A Q&A on Ryan's Medicare ideas

Posted: August 13, 2012

Wisconsin Republican Paul Ryan, Mitt Romney's choice for vice president, has provoked consternation from Democrats and anxiety among some congressional Republicans with his proposals to reshape Medicare.

The Republican-controlled House, twice approved along party lines his proposals to overhaul the popular insurance program for the elderly and disabled by giving beneficiaries a set amount of money every year to buy coverage from competing health plans. That is a fundamental shift from today's program, in which the federal government pays for as many services as beneficiaries use. The proposals were never enacted because of opposition from the Democratic-controlled Senate and President Obama.

Here is a guide to some issues Ryan's plan raises:

Q: What is Ryan's latest Medicare plan?

A: Ryan would gradually raise the eligibility age of Medicare from 65 to 67 by 2034, and cap its spending increases at half a percentage point higher than the growth rate of the economy, or the gross domestic product. Ryan's plan would provide a set amount of money annually for future Medicare beneficiaries - those currently under age 55 - to buy a private health plan or the traditional government-administered program through a newly created Medicare exchange.

Under the proposal, all plans, including traditional Medicare, would submit bids for how much they would charge to cover beneficiaries' health-care costs. All plans would include a minimum set of benefits equal to the value of those in the traditional program. The government would pay the full premium for the private plan with the second-lowest bid or for traditional Medicare, whichever is lower. Beneficiaries would have to pay the difference if they chose a plan that set rates higher. There could be one less-expensive plan and beneficiaries who chose it would get a rebate for the difference.

Q: So seniors could stay on traditional, government-run Medicare if they like?

A: Ryan says that is the case. Democrats and some critics argue that the plan would so fundamentally alter Medicare it might no longer be desirable or affordable.

"The real question is what it would cost," and whether seniors would pay more out of pocket than they do now, said Jonathan Gruber, an economist at the Massachusetts Institute of Technology. Gruber, who helped design both Romney's Massachusetts health-care program and Obama's national plan, cited the risk that the government-run plan would attract the sickest people, driving up its costs, while private plans would lure the healthiest. In addition, medical providers could abandon the program if Medicare cut their reimbursement rates to curb costs.

Q: Would the changes apply to current seniors?

A: Ryan's plan would apply only to those under age 55. Current Medicare beneficiaries and those nearing eligibility would still get Medicare benefits as they exist today.

Q: Would seniors pay more under Ryan's plan?

A: The Congressional Budget Office estimated Ryan's original 2012 proposal would require a typical 65-year-old to pay a lot more for Medicare by 2030. But his latest plan is missing key details, so the CBO's analysis has been limited.

Critics predict traditional Medicare, which must compete with private plans, could become unaffordable if it attracts the sickest people who require more health care and who, therefore, drive up the program's costs.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy organization not affiliated with Kaiser Permanente.

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