How Deficit Reduction Plans Would Affect Medicare

Margaret Dick Tocknell, April 20, 2011

The call for deficit reduction has hit a fever pitch in Washington, D.C. First, Rep. Paul Ryan (R-WI) presented his so-called “Path to Prosperity: Restoring America’s Promise” plan, then President Obama countered with a speech offering his version of a deficit reduction strategy. The numbers both plans throw around are almost too large to imagine. Forget millions. The focus here is billions and even trillions.

Rep. Ryan has played his cards well. He jumped out of the gate with a proposal to revamp Medicare spending and put that entitlement program in play for massive cuts. Obama hedged his bets. He made it clear that he will oppose GOP efforts to reduce the deficit by recreating Medicare but proceeded to propose his own set of reductions to the program. The difference, he explained, is that “their plan lowers the government’s healthcare bills by asking seniors and poor families to pay them instead. Our approach lowers the government’s healthcare bills by reducing the cost of healthcare itself.”

Medicare is a complicated program, and so are the proposals to reduce its costs. Let's take a look at how Medicare would be affected by elements of each plan. The table below is much as possible an apples to-apples comparison, but in some cases the two plans use different years to report savings or to introduce program changes. The figures were gleaned from the Ryan budget and Obama deficit reduction proposals.

How Proposed Deficit Reduction Plans Would Affect Medicare

Eligibility age

Maintain age 65

Age 65 until 2021; increase eligibility age by two months each year until it reaches age 67 by 2032.

Beneficiary spending

Cap Medicare spending/beneficiary to GDP plus 0.50 of a percent

Premium supports by 2021; support will vary by health, age and income of beneficiary; coverage though private health plans

Medicare cuts

No specific amount noted for Medicare

$30 billion FY2012-FY2021

Total Medicare spending in 2012

$1.1 trillion (includes Medicaid)

$950 billion

Total reduction in healthcare spending

$480 billion by 2023; additional $1 trillion by 2033

$2.2 trillion FY2012-FY2021, including $1.4 trillion from not implementing the ACA, $771 billion from Medicaid and $30 billion from Medicare

Affordable Care Act

Continues to be enacted

Margaret Dick Tocknell Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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