Paul Ryan’s Medicare

Paul Ryan has dared to take on a political untouchable – Medicare. As a result, the airwaves are filled with an endless chorus of talking heads chittering away at all hours about the effects of his proposed changes. It’s been called everything from the one possible savior of the fiscal health of the nation to a sure-fire method for throwing Granny under the bus. Underneath all the hype and posturing, what are the real facts about Paul Ryan’s Medicare?

The Spending Numbers

One of the hallmarks of the debate about Paul Ryan’s Medicare plan has been the statistics. Where on earth are these numbers coming from? What are they based on, really?

The important thing to remember is that almost all of the numbers are based on projections from the Congressional Budget Office (CBO). They use today’s spending levels and costs to take a best guess at what future costs will be, and these projections can be spun and presented to suit the needs of whoever’s talking. Here are the big stats to remember:

• 14% vs. 5% – The percentage of total GDP consumed by Medicare. Under the current plan, it would shoot to 14% by 2050, while under Ryan’s Plan it would drop to 5%, according to the CBO.

• $13,000 – The current average annual cost per beneficiary to provide Medicare, according to CNN Money. $10,000 is the government’s share, while the average senior pays $3,000 out of pocket under the current Medicare system.

The Key Dates

Another aspect of the debate around Paul Ryan’s Medicare has to do with its effective dates. Much like ObamaCare, many of the provisions don’t go into effect until later. Americans currently age 55 or older are exempt. The key dates to remember are:

• 2012 – The year the plan would be passed.

• 2022 – The first year the Ryan plan is open to enrollees

• 2033 – The year the retirement age would move from 65 to 67

The Big Ownership Shift

The core of the rest of the debate centers around the issue of ownership. At the moment, the Federal government owns the Medicare system, which by extension makes the Federal government the owner of America’s future health and access to affordable services. Under Paul Ryan’s Medicare plan, the ownership of future health and access to affordable service passes to the consumer.

This transfer of ownership is accomplished through the use of vouchers. As of this writing, the value of the vouchers is not set. Vouchers go to individuals, who can then buy approved health plans in exchange for their voucher. Insurance providers have to compete to be included in approved lists, and compete to offer more than their peers to earn the vouchers.

Outside of the health plans they’ve purchased with their vouchers, seniors will then be responsible for the cost of their health care. This ownership of the costs is designed to make healthcare buyers mindful of costs and eager to seek out value. Under the current system, since the tab is picked up by the government, the total bill is easy to inflate, driving up costs at a shocking 2 – 2.5% more than GDP growth annually, according to the CBO. Under the Ryan plan, seniors have zero incentive to buy $30 aspirins at the hospital when they can get a bottle at the store for less.

Provisions For Rich & Poor

There are some exceptions to the pure voucher system. The poorest segment of beneficiaries will receive an additional $6,000 in cash vouchers to cover their health costs (co-pays, deductibles, and so on). On the other end of the spectrum, the richest 2% of Americans will receive only 30% of the standard benefit, and the next richest 6% will receive only half of the standard benefit. In this way the plan offers more to those who need it most while not offering as many benefits to those who can pay for their own care.

Based On A Working Model

Last but not least, the Paul Ryan Medicare plan is based on a model for patient satisfaction and cost control that is already working. Known as the Federal Employees plan, this is the plan that government officials enjoy. Many of its core tenets are incorporated into the Ryan plan to be offered to the general public.

Whether the Ryan plan will ultimately pass is anyone’s guess, and the final form may be altered depending how the debt ceiling crisis plays out. However, separating the facts from the hype is essential to make an informed decision about the strengths or weaknesses of Ryan’s Medicare plan.