Trudy Leiberman: Medicare, Paul Ryan, and beyond: a primer
Published on Aug 17, 2012 - 7:50:35 AM
August 15, 2012 - 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."
Under such an arrangement, the government would give beneficiaries a fixed amount of money each year to buy health insurance in the private market—similar to the way some uninsured people may get subsidies under the Affordable Care Act. If vouchers, sometimes called "premium supports," are insufficient to buy what the seniors want, they will have to pay the difference out-of-pocket. Over time, Medicare experts believe, the voucher may not keep pace with medical inflation, shrinking in value. In analyzing Ryan's plan last year, the Congressional Budget Office found that "most elderly people who would be entitled to premium support payments would pay more for their healthcare than they would pay under current the Medicare system."
To understand exactly how a voucher plan would work and how much seniors will pay on their own, you need details, which are lacking at the moment. Ryan says people currently on Medicare can stay in the traditional program, but the fear is that the healthiest and wealthiest might opt out. If only sick people remain, Medicare could find itself in a what insurers call a "death spiral," with the people remaining in the program paying ever heavier premiums. But Ryan is a big champion of voucher plans for Medicare, and if the GOP ticket wins, this could move to the top of the agenda. The president is not a fan of vouchers, so this change is unlikely if Obama wins.
MAKING PEOPLE PAY MORE FOR THE BENEFITS THEY HAVE
What's already happened? A change already in place—called for by the prescription drug law passed in 2003 (under George Bush) and by the ACA, and thus supported by both Democrats and Republicans—requires people with higher incomes to pay more for their Medicare Part B benefits (doctor visits, lab tests, and outpatient hospital services), as well as for their Part D benefits (prescription drugs). The higher premiums now affect those with incomes of $85,000 and up and couples with incomes of $170,000.
What's in the wind? There's Beltway talk of requiring people whose incomes are not considered high by today's standards to pay more. Some proposals call for changing the way the income thresholds for the higher premiums are determined. That would mean people who do not have high incomes now would be considered having high incomes for the purposes of paying more. As I recently explained, about 5 percent of seniors now pay an income-related premium for Part B; by the end of the decade 10 percent will. For drug, or Part D benefits, the proportion of seniors paying higher premiums would grow from 3 percent today to 8 percent by 2019 if these changes are enacted. Look for some politicians from both parties to support this one.
GIVING BENEFITS TO FEWER PEOPLE
What's in the wind? If Republicans take the White House and both houses of Congress, seniors on Medicare who have higher incomes may find themselves subject to means testing, a step that would also radically change Medicare. Medicare is social insurance: People are obligated to pay into the system while they are working and, in turn, they have a right to benefits later when they turn 65. It doesn't matter how high their income is, they are entitled to Medicare benefits. This universality—the idea that everyone is in the pool—has contributed to Medicare's popularity. It's not a welfare program like its cousin, Medicaid. To qualify for Medicaid benefits, recipients' income and assets cannot exceed certain guidelines.
The budget discussion is sure to include the notion of means testing Medicare too. Supporters argue that rich people like Warren Buffett don't need Social Security or Medicare, and the federal government could save billions by giving benefits only to those who truly need them. The counterargument: With means testing, these programs will turn into welfare programs, like Medicaid, and lose popular support.
Ryan's "Path to Prosperity" budget plan also proposes changing the financing arrangement for Medicaid. It calls for converting the matching payments the federal government makes to the states into block grants of fixed dollar amounts. A state could use that money as it saw fit. Republicans and some Democrats support using block grants for Medicaid. But there's a problem: fewer people would be covered. The CBO found the "large projected reduction in payments would probably reduce eligibility for Medicaid."
The health reform law expanded eligibility for Medicaid, but the Supreme Court decision upholding the law allows states to opt out of the expansion. Meanwhile, block granting would move far away from the goals of the ACA, which envisioned 17 million more people added to the program.The CBO also reported that block grant financing could also mean less extensive coverage for recipients and lower payments to doctors and hospitals. Health providers may not like that, and may try blocking congressional attempts to change the program.
GIVING FEWER BENEFITS
No one yet is taking about trimming the basic Medicare benefits, but in this volatile political mix, anything might come up. Some states have already cut benefits for Medicaid recipients, especially dental services. More benefit cuts are likely as states continue to have budget shortfalls.
All these possibilities are perfect for people stories.The dollars and cents angle is the one the press should pursue in explaining any of these proposals to their audiences.
What's been missing so far in the public discussion of entitlements is how "reforms" would affect ordinary people.
Republished with permission from the Columbia Journalism Review. For more articles by Trudy Lieberman: http://www.cjr.org/author/trudy-lieberman-1/
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