Medicare privatization plan hits wall in Senate

Rejection of the GOP deficit reduction plan, which also proposes Medicaid block grants, sets the stage for difficult negotiations over the nation's debt limit.

By Doug Trapp — Posted June 3, 2011

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The Senate on May 25 declined to consider a House-approved plan to cut spending by $4 trillion over the next decade in part by changing Medicare into a voucher program and Medicaid into a block grant program.

A motion to bring to the floor the plan, crafted by House Budget Committee Chair Paul Ryan (R, Wis.), failed on a 40-57 vote, with five GOP senators joining Democrats against the motion: Sens. Lisa Murkowski of Alaska, Scott Brown of Massachusetts, Rand Paul, MD, of Kentucky, and Susan Collins and Olympia Snowe of Maine. The House had approved the Ryan plan on April 14 by a largely party-line vote, although a few Republicans voted with the Democrats in opposition.

Democrats have attempted to brand Republicans and the Ryan proposal as representing an attack on the health security of seniors and the poor. But despite backing off some of their initial rhetoric on the plan, most Republicans have stood by Ryan even as polls show that most Americans oppose the proposed changes in entitlement programs.

Senate Minority Leader Mitch McConnell (R, Ky.) said on May 25 that Democrats are unwilling to deal with the fiscal crisis facing the nation. "They're so focused on an election that's nearly two years away that they can't see the crisis in front of us." Also, the Senate has yet to adopt any fiscal 2012 budget resolution, he said.

Ryan wrote in recent newspaper editorials that Medicare, Medicaid and the nation's economy are at risk if the programs' financing is not overhauled. "If we don't get skyrocketing health care costs under control, we have no hope of containing government spending and averting a debt crisis." Total health spending has increased from 5% of the U.S. economy in 1960 to almost 20% today, Ryan noted.

And although the Senate turned down the Ryan Medicare and Medicaid proposals, versions of the bills could resurface in coming weeks and months. GOP leaders, including McConnell, have said they will not vote to increase the nation's debt limit without also adopting federal spending reductions. The U.S. will reach its statutory $14.3 trillion debt ceiling by early August. If Congress does not expand it, the U.S. is at risk of defaulting on its debt, possibly triggering another global financial crisis, according to Obama administration officials and many economists.

But Democrats were not indicating a mood to compromise after a Democrat won a May 24 special election in a conservative-leaning upstate New York congressional district. Proposed long-term cuts to Medicare were identified as a central issue in the election. Senate Majority Leader Harry Reid (D, Nev.) said voters implicitly rejected the Medicare voucher proposal. "Republicans are holding the United States' credit hostage to ram through their plan to end Medicare," Reid said.

The GOP plan also would change Medicaid from a program with defined benefits into a block-grant program with fixed federal spending. This change, along with the repeal of the health reform law's Medicaid expansion, would reduce federal Medicaid spending by $1.4 trillion over a decade, according to a May 10 analysis by the Kaiser Commission on Medicaid and the Uninsured. The plan would reduce federal Medicaid spending by 34% beginning in 2012 and by 44% in 2021, which would increase pressure to reduce or control physician and hospital Medicaid pay, the report concluded.

Republicans could face another backlash at the polls for embracing Ryan's Medicaid reform proposal. Sixty percent of Americans oppose turning Medicaid into a block-grant program, while 35% of respondents support such a change, according to the May Kaiser Health Tracking Poll. Citing arguments to poll respondents about the need to reduce the federal deficit or for maintaining the health care safety net did not sway opinions greatly on either side.

One main focus of the congressional debate on federal deficits and entitlements has been on how Medicaid should be changed or cut, said Kaiser Family Foundation President and CEO Drew Altman, PhD. "The big surprise in this month's tracking poll is that one group who does not want to cut Medicaid is the American people."

The poll also found that 19% of the respondents had been enrolled in Medicaid. Of those people, 89% had a very positive or somewhat positive opinion of it. However, 32% of the same group said they had problems finding a physician who accepted Medicaid patients.

More than 1,200 adults responded to the Kaiser poll, conducted May 12-17. It is available online (link).

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