Mitt Romney’s choice of Wisconsin Rep. Paul Ryan as his vice presidential nominee elevates Medicare and Medicaid (along with Social Security) to Level A campaign issues. Ryan has emerged as a leading Congressional thinker and idea shaper for the GOP on fiscal matters, and his path cuts right through Medicare and Medicaid.
Consider the scale: Last year the Congressional Budget Office examined the “Path to Prosperity,” his budget proposal for 2013, and found, among many other things, that it would cut federal health spending as a percentage of GDP from about 12 percent projected under current law to about 6 percent in 2030. That’s huge. No wonder his proposals are controversial.
Until recently, coverage of the discussions about entitlements—programs that eventually touch almost everyone—has been has been largely unhelpful, or cloaked in political spin. But covering Medicare (and Medicaid too) is hard. How do journalists cover and clarify the debates about reform without getting too deep in the weeds?
As with most legislation, the devil will be in the details, and a lot is not known about what will finally emerge from the legislative sausage grinder. What follows might help reporters cover the discussion—a rough guide to how these programs could change under Ryan’s influence, whether he remains as chairman of the House Budget Committee or moves to the vice president’s chair. Either way he will exert his pull over the future of entitlements. This guide offers a way to identify and categorize the kinds of changes that are on the table.
Last year, Medicare cost the federal government some $551 billion dollars and the federal government and the states together spent $389 billion in fiscal 2010 for Medicaid. Both are projected to grow, which worries budget experts. Medicare could be fixed by raising payroll taxes that fund Medicare Part A, which pays for hospital benefits, but in the in the current climate, raising taxes even to support a popular program like Medicare is politically out of the question. It’s the same story for Medicaid, which is funded jointly by the states and the federal government. Since tax increases are not likely, that leaves cutting the programs as the solution of choice. But how?
Some changes are already here. For Medicare, both the prescription drug law passed in 2003 and the health reform law enacted two years ago under President Obama, already include some changes to beef up the program’s finances. Other possibilities for trimming both Medicare and Medicaid in the future are “in the wind,” supported by pols from both parties, who sometimes still talk of a “grand bargain” on entitlements. And then there is Paul Ryan.
Here’s how to think about what may be coming down the pike:
SHIFTING SOME GOVERNMENT COSTS TO BENEFICIARIES
What’s already happened? The health reform law, also called the Affordable Care Act (ACA), already calls for seniors to pay more for their healthcare by requiring their Medigap insurance policies to pay out less. Seniors typically buy Medigap policies to cover the gaps in Medicare benefits. But the ACA bars insurers who sell Medigap policies plans F and C from covering all of a seniors’ expenses that remain after Medicare pays the bills. Those two plans are the most popular Medigap policies precisely because they do cover almost all remaining expenses. Seniors tend to be risk averse and want no financial surprises at the end of an illness.
Politicians on both sides supported this provision in the ACA, so there’s been little talk about it and therefore little press coverage. Millions of seniors will be surprised come 2015, when they learn their Medigap policies won’t cover as much. The rationale: Some health policy analysts believe consumers use too many medical services, and paying more out of pocket—having “more skin in the game”—will cause them to seek less healthcare.
What’s in the wind? There’s serious talk of carrying this “more skin-in-the-game approach” a step further. Under a proposal marketed as “Medicare benefit simplification” and pushed by Connecticut Sen. Joe Lieberman, seniors would pay one so-called “unified deductible” instead of three separate deductibles they now pay for hospital, doctor, and drug coverage. More to the point, Lieberman’s proposal would instead cap all out of pocket spending at $7,500 for low and moderate-income families—meaning such families would pay the first $7,500 of medical expenses. Those with higher incomes—$85,000 and up—would have to pay about $12,500 on their own, before they could collect Medicare benefits.
But the biggest way to make seniors pay more is through a voucher arrangement, and that’s at the core of Ryan’s budget proposals. Vouchers are a way to transform Medicare, a social insurance program, into a privatized system, and giving seniors a lot of “skin in the game.”