Liberal analysts have called out their own side on a misleading claim about the cost to seniors of the Ryan-envisioned premium support plan for Medicare. The real answer is that nobody knows how much this will cost seniors. The initial Ryan budget, which would have ended traditional Medicare entirely and given a voucher to seniors that would not have risen at the same level of health care costs, would have cost seniors up to $6,400 a year, according to the Congressional Budget Office. But Ryan changed the plan in 2012, exempting current seniors over the age of 55, retaining traditional Medicare, setting up a competitive bidding system where the voucher equals the price of the second-lowest insurance premium among the bids submitted by Medicare and private insurers for seniors’ business, and allowing an annual rise in the total cost of the vouchers of GDP + 0.5%, roughly the same as the Obama Administration’s target under the Affordable Care Act.
However, the Ryan plan for Medicare doesn’t deal with the central question – whether competitive bidding will actually succeed in bringing costs down. Competition has proven a failure in the health care system. What if all the bids are higher in a given year, above the GDP + 0.5% target? Does the excess cost fall to seniors to make up, or does government adjust its target? Ryan’s plan is silent on this, so it’s impossible to know how much seniors would have to pay extra for their health care over time. But if costs rose above that target, past experience would indicate that seniors would face an additional burden.
CBO said they couldn’t work this out absent more information. But David Cutler, Topher Spiro and Maura Calsyn have a report for the Center for American Progress that tries to put a number to the potential excess costs, for both current and future seniors.
Cutler, Spiro and Calsyn factor in the block granting of Medicaid, which is how many seniors access nursing home care, and the repeal of the Affordable Care Act, which would raise prescription drug costs for seniors (by reopening the “doughnut hole”) and raise costs for preventive care. Their summary is:
Gov. Romney and Rep. Ryan claim that no one over 55 will be affected by their health care plan. This claim is false. Their plan would harm all seniors. The Romney-Ryan plan would hurt current seniors in two important ways:
• Increased drug costs and higher Medicare premiums. By repealing the Affordable Care Act, the Romney-Ryan plan would raise health care costs in retirement by $11,000 for the average person who is 65 years old today.
• Increased long-term care costs, including increased costs for nursing home care, because of cuts to Medicaid. A substantial share of Medicaid spending pays for health care costs for Medicare beneficiaries. The Romney-Ryan Medicaid cuts mean a loss of over $2,500 annually for seniors currently on Medicare who also rely on Medicaid. Unlike the Medicare voucher system that would begin in 2023 the cuts to Medicaid would begin almost immediately.
For seniors who will become eligible for Medicare after 2022, the financial harm would be even worse.
• Increasingly unaffordable costs for all seniors who qualify for Medicare after 2022. For seniors turning 65 in 2023, Medicare costs during retirement would increase by $59,500 in 2012 dollars under the Romney-Ryan plan. Because under the Romney-Ryan plan the amount of seniors’ vouchers will not keep pace with rising health care costs, these numbers are even worse for future generations. In today’s dollars seniors who qualify for Medicare in 2030 would see an increase of $124,600 in Medicare costs over their retirement. Seniors who qualify for Medicare in 2040 will see an increase of $216,600. And by 2050 newly eligible seniors will pay $331,200 more in Medicare costs over their retirement.
• Additional costs from private plans cherry picking healthier patients. Three-fourths of all Medicare beneficiaries are currently in traditional Medicare. The Romney-Ryan plan would include traditional Medicare as an option in the proposed program, but the costs for seniors who choose to remain in the traditional Medicare program would likely increase even more sharply than for seniors who chose a private plan. Most analysts expect the traditional Medicare plan to attract Medicare beneficiaries with the greatest health needs. In that case, Medicare would no longer enjoy a balanced risk pool and seniors choosing traditional Medicare could wind up paying an extra $29,000 on average over their retirement lifetime above and beyond the costs described above.
The trio describe these as conservative estimates. These are actually lower numbers over the lifetime of the individual that what you would get from the 2011 Ryan Medicare plan, but as you can see, these are huge numbers that would make senior health care completely unaffordable, and shift the costs directly onto them and away from government. There’s actually no other way for the system to work. Ryan is dedicated to “preserving” Medicare by making the financial commitment on the part of the government cheaper. Either stakeholders charge lower prices across the board, or seniors take on the financial burden. And since Ryan and Mitt Romney would give BACK lowered reimbursement to hospitals, there’s exceedingly little chance that they would force prices lower anywhere in the system. They have to rely on the chimera of competition, which simply doesn’t work.
So seniors will take the hit under this plan. Then again, the growth rate of Medicare under the Obama Administration’s plan and the Ryan plan are exactly the same. The Obama people would tell you that the difference is that they do force providers to accept less. It remains to be seen whether that will work.