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My Issue With How Paul Ryan Explains His Medicare Reform

Thomas Whitley

While I think talking about Medicare is potentially a big loser for both parties and it is also not the program that experiences the deepest cuts (those are reserved for programs that help the poor like Medicaid, housing assistance, & food stamps, and for everything else the government does that isn't Medicare, Medicaid, and Social Security like food safety regulations, highway funding, and air traffic control), I thought I'd take a moment to review Paul Ryan's logic about why he'll be able to sell his Medicare plan. First, we need to be clear that we're talking about facts and not recycling talking points. Ezra Klein put it this way this morning:

I’ve got a modest proposal: You’re not allowed to demand a “serious conversation” over Medicare unless you can answer these three questions:

1) Mitt Romney says that “unlike the current president who has cut Medicare funding by $700 billion. We will preserve and protect Medicare.” What happens to those cuts in the Ryan budget?

2) What is the growth rate of Medicare under the Ryan budget?

3) What is the growth rate of Medicare under the Obama budget?

The answers aren't that hard to find if you actually look at the plans that have been proposed. 1. The cuts that Obama proposed and passed in the ACA are preserved in the Ryan Budget. In other words, both Obama and Ryan have proposed the same amount of cuts in the program. The difference, as I've said before, is how they propose to go about achieving those cuts. Obama wants to change how payments are made to providers by focusing on quality instead of quantity, e.g. a hospital that has a high rate of patients being readmitted would see cuts in their Medicare payments. Ryan's cuts come on the side of the beneficiary, i.e. the average American actually receives less over time.

Questions number 2 and 3 are easy. The answer for both is GDP+0.5%. That is, both Obama and Ryan propose capping Medicare spending at the same rate of GDP.

So now let's take a look at how Ryan is defending his Medicare changes. Here's (video) how Romney and Ryan defended the plan on '60 Minutes' yesterday.

Romney: What Paul Ryan and I have talked about is saving Medicare, is providing people greater choice in Medicare, making sure it's there for current seniors. No changes, by the way, for current seniors, or those nearing retirement. But looking for young people down the road and saying, "We're going to give you a bigger choice." In America, the nature of this country has been giving people more freedom, more choices. That's how we make Medicare work down the road.

Ryan: My mom is a Medicare senior in Florida. Our point is we need to preserve their benefits, because government made promises to them that they've organized their retirements around. In order to make sure we can do that, you must reform it for those of us who are younger.

Ryan and his defenders have continuously said that his plan does not change things for seniors currently on Medicare. He also says that anyone who is 55 or older will not be affected, i.e. they will get Medicare just like it is. The changes will be for those who are younger. There are a few negative effects that I see from this.

  1. The 40-54 range. Ryan's plan puts those who are nearing retirement, though not quite there yet in a particularly difficult situation. Many have been preparing for and planning on Medicare for some time, but under Ryan's plan, they would get something different, specifically a voucher that can be used to purchase insurance in an exchange that would include private insurers and the current Medicare plan. This voucher, though, would be equal to the second cheapest plan, in their attempt to spur competition. If, however, someone needs a better plan, they would have to pay for the difference themselves.
  2. Those younger than 40. Ryan's plan for Medicare calls for continual cuts to Medicare benefits, that is, the amount recipients of "Medicare" receive through their voucher or coupon keeps going down. Ryan's "GDP+0.5%" is a hard cap that "would automatically lower Medicare spending so that it is below the trigger level." The Obama "GDP+0.5%" cap, though, would be implemented a bit differently. As Kaiser Health News points out: "His proposal follows an effort in the 2010 health law to curb Medicare cost growth by tying the spending target to the Consumer Price Index in early years, and later on to the rate of GDP growth plus 1 percentage point. Now Obama is proposing to lower the target to the rate of GDP plus half a percentage point." The CBO has estimated that under Ryan's plan the average 65-year-old would pay a lot more by 2030 - 68% of their coverage costs versus compared with 25% today. This doesn't seem like a move in the right direction for me.

I can understand the rhetoric behind Ryan's plan, that painful cuts are needed to keep these social programs around and to "keep our promise" to our children and grandchildren, but I just don't agree with his plan to increasingly shift more and more of the cost onto individuals in low- and middle-income brackets while giving more tax breaks to those at the top. (Aside: He wants to cut $170 billion from Pell Grants, which could mean that over 1 million students lose Pell grants entirely. I'll let you decide if you think that's helping our country's future.) See this handy chart for reference:


To sum up, Romney and Ryan are trying to sell their proposed changes to Medicare by reassuring current seniors that they won't experience any changes to Medicare, but then he wants to turn the program into one where recipients receive vouchers that have a diminishing return and serve to increase the individual's share of costs. The theory is that they can still win the much-needed senior vote in Florida, Pennsylvania, and Iowa (3 of the 5 oldest states in the country) by getting them to think only of their interests and not those of their children and grandchildren. I think seniors are smarter than that and I think other age groups realize that while they're the ones who would be most drastically affected by the Romney-Ryan plan the GOP ticket only seems concerned about shoring up the senior vote so they can win in November. Only time will tell if the strategy is a winning one.