Monday, June 27, 2011

Plans for Medicare Expense Cuts

ObamaCare vs. Ryan-House GOP Plan

If you’ve been following national news in recent months, you may have come across mention of the Ryan-House GOP Plan. What is it? How is it different from Obama’s plan per the Patient Protection and Affordable Care Act (PPACA)? How might it affect you?

Drafted by Representative Paul D. Ryan, chairman of the House Budget Committee, and in competition with Obama’s and the Democrats’ plan for reducing governmental health care costs, the Ryan-House GOP Plan has been proposed by the Republicans in Congress for the same goal. It does not necessarily deny that some aspects of the Obama plan are good, but it serves as an alternative and as a potential opportunity for improvement of the governmental cost management of health care reform.

So what are the differences between the Obama plan and the Ryan-House GOP Plan? They both aim to save the government money, but in different manners. Firstly, regarding Medicare, the PPACA plans to reduce costs by granting more power to the Independent Payment Advisory Board, allow the Medicare program to bargain with drug companies for reduced prices, and take measures against fraud. This is estimated to save approximately $200 billion in the next ten years. On the other hand, the Ryan-House GOP Plan plans to reduce government costs by creating vouchers instead of providing full health care to Medicare beneficiaries under the age of 54. Also, premiums for Medicare coverage would be increased to cover approximately 35% of Medicare costs, rather than the 25% proposed under the PPACA, saving $241 billion in the next ten years. In addition, Senator Ryan’s suggestion that the eligibility age of Medicare be raised gradually from 65 to 67 would save approximately $124 billion by itself in the next ten years. Overall, this is projected to save $30 billion above and beyond the PPACA. Regarding Medicaid cost reductions, Obama has not come up with a definite plan, but projects cost decreases of $100 billion over the next ten years. On the other hand the Ryan-House GOP Plan has a plan to make Medicaid a block-grant program, where states are just given a sum of money for Medicaid to distribute as is fit. This plan is supposed to save $771 billion over the next ten years. Furthermore, the Ryan-House GOP Plan calls for the repeal of the PPACA in order to reduce costs.

The Ryan-House GOP Plan might be viewed unfavorably by those who are opposed to a reduction of benefits to Medicare beneficiaries. In any case, it is more clearly outlined in some areas of interest such as Medicaid cost reduction. If the Ryan-House GOP Plan is adopted, it may or may not be adopted in full (especially if the PPACA is not repealed). It does seem to be a worthy plan for consideration, and is being reviewed by the bipartisan panel of Republican Senator Pete Domenici and Democratic budget expert Alice Rivlin.  Most Democrats, including Senator Charles Schumer, rail against the Ryan plan arguing that it is a scheme to destroy Medicare and use that savings to give tax cuts to the wealthy on the backs of seniors. It could just as easily be argued that the Ryan plan is fiscally far-sighted and provides a better framework to maintain solvency of the Medicare program.