How Deficit Reduction Plans Would Affect Medicare

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

The big question is whether any of Ryan’s or even the President’s proposals will come to fruition and those trillion dollars in savings achieved. Increasing the age of eligibility doesn’t even begin until 2021 and then takes another 11 years to 2032 to actually reach the proposed eligibility age of 67. Premium supports are at least 10 years away. Even capping Medicare beneficiary costs is a couple of years away.

The Congressional Budget Office's analysis of Ryan's plan is here. The agency's analysis of the President's plan is here.

Ben Goldberg, CEO of the National Academy of Social Insurance, a Washington, D.C. healthcare think tank, says his main concern is that both proposals seem more concerned with reducing costs than improving healthcare. He acknowledges that the President’s cost reduction proposals are a little easier to understand because with the Affordable Care Act in place “the administration is already implementing measures that will reduce healthcare costs by looking at how healthcare is delivered and how that system can be improved to reduce costs.”

That opinion is shared by Marsha Proctor Killen, CEO at StrategyGen a Jacksonville, Fla-based healthcare benefits consultant. She sees premium supports as a windfall for private healthcare insurers. “Yes, they could produce a savings for the program because the beneficiaries will be purchasing their own coverage and private insurers will be paying for the medical procedures but how will privatizing the system improve healthcare?”

So what do we really have here? Are we looking to make meaningful policy or simply score some budget points? Ryan’s budget has already passed the House but will probably never see the light of day in the Senate. But once again the public debate about healthcare has been reduced to dollar and cents not long-term policies and good sense.