Proposal Would Shift Escalating Medicare Costs To Beneficiaries

Proposal Would Shift Escalating Medicare Costs To Beneficiaries

Under growing pressure to reduce the federal debt, Congress is considering a new Medicare proposal that would shift the risk of rising costs that outpace spending targets set by the government to seniors and the disabled.  The proposal comes from a key recommendation of President Obama’s Fiscal Commission.

Under the proposal by Congressman Paul Ryan (WI), now Chairman of the House Budget Committee, and Alice Rivlin, a monetary and fiscal policy expert, Medicare would be changed from a system that pays per procedure, to one that would provide a fixed amount of money or voucher, to private health plans to provide coverage.

The plan would affect both current and future Medicare beneficiaries by carving Medicare into two systems.  People who already receive Medicare would continue under the current system.  People who turn 65 by 2021 would receive a voucher to purchase private insurance.

The idea is to cut government spending on Medicare by limiting the annual growth of the Medicare voucher to the growth of the gross domestic product plus one percentage point.  However, for the last 40 years national healthcare spending has exceeded the growth of the gross domestic product by more than two percentage points, and TSCL is highly concerned that the vouchers would rapidly become increasingly inadequate to purchase sufficient coverage or that seniors would face significantly higher premiums.  In addition, the CBO recently wrote that the average age and cost of enrollees remaining in the current system would increase over time, and TSCL believes that would lead to far higher premiums for older beneficiaries as well.

Simply setting government spending limits and putting seniors at greater risk for rising costs does nothing to slow rising healthcare costs.  TSCL is sharing the results of our recent 2011 Advisor Senior Survey on healthcare costs and the inadequacy of COLAs to cover rising costs in our visits with Members of Congress.  We encourage you to contact your Members of Congress and describe your Medicare and other out-of-pocket costs and what portion of your Social Security payments is required to cover them.  Use examples of recent cost increases and let them know your concerns about keeping Medicare affordable!

Sources:  Preliminary Analysis of the Rivlin-Ryan Health Care Proposal, Congressional Budget Office, November 17, 2010.