House Republican budget seeks to slow Medicare, slash Medicaid

Proponents of the plan say it would place health entitlements on a stable path, but opponents warn that cuts would hurt seniors and poor beneficiaries.

By Charles Fiegl amednews staff — Posted April 2, 2012

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House Republicans have reintroduced a modified budget proposal that would significantly overhaul health care entitlement programs by turning Medicaid into a block grant program and introducing more market competition into Medicare.

Rep. Paul Ryan (R, Wis.), the House Budget Committee chair, released a $3.4 trillion budget proposal for fiscal 2013 that aims to lower future revenues and cut deficits by $5 trillion when compared with the budget plan introduced by President Obama in February. The Ryan framework, which is similar to his 2012 spending plan, passed the budget committee on March 21, putting it on track for a vote by the full House before the end of the month. The Senate was not expected to take up the budget blueprint.

The nation’s entitlement programs would remain on an unsustainable path under current law and must be reformed, Ryan said. He said his “Path to Prosperity” budget would save Medicare and Medicaid for future generations without bankrupting the country.

Obama’s budget, and the lack of an approved spending plan from the Senate, ignores a future financial crisis for Medicaid and Medicare, Ryan said. “The Path to Prosperity budget tackles our generation’s greatest domestic challenge: reforming and modernizing government to prevent an explosion of debt from crippling our nation and robbing our children of their future.”

The GOP budget’s framework addresses long-term fiscal problems in Medicare, said Robert Moffit, PhD, a senior fellow with the Heritage Foundation, a conservative research institution in Washington. Moffit compared the proposal to the premium support programs seniors use to obtain drug coverage from the Part D benefit or private insurance coverage from Medicare Advantage. He said the Ryan plan would harness free markets, using competition and consumer choice to ensure that costs are contained and Medicare remains viable.

“Ryan is offering a new model to control costs,” Moffit said. “It’s largely absent from the Medicare system.”

As in 2011, Democrats came out against the Ryan plan. The House Budget Committee passed the proposal by a 19-18 vote, with all Democratic members of the panel in opposition. Rep. Chris Van Hollen (D, Md.), the highest-ranking Democrat on the committee, said the proposal would “deform” Medicare. “This Republican plan simply rations health care and choice of doctor by income.”

A premium support system would undermine Medicare over time, said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, a liberal research organization in Washington. Private insurance tends to be more costly, and beneficiaries will pay more for coverage. Vouchers to purchase health coverage would be capped at gross domestic product plus 0.5%, which would be below historical spending levels, he said.

The Obama budget also would cap Medicare growth at GDP plus 0.5%, but it relies on the Medicare Independent Payment Advisory Board to control program costs.

The Ryan plan would call for wealthier seniors to pay more for Medicare and would raise the eligibility age for coverage to 67. In general, restricting eligibility would remove healthier beneficiaries from the program and raise premiums for everyone else, Park said.

The plan also would repeal health system reform law provisions that will expand Medicaid coverage starting in 2014. Instead, states would receive block grants, which would free states “to tailor their Medicaid programs to the unique needs of their own populations,” the budget says.

Block grants would give states freedom to experiment with new health care delivery models to treat the poor, Moffit said. Medicaid beneficiaries have trouble obtaining needed care because of flaws in the current model. “We’re not getting the best use on dollars with Medicaid.”

The Ryan budget would cut $2.4 trillion from Medicaid and other health programs. Reduced spending would increase the number of uninsured dramatically, Park said. “Those who retain coverage will have benefits scaled back and have higher cost-sharing.”

American Academy of Pediatrics President Robert W. Block, MD, said the proposal would undo investments in health programs for children. More than half of Medicaid recipients are children, but their care accounts for up to only one-quarter of the program’s costs.

“Whether considering fiscal year 2013 federal spending bills or reviewing long-term budget proposals, Congress must seize this opportunity to invest in the future of our country by protecting children’s health,” Dr. Block said.

Other health care groups also expressed concerns about the Ryan budget because of potential negative impacts on seniors and the poor. “It would do away with needed coverage expansions, and would worsen already significant Medicare and Medicaid underpayments to hospitals,” said Chip Kahn, president and CEO of the Federation of American Hospitals.

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The House GOP plan to bend the health care cost curve

House Budget Committee Chair Paul Ryan (R, Wis.) has put forth a budget proposal that would restrain long-term federal health spending. The Ryan framework would slow, and in some cases reverse, the growth of entitlements as a portion of the overall economy. A Congressional Budget Office projection lists spending as a percentage of gross domestic product to compare the proposed GOP budget with an alternative fiscal scenario based on current law.

Category 2011 2023 2030
Medicare, Ryan plan 3.25% 3.50% 4.25%
Medicare, current law 3.25% 4.00% 5.00%
Medicaid/CHIP, Ryan plan 2.00% 1.25% 1.25%
Medicaid/CHIP, current law 2.00% 3.00% 3.50%

Source: “Long-Term Budgetary Impact of Paths for Federal Revenues and Spending Specified by Chairman Ryan,” Congressional Budget Office, March (link)

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