Ryan pushes defined contribution, wholesale repeal of PPACA


Despite Republican attacks, the budget blueprint passed by the GOP-controlled House of Representatives likely would require an individual mandate for Medicare.

NATIONAL REPORTS-Despite relentless Republican attacks on the health reform law's individual mandate, the budget blueprint passed by the GOP-controlled House of Representatives likely would require a similar individual mandate for Medicare, experts say.

Without a mandate, they warn, the Republicans' Medicare overhaul would leave many seniors uninsured because its proposed voucher payments would be too puny to buy good coverage. And without tough insurance market rules like those in last year's reform law, health plans would cherrypick younger and healthier subscribers, critics say.

To make the GOP proposal work, there are three possibilities.

Conservative analysts counter that rising Medicare costs will force beneficiaries to bear higher costs even under traditional Medicare, and turning Medicare into a fully market-based system will give beneficiaries more choice and control costs more effectively.

"There's a genius in the marketplace, and we haven't utilized that," says Grace-Marie Turner, president of the Galen Institute in Alexandria, Va.

Moon, however, says there's no evidence that competition among private health plans controls costs better than traditional Medicare.


The House bill, introduced by Budget Committee Chairman Paul Ryan (R-Wis.) would convert Medicare from a defined-benefit to a defined-contribution program for all new beneficiaries starting in 2022, and gradually raise the eligibility age to 67 by 2033. While the budget bill lacks details, seniors would pick a private plan through a new Medicare insurance exchange, and the government would pay the insurer the defined amount, adjusted for the person's age and health status.

The Ryan plan also would change Medicaid to a state block-grant program in 2013. In addition, it would give dual eligibles a flat annual sum for a medical savings account-starting at $7,800 and rising with the consumer price index. Further, it would repeal most of the Patient Protection and Affordable Care Act-including the Medicaid expansion, insurance subsidies and alternative payment pilots-though it would retain the Medicare spending caps.

The nonpartisan Congressional Budget Office (CBO) projects that the House bill would drive down overall federal healthcare spending from 12% of GDP in 2050 to 5%. The bill's main Medicare cost-cutting mechanism is tying the annual increase in the voucher amount to the urban consumer price index, which historically has risen much slower than medical costs.

But Ryan's Medicare plan has run into heavy opposition because the CBO also says the plan would impose sharply higher costs on beneficiaries. While the voucher amount would start at an average of $8,000 per beneficiary-the same amount traditional Medicare would pay-the CBO projected that by 2030 typical 65-year-olds would shoulder 68% of their own healthcare costs, compared with 25% to 30% under the current model. Seniors in the top 8% of the income distribution would have to pay even more, and many would choose not to purchase insurance.

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