Medicare Under Paul Ryan's Budget Plan


Rep. Paul Ryan, the Republican Chairman of the House Budget Committee, released his latest budget proposal today. In many ways, the plan resembles the budget proposals Ryan has been putting forth for years. One major differnence, however, is that he's updated his Medicare plan to resemble the joint plan he recently put forth with Democratic Sen. Ron Wyden. Ryan's old plans called for converting Medicare into a premium-support system driven exclusively by private competition. The change would be gradual: the current system would be preserved for seniors currently in the system and anyone less than a decade out of Medicare. 

Ryan's new budget would also retain a "traditional" government-run Medicare option that seniors could buy into with their premium support payments. I have some serious concerns about this option. But it does offer a likely budgetary future that is significantly better than the current status quo. Here's what the Congressional Budget Office has to say about Medicare under the Ryan plan:

Under the specified paths, by 2030, 39 percent of Medicare beneficiaries would be subject to the spending constraints established for the program (that is, they will have entered the program in 2023 or later); that share would rise to 91 percent by 2050. Net federal spending on Medicare—including offsetting receipts, which are mostly payments of premiums—would be 4¼ percent of GDP in 2030 and 4¾ percent in 2050, CBO calculates. In contrast, by 2050, net Medicare spending would grow to 6½ percent of GDP under the baseline scenario and to 7¼ percent of GDP under the alternative fiscal scenario.

Two things stand out about this passage. The first is how gradual the transition from today's single-payer Medicare system to a fully premium support driven system would be: In 18 years, more than 60 percent of the Medicare population would still be enrolled in the current system. Nearly four decades from now, large remnants of today's system would still exist, with nearly 10 percent of Medicare enrollees still enrolled. And even that doesn't capture the glacial slowness of the change. Under Ryan's updated plan, many seniors would still be enrolled in a premium-supported version of government-run Medicare. It is hard to describe this as a radical change to the system. 

And yet as gradual as the transformation would be, the budgetary effects would be significant—4.75 percent of the economy in 2050 compared with 7.25 percent under the CBO's more realistic alternative budgetary scenario. 

There is a case to be made for making more rapid changes to Medicare: GOP Sens. Rand Paul, Jim DeMint, and Mike Lee recently released an imperfect plan to shift Medicare beneficiaries into a version of the Federal Employee Health Benefits Plan that relies on transitioning to a system made up exclusively of private insurance plans almost immediately. As a result, that plan could produce significant budget savings much more quickly. But even Ryan's plan to gradually transform the system would, in the long run, produce substantial savings. 

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  1. I can’t get too excited about a budget plan that doesn’t cut defense spending.

    1. I live in military central down in SE Va. The current figures are that the DOD accounts for 46% of our gross regional product. Wanting to cut the military puts me in a very lonely position down here. It’s a surefire way to kill a conversation.

      1. Maybe you should have chosen a better place to live.

        1. Born here. Own a capital intensive business here. It would be difficult to move at this point without liquidating everything. Besides, it is a decent place to live.

          1. “And I just put a new OBX decal on my truck.”


            1. Ha! I don’t go down there much anymore. It’s gotten so crowded in the last 20 years that the drive into Duck feels like commuting around DC.

    2. Well, but that can always be worked on separately, can’t it? Does the same politician have to come up solo with a budget plan satisfying you in its entirety? Couldn’t you have one who plans cuts here, another who plans them there, and together they add up to real savings?

      1. best I can see, Ryan is the ONLY ONE putting forth cuts to anything. Perhaps instead of moaning and bitching, someone can offer a counter-proposal and things can progress from there. Of course, that hints at a potential solution and who wants that when it’s so much easier to snipe and parry for partisan points.

        1. Looking at some other sites and they don’t see it as something to be countered. All social programs should be off the table, people say, and all the deficit should be made up by “the rich” paying their fair share. Of course, no amount of trying to point out how even taxing the rich out of existence would not balance the budget is meaningless to them.

          The poor! The elderly! You are breaking their backs to give money to your 1% overlords!

      2. Does the same politician have to come up solo with a budget plan satisfying you in its entirety?

        If he’s going to bother coming up with an entire budget plan, yes. Don’t get me wrong, this does sound like a positive change to Medicare, but I doubt there will be any major changes to entitlement spending before we start looking like Greece. And yeah, I’m skeptical of anyone claiming to want to cut spending while not touching the military. Let’s not forget that our insane levels of military spending are what make stupid wars possible.

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  3. In 18 years, more than 60 percent of the Medicare population would still be enrolled in the current system. Nearly four decades from now, large remnants of today’s system would still exist, with nearly 10 percent of Medicare enrollees still enrolled. And even that doesn’t capture the glacial slowness of the change….It is hard to describe this as a radical change to the system.

    In about 15 minutes, the Democrats are going to denounce it as an attack on Medicare–and they’re going to use it try to keep their seats in this very election cycle.

    Is it a step in the right direction?


    Does anybody seriously think it has a snowball’s chance in an election year?

    1. So what about the next year?

      1. Won’t clear the Dem filibuster in the Senate.

        Face it, people: our debt problem won’t be solved with legislation. It will be “solved” only by catastrophe.

      2. Next year, who knows?

        But there’s an argument to make that next year, they’ll look at this year’s Ryan budget much like this year they look at last year’s Ryan budget…

        Everybody basically ignored that budget he proposed in April of 2011, too.

        Unless the American people suddenly become fiscally conservative, to the detriment of entitlement programs, then we’re not about to see a lot of change.

        There are things that could make the American people tip in our direction: high gasoline prices, a spike in unemployment and runaway inflation are all possible candidates.

        But it’s not like I’m hoping any of that will happen. The point of being fiscally conservative is to avoid all that stuff, not to sit around hoping that terrible stuff will happen so I can say I was right all along.

        1. RC Dean is right though. And this should be the standard libertarian mantra: politicians are not the solution to our problems.

          They’re not even the solution to our budget problems.

          If our politicians won’t face and solve our budget problems, it isn’t because of the politicians we have or their ideologies. It’s because the American people are unwilling to hold politicians accountable for not solving our budget problems.

          Whose fault is it that the American people aren’t willing to do that?

          It’s your fault. It’s mine, too. We haven’t done enough to convince people. We should try harder and work smarter.

          1. You got people out there who are gonna vote for Obama because they like him stickin’ it to Catholics–as if that were important for some reason.

            How you gonna convince politicians that keeping their positions of power depends on whether they get the budget under control when people are so easily distracted?

            Ever see Land of the Dead? Every time the government wants to gun down the zombies, all they have to do is shoot some fireworks up in the air, and the zombies just stare into the sky and let people do whatever they want to them?

            We’re like that. One year it was Terry Schiavo they threw up into the air. Like it was important. Ground Zero Mosque!

    2. Does anybody seriously think it has a snowball’s chance in a Democracy?

  4. Nearly four decades from now, large remnants of today’s system would still exist, with nearly 10 percent of Medicare enrollees still enrolled. And even that doesn’t capture the glacial slowness of the change.

    When slow change is embraced by Congress, it’s an embrace of doing nothing at all. It is virtually guaranteed that minor changes to Medicare implemented over a period of years or decades will be offset by other programs or changes so that the net effect will be zero or worse.

    The only option other than doing nothing at all and watching it collapse, is to radically overhaul Medicare in the near term.

    1. There probably needs to be a crisis, but it doesn’t necessarily need to be a collapse of Medicare.

      If you can use 9/11 to justify the invasion of Iraq and the housing crisis to bail out the auto industry, then you don’t necessarily need a Medicare crisis to reform Medicare.

      Hell, high gasoline prices might do the trick.

      1. If we don’t reform Medicare right freaking now, then the Iranians are definitely gonna get the bomb.

        Do you want that? Huh?

        Well DO you?!

      2. I don’t see Congress risking the elderly vote anytime soon. The AARP has their tiny legislative balls in a vise and they aren’t afraid to tighten down whenever necessary.

        1. Yeah, big changes typically don’t happen without a crisis of some kind.

          They had been trying to integrate the INS, the Customs Department and other overlapping agencies into one Department since the Nixon Administration. Every president since Nixon tried to integrate them into one Department. It wasn’t until after 9/11 (and the INS sent visas to the 9/11 hijackers months after 9/11) that a president was finally able to get that done.

          The crisis I suggested, with Iran, is probably a little far fetched, but not too far. There’s a tie in with fuel prices there somewhere.

          Interests like the AARP won’t be overcome without some kind of crisis.

          Reasonable arguments aren’t enough. Everybody knows our budget is a big problem, it’s just that because it isn’t an impending crisis, nobody has the will to do anything about it.

          AARP against? Check.

          Election Year? Check.

          Not gonna happen.

          1. The problem with waiting for a full-bore crisis is that the stupid comes out in strength during a crisis. We won’t go to deregulation or free markets when the shit hits the fan; we’ll increase government spending and involvement.

            1. Of course we will. I mean, someone needs to do something!

            2. Sometimes people go free market in a crisis.

              See Italy and Greece slashing their budgets because the market wouldn’t settle for anything less.

              In the U.S., Reagan ended the oil crisis with free market solutions–or by getting rid of some regulatory impediments anyway. Carter deregulated the airline industry.

              It can happen!

              It’s just that we’ve had some incredibly rotten presidents over the last few decades.

              If there’s anything good about Romney? It’s that being an investment guy? His reaction to crises is to see them as opportunities, and he isn’t necessarily hostile to the idea of capitalism in a crisis.

              Private equity guys are all about taking advantage of crises, so if we have any reason to be optimistic about capitalistic solutions being put forward in a crisis, Romney’s probably the guy.

              1. His reaction to crises is to see them as opportunities,

                MY man.

  5. But even Ryan’s plan to gradually transform the system would, in the long run, produce substantial savings.

    Despite the fact that Ryan’s budget plan doesn’t address defense spending or other problematic budgetary matters, the bottom line in this argument is we have to start somewhere, and there isn’t any other plan currently being proposed that is even remotely realistic from a legislation standpoint.

    Let’s not make the perfect the enemy of the good.

    1. What makes a plan “realistic”. The Rand Paul budget plan is just as realistic, IMO.

      1. What makes a plan “realistic”?

        As much as I wish the Paul/Demint/Lee was realistic, it’s not. They are proposing to completely eliminate Medicare-and I happen to agree with them but that’s irrelevant to my point.

        Ryan wrote about the inevitable demonizing that’s already happened to him in the WSJ ed-page this morning –“We assumed there would be some who would distort for political gain our efforts to preserve programs like Medicare. Having been featured in an attack ad literally throwing an elderly woman off a cliff, I can confirm that those assumptions were on the mark.”

        Paul’s plan wouldn’t even make it out of committee.

        1. Here’s the Paul editorial, in case anyone wants to read it-


      2. What makes a plan “realistic”.

        The alternatives.

    2. The problem is calling it a budget plan. It is more of a plan for benefits programs, other shit like the military budget can be addressed in additional legislation. It is best that spending gets lumped together in “budget plans” much less over time.

      1. CA,

        Check the editorial above. He gets in to more than just Medicare-

        Led by House Ways and Means Committee Chairman Dave Camp, our budget consolidates the current six individual income tax brackets into just two brackets of 10% and 25%.

        We propose to reduce the corporate tax rate of 35%, which will soon be the highest rate in the developed world, to a much more competitive 25%. Our budget also shifts to a “territorial” tax system to end the practice of hitting businesses with extra taxes when they invest profits earned abroad in jobs and factories here at home.

        1. This might make the left even more apoplectic than the Medicare reform. They simply can’t abide a world in which someone making, say, $500k sends a “only 25%” of his money to the federal government.

          I’d like to see the Republicans divorce entitlement reform from taxes at this point. Cutting entitlements is more important and needs to get done. Then you could say, here is our plan to save Medicare. Obama wants to let it go bankrupt. We will get to taxes later, but understand that no amount of taxation can save medicare, Medicaid, and SS absent structural reform to those programs. Simple as that.

    3. Neither the Ryan plan nor the Paul plan can pass the current Senate or get signed by the current president. Why is one more realistic than the other?

      1. I think the Ryan plan would have a better shot at passing the senate. Rand himself admitted his plan would have no chance of passing the senate.

        I agree that President Not My Fault wouldn’t sign either of them, but he might as well start packing his shit if he has to do this before the election.

    4. Let’s not make the perfect the enemy of the good.

      Good point.

      1. There is always room for improvement….especially in politics.

  6. Have you ever felt like you’re in a car heading for a cliff and the conversation is going something like this:
    “There’s a cliff up ahead.”
    “Maybe we should turn away.”
    “I’m not going to turn away. You turn away.”
    “Not me.”
    “I’ve got an idea. How about we hit the breaks.”
    “Hit the breaks? Why do you hate driving so much?”
    “I don’t hate driving. It’s just…you know…”
    “Maybe I should take my foot off the accelerator.”
    “Take your foot off? Why would you want to do that?”
    “You know. That cliff up there.”
    “Oh. Yeah. Nah, I wouldn’t worry about it. But you really should make sure not to drive off the cliff.”
    “Yeah. That would be a good idea.”

  7. Bailout boy Paul Ryan has no credibility on spending issues. Look at his record in Congress. Are they floating him as the GOP nominee coming out of a brokered convention?

    1. +1

    2. While Paul Ryan is no libertarian, I give him a lot of credit for at least trying to reign in spending (with real proposals…not just words). He’s taking a huge risk to his career and reputation by putting these cuts on paper. He’s sure to be demonized by the Dems (and possibly even some Republicans) as he was the first time around. For that he deserves some absolution.

    3. God, I hope so.

  8. Why is severing insurance from employment connection a negative? It’s one less distraction in the true cost of medical care, even if it results in exchanges.

  9. In general, glacial change that extends beyond my lifetime is the only way America will approach liberalism by traditional means. I don’t have time for that shit so I would prefer the quick and dirty roulette wheel of collapse. I’m just taking a passive aggressive role in political shit until that happens. I wouldn’t want anything to slow down the process.

    1. I hear you, but I’m worried that free markets and limited government are not at all likely in the event of a collapse. Rather the reverse.

      1. Well, I dunno. The US rose out of Britain, so maybe there’s still hope.

        1. Neither the Colonies nor the UK were suffering an economic collapse at the time.

          1. Yeah, you’re right. If history repeats itself, we’re more likely to turn out like 50’s UK, USSR, or Germany.

            1. I’ve got a bad feeling. And if our economic disaster occurs while we maintain a huge military advantage, well, that’s a bad situation waiting to happen.

              1. A distopian, omnipotent regime can be part of the collapse aftermath. Why not. How else will people learn?

                Then maybe a remote chance of a liberal revolution. At the least, there will be some entertainment value for me.

      2. To quote our old, departed buddy TWC: When the revolution comes, it won’t matter who wins. People like us will be on the wrong side of the

  10. I’d like to see the Republicans divorce entitlement reform from taxes at this point.

    I disagree. They need to be welded together, much more directly than the Repubs are doing.

    Our problem here is, essentially, public choice: those bearing the cost don’t feel it directly and immediately, while those cashing the checks do.

    Put all entitlements in a bucket, that is fully funded by a single payroll tax, no employer portion. As the cost of entitlements goes up, so does the tax, so every worker feels the pain. If the cost of entitlements go down, so will the tax, so every worker feels the love.

    Until taxpayers see, directly and immediately, what the real costs of entitlements are, there won’t be enough of a constituency to cut them.

    1. Wonderful idea. It will never, ever, ever happen. The trend is largely to shrink the tax base for the taxes we have already. Yes, any economist with an IQ above 40 will tell you that’s suicidal. And any political scientist with an IQ above 40 will tell you its a great way to get marginal votes.

    2. This is why I have argued that we should eliminate withholding (thus forcing everybody who pays income or payroll taxes to write the government a big check) and move tax day to the first Monday in November.

      1. That is one of the best ideas I’ve heard in a while! Just so you know, I plan to use that and take full credit. 🙂

    3. Learn to distinguish the difference between payouts that were paid into by recepients from ones that weren’t.

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