Summary of Health Care Portions of Ryan Budget
Long-Term Medicare Changes; Premium Support: Beginning in 2022, raises the eligibility age for Medicare by two months per year, such that the eligibility age would reach 67 in 2033. Creates a premium support system for beneficiaries turning 65 in 2022, and all those participating in the program in the years beyond. Seniors currently participating in Medicare, or those within ten years of doing so, would not have to participate in the premium support program (although they could elect to do so voluntarily in the years after 2022); for those remaining in the existing Medicare program, beneficiaries’ premiums would be held harmless (to prevent premiums from rising as those grandfathered into the existing program become older, sicker, and therefore costlier).
The Congressional Budget Office estimates that in 2022, 65-year old beneficiaries entering the premium support program would receive a payment of about $8,000 per year, which would reflect traditional Medicare’s estimated spending on the average 65-year old in that year. Premium support payments would be risk adjusted to reflect participants’ age and health status; the amount of the payment would increase each year in line with consumer price inflation. Private plans participating in the Medicare program and receiving premium support payments would have to issue coverage to all applicants, could not charge seniors of the same age different premiums, and would have to meet benefit standards established by the Office of Personnel Management.
Low income beneficiaries would receive additional funds in a medical savings account to cover health expenses; amounts would total $7,800 in 2022, and would rise in future years according to the growth in consumer prices. High-income beneficiaries (i.e., those seniors in the top 8 percent of income) would have their premium support payments reduced – those in the top 2 percent of income would receive only 30% of the premium support amount, while those in the next 6 percent of income would receive half of the premium support amount.
Although the Congressional Budget Office has published estimates comparing spending levels under the premium support program and under traditional Medicare, it is worth noting that according to the CBO’s March 2011 baseline, by 2020 the Medicare Hospital Insurance Trust Fund will be insolvent – meaning the government will be financially able to pay MUCH less of seniors’ health costs in 2022 than the CBO analysis indicates. It is also worth noting that according to tables released by the House Budget Committee, Medicare spending is projected to grow in every year of the budgetary window (i.e., 2012-2021).
Medicaid Block Grant: Converts the Medicaid program to a block grant, beginning in 2013. The block grant would be increased annually to reflect population growth as well as the growth of consumer prices; states would gain additional flexibility to manage their Medicaid programs in the way they see fit. Beginning in 2022 (i.e., when the Medicare changes presumed in the budget take effect), reduces the size of the block grant to eliminate projected acute care expenses for beneficiaries dually eligible for Medicare and Medicaid (who would instead receive additional health care resources through medical savings accounts, as outlined above). It is worth noting that according to tables released by the House Budget Committee, Medicaid spending is projected to grow in every year of the budgetary window (i.e., 2012-2021).
Health Care Law: Assumes repeal of the law’s coverage expansions scheduled to take effect in 2014. Also assumes repeal of the law’s tax increases, including but not limited to the tax on medical devices, the new restrictions on Health Savings Accounts and Flexible Spending Arrangements, the “Cadillac tax” on high-cost health plans, the expanded payroll taxes on individuals with incomes of over $200,000, the employer mandate penalties, and the taxes on insurers and pharmaceutical companies. A CBO estimate released in February found that taxes will increase by $813 billion over the 2012-2021 period absent their repeal.
Repeals the CLASS Act, which HHS Secretary Sebelius has admitted is “totally unsustainable” as written in the health care law. Also repeals the Independent Payment Advisory Board (IPAB), a board of unelected bureaucrats empowered to enforce caps on Medicare spending that forms the centerpiece of the President’s attempt to reduce Medicare spending. In addition, the budget presumes the repeal of the drug discount program scheduled to close the Medicare Part D “doughnut hole” in 2020, and repeals $10 billion of the law’s cuts to Medicare Advantage by creating a stabilization fund to preserve private plan choices within Medicare.
Retains most of the health care law’s other Medicare spending reductions, except as specified above. However, because the law’s coverage expansions are assumed to be repealed, the Medicare savings will actually be dedicated towards extending Medicare’s solvency, rather than financing new entitlements for other populations. The Medicare actuary has previously noted that the Medicare savings in the health care law “cannot be simultaneously used to finance other federal outlays…and to extend the [Medicare Part A] trust fund.” Likewise, the Congressional Budget Office notes that currently, the Medicare reductions in the law “would not enhance the ability of the government to pay for future Medicare benefits.” The Ryan budget would change this dynamic, ensuring that the Medicare reductions previously enacted will be used to improve the solvency of the Medicare program.
Liability Reform: Assumes health care savings from enacting limits on medical liability suits. According to House Budget Committee staff, the proposal will result in a total of $43 billion in deficit reduction in mandatory programs over the 2012-2021 period from enacting such measures, largely through reduced malpractice premiums for providers (which comprise a component of the Medicare physician payment formula) as well as reduced incidence of defensive medicine practices, which CBO previously estimated would reduce health expenditures by about 0.5%.
Health Reform Reserve Fund: Provides a reserve fund for “any bill, joint resolution, amendment, or conference report that repeals” the health care law, allowing for in spending levels to reflect the composition of a “repeal and replace” bill.
SGR Reserve Fund: Provides a deficit-neutral reserve fund for legislation “that includes provisions amending or superseding the system for updating payments” under the Medicare sustainable growth rate mechanism, allowing for deficit-neutral adjustments in spending levels to reflect the composition of a “doc fix” bill.