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“Ryan Plan” would end today’s Medicare program

Commentary by Fight Back! Editors |
August 19, 2012
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In April of 2012, the nonpartisan Congressional Budget Office (CBO) did a report on the impact of Republican Congressman Paul Ryan’s budget proposal, which was later passed by the House of Representatives, on health care. An analysis of the CBO report by Fight Back! shows that this plan would shift the burden of health care to poor, elderly and disabled people. This would cause millions of poor, seniors and disabled people to lose insurance and it would cause millions to pay much more for health care.

The immediate impact of the Ryan/Republican budget plan would be to stop the expansion of Medicaid (government health care for low-income individuals and families) and block the state insurance exchanges designed to make it easier to buy private health insurance. The CBO estimated last March that these two parts of the “Affordable Care Act” (labeled “Obamacare” by its critics) would reduce the number of people without health insurance by 30 million. By blocking this plan, the Ryan/Republican budget would yank health insurance from 30 million Americans and put even more strain on local communities which are the health care providers to those without health insurance through county hospitals, community clinics and hospital emergency rooms.

The Ryan/Republican budget plan would also convert Medicaid into a “block grant.” Instead of trying the cover the medical costs of those eligible for the program, the federal government would give the states a set amount of money to run their state Medicaid programs, that will slowly increase over time. Under this plan, the federal government will reduce spending on Medicaid by 35% over the next ten years. If all of this spending cut were done by restricting the number of people getting Medicaid, another 10 million people could lose their health insurance. In fact, the number would probably be smaller, because of cuts in benefits making it more difficult to find a doctor who takes Medicaid (many already do not because of the low reimbursement rate, which is only half or less of the amount paid to health care providers under Medicare for the elderly and disabled).

What many people living in the U.S. don’t know is that two thirds of the spending on Medicaid today goes to seniors and disabled people, who would bear much of the cuts in Medicaid spending. Seniors and disabled people would also bear the burden of changes in Medicare proposed by the Ryan/Republican budget plan. While the proposed changes in Medicare would not begin for ten years (in 2022), it would lead to millions of seniors losing their insurance and the rest paying much more to private health care plans.

The first change is that the Ryan/Republican plan would start to raise the age at which one can join Medicare from, 65 to 67 starting in 2022. This would lead to a million seniors aged 65 and 66, who could not afford to pay for private health insurance, to lose their health insurance, and have the rest paying more for their insurance. This would also drive up health insurance costs for businesses that employ older workers and be an even greater incentive not to hire or even try to fire elderly workers.

Even more drastic is that the Ryan/Republican plan would end Medicare as government health insurance and instead give government subsidies for the elderly and disabled to buy private health insurance starting in 2022. But these subsidies are limited to what it would cost the government to provide insurance - which is much less than the private sector, as administrative costs in Medicare are about 2% of total costs, as compared to 20% or more for private health insurance.

What this means is that eventually the elderly would have to pay more than two-thirds of their health care costs under the Ryan/Republican plan, as compared to less than one-third under current Medicare. Thus the Ryan/Republican plan would more than double the health care costs for the elderly and disabled, forcing more and more of them to have to choose between medical costs on one hand, and food, rent and other necessities on the other. Millions could end up giving up health insurance in order to avoid hunger and homelessness.

While poor, elderly and disabled people would bear the cost changes in health care from the Ryan/Republican budget plan, the big winners would be private health insurance companies and the rich. Private health insurance companies would win as seniors and disabled are forced to buy health insurance from them, as Medicare as a government health insurance would no longer be available for them. The rich would also be winners as they could afford to pay for private insurance and their increased costs would be more than offset by the huge tax breaks that the Ryan/Republican plan would offer them.

Fight Back! encourages all of our readers to say no to the “Ryan plan”, the Republican agenda and the 1% by joining the massive August 27 protest at the Republican National Convention in Tampa, Florida.