoting several Bush administration economists acknowledging the obvious: that the Bush tax cuts significantly decreased revenue.

  • ||

    Well, yeah. You lower the rates on the middle class - there's a cost to that. The middle class are the sheep, not the rich. You think Warren Buffett cares about your silly tax increase? He'll just throw a few more BH shares at his foundation - take a bow for the media - and move on muttering 'suckers' to himself.

    So if this is the answer, where is Obama? How come he made a silly stink about 25% of the cost of the Bush tax cuts but ignored 75% of the cost, where the real money is? The Democrats say they hate the Bush tax cuts but when push comes to shove they support the vast majority of them over the Clinton tax rates.

  • ||

    Except that the federal government's all time highest revenues occurred during the Bush administration after the tax cuts. The facts sometimes get in the way of pontification...

  • ||

    Tony, they didn't DECREASE revenue. An increase that does not matching an economist's estimate does not equal a decrease. Also note that in the initial years of the tax cut, we were in what could have been a major recession, two years later we weren't.

  • Concerned Citizen||

    So much idiocy in three paragraphs. Competition won't make private insurance cheaper? Like with car insurance? Or any other good or service that's subjected to competition?

  • ||

    Shorter Tony:

    We need to continue to hide the costs of health care from health care consumers.

  • Tony||

    Because if they knew the true costs, more people would just man up and die?

  • ||

    No, because they would shop around instead of just saying to themselves "I show my insurance card, and the insurance company pays! Whuta country!"

  • Tony||

    Healthcare is not subject to normal market forces! Anything that you have to buy at any random moment in order not to die is not something to which a rational supply/demand calculus can apply.

    These are simple choices. Either healthcare is a privilege of those who can afford it, or it's a right of modern human beings. Once you decide that the latter is the correct position, the only question left is how to pay for it. Paul Ryan's industry giveaways, or a simple, fair single-payer system?

  • Dave T||

    MOST HEALTH CARE IS NOT LIFE OR DEATH. Please try again.

  • #||

    exactly... most healthcare expenses are either common uses or cronic issues... not life and death emergency.

  • ||

    Anything that you have to buy at any random moment in order not to die is not something to which a rational supply/demand calculus can apply.

    Translation: "The high, inelastic demand for healthcare favors producers instead of consumers! WAAAH!"

  • ||

    ""No, because they would shop around instead of just saying to themselves "I show my insurance card, and the insurance company pays!""

    Usually, with most insurance today, the amount the insurer pays the docs is already agreed upon. If you have insurance B, then it doesn't matter which doctor you go to, insurance B will pay the same. There is no shopping around for price in this case, even if the doc said he would do it for less than the contracted rate, the insurer will still pay the contracted rate.

  • mad libertarian guy||

    Because if we know exactly what the costs are, SOMALIA!!!11!!

  • Dave T||

    "What you’ve just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul."

  • ||

    The GOP is a machine designed to funnel as much money as it can get its hands on to the top 1% of earners. This plan is about cutting benefits.

    This plan explicitly cuts the benefits of the upper middle class and wealthy but, like the Bowles-Simpson plan on Social Security, is far more generous to the poor.

    If Ryan's plan saves money it's because of cuts to benefits. It's not because "competition blah blah" will make private insurance cheaper than Medicare.

    And I'm sure you feel the same about Obama's plan and its Medicare cuts? Probably not, if there's one thing that Tony believes, it's that bands of experts know what's better for you much better than you do.

    I have to assume you'll be right there with Lindsey Graham wanting to ban the wrong kind of speech.

  • Mr. FIFY||

    Healthcare is NOT a privilege at all, Tony.

  • Red Rocks Rockin||

    It's cute that you think millionaires give a shit how high taxes go.

  • ||

    Here's the thing that gets me: shouldn't the Democrats be all in favor of progressivizing these policies by reducing/ending taxpayer subsidization of healthcare for the wealthy and upper middle class? Giving the poor large vouchers fulfills pretty much the only reason to have these programs. Do they support going bankrupt so Bill Gates can receive taxpayer subsidized care? One wouldn't think so, but then I've long argued that the Left isn't progressive at all, from an economics standpoint.

  • ||

    shouldn't the Democrats be all in favor of progressivizing these policies by reducing/ending taxpayer subsidization of healthcare for the wealthy and upper middle class?

    Democrats oppose solutions that solve problems that are politically advantageous to them.

  • Tony||

    It's just that means-testing wouldn't save that much money (since rich people are relatively few in number), and might actually increase overall costs because of the new administration that would be necessary.

  • Id||

    Rich people are relatively few in number, so giving them government handouts isn't a problem, but they are large enough in number that raising taxes on them will solve the governments shortfalls. Do I have that right?

  • ||

    The quiet popping noise you just heard was Tony's head exploding.

  • Rob||

    Actually, that loud crash you heard was ld slamming the lid on Tony's head after stuffing him into a garbage can.

  • 2+2=5||

    Yep, that sounds correct.

  • Jersey Patriot||

    Nicely done.

  • Mr. FIFY||

    Here it comes...

    "It's only a two-percent tax increase on those fucking rich bastards! It'll solve ALL of our budget woes! We'll be ass-deep in largesse! DON'T YOU CARE ABOUT THE POOR AND THE OLD AND THE CHILDREN????????!!!!!1!ONE!2-1!!EXCLAMATION!PO!NT!!"

    There... now Tony, shrike, and other hand-wringers won't have to say it.

  • ||

    What Tony fails to realize is that the wealthy don't make enough to solve the budgetary problems by themselves.

    http://www.nationalreview.com/.....4c2100ff,0

  • ||

    Good for him but Paul Ryan voted for the Medicare Pharma Welfare Part D Medicare plan and every Bush budget buster he could.

    But I approve nevertheless. Medicare and defense are the only two feasible places to find significant savings.

    Sista Sarah should be screaming about Death Panels again but I won't wait.

  • ||

    And Part D has a mandate too.

  • Kevin||

    Paul Ryan is as shameless as they come. He voted for TARP & the Medicare expansion along with other Bush big ticket items.

    Most of his supporters are completely obtuse to this fact and yes those votes still do VERY MUCH MATTER. They speak directly to his credibility.

    All of policy-wonks at NRO, etc. can keep touting this guy all they what, but it is his actions (Votes) that show how completely insincere Paul Ryan is.

  • Brett L||

    Everyone knows once you've been wrong, you can never be right. No wonder our political class is so fucked up.

  • The O Man||

    Let me be clear...my actions show how completely sincere I am in ending the wrongs of the Bush administration.

  • ||

    I agree with you that Paul Ryan was wrong on those votes, and so I also don't view him as sincere.

    However, even if a person is insincere, if they are supporting a good idea, I will support the idea.

  • ||

    TARP and Medicare Part D were inexcusable votes. But there aren't many politicians in DC willing to step on the third rail (which we are getting clubbed to death with), so I take what I can get.

  • thebardofmurdock||

    The Hunt for a Red November

    Who is the wonky budgeteer, so bold
    That would the sacred Medicare remold;
    Who walks the plank of Medicaid reform,
    And calls out for his peers to help transform
    The decades-old response of lethargy
    To debt we use to fill our treasury?

    He like a visionary does foreknow
    That failure to attack the status quo –
    A welfare state that throws a safety net
    Sustained by IOUs and foreign debt
    And birth to death pursues us through the years –
    Will surely drown the country in arrears.

    He knows the coming Democratic swarm
    Will seek to obfuscate and misinform,
    With masses marching in the public square
    And congressmen who wail their false despair.
    But toward the sound of battle he will stride
    With Providence and reason by his side.

    For does not debt this country now enslave,
    And drown our children in its tidal wave?
    But he recalls what Patrick Henry said,
    ’Tis better for a man that he was dead
    Than sacrifice his sacred liberty
    To wretches who are sunk in luxury.

    So up from Janesville in the Badger state
    Comes forth the wonky warrior to debate
    The spenders who now reap what they have sown:
    A country that survives from loan to loan.
    For other candidates we need not delve,
    Draft Ryan as our president in ’12!

  • ||

    does this recent budget proposal leave pentagon budget cuts "on the table" like ryan promised earlier this year?

  • ||

    my name should be spelled J'rome

  • ||

    So as I say, I wake up every morning, thankful that I have exceptional health insurance coverage I found through "Wise Medical Insurance" for my family because it gives me peace of mind knowing that my family can count on me to deliver their health care needs.

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