Tuesday, May 3, 2011
Defending the Ryan Medicare Plan
Ryan's critics have focused particular attention on his plan's indexation of the Medicare "premium support credits" to the CPI in the years after 2022, suggesting that this idea is somehow beyond the pale. But this is sheer hypocrisy on their part because the indexing of government-financed premium credits below cost growth is in the president’' plan too, and yet not a complaint has been heard about that from its advocates. That's right. After 2018, if the aggregate governmental cost of premium credits and cost-sharing subsidies provided in the state-run exchanges exceeds about 0.5 percent of GDP (a condition that the Congressional Budget Office says will be met), the recently-enacted health law requires the government's per capita contribution to health plan premiums in the exchanges to rise more slowly than premiums. The administration actuaries interpret the law to mean that the government's contributions toward coverage will rise with GDP growth after 2018. CBO appears to have a different interpretation. Still, under all interpretations and projections, it's clear that the exchange credits in the new law will not keep pace with expectations of rising health costs. And that's exactly what the president is now saying is so wrong with Ryan's Medicare plan.
Critics contend that the Ryan plan would shift huge new costs onto Medicare beneficiaries for reasons beyond the indexing of the credits, and they cite CBO's analysis of the Ryan budget as proof. But this analysis is based on two flawed assumptions. First, it assumes that traditional Medicare can keep cutting what it pays to hospitals and doctors with no consequences whatsoever for the beneficiaries. CBO's assessment is that in 2022 traditional Medicare could provide the insurance benefit for just 66 percent of what a private insurance plan would cost. This is sheer folly based entirely on deep payment reductions for services. If those cuts really were to go into effect as scheduled, Medicare rates would be well below those of Medicaid, and seniors would have very restricted access to care. CBO's analysis also assumes no savings from establishing rigorous competition in the Medicare program. But the cost-cutting in the prescription drug program demonstrates that the potential is there for massive savings from a functioning marketplace.
The full column is available here.