Deficit Schlock: Why Rep. Paul Ryan is Putting Medicare on the Chopping Block

Last Updated Nov 18, 2010 11:59 PM EST

As my colleague Marion Maneker notes, Rep. Paul Ryan wants to "deal with Medicare" in seeking to lower the federal deficit. And how would the Wisconsin Republican deal with a government healthcare programs like Medicare? By privatizing it.

Under his proposal, which Ryan developed with former White House budget director Alice Rivlin, people who turn 65 in 2021 or later wouldn't sign up for Medicare. Instead, they'd get a voucher that would be used to buy private health insurance.

That would likely result in voucher recipients having to get less extensive coverage or pay higher premiums than is currently offered under Medicare, according to a CBO analysis of the plan. That's because Ryan and Rivlin would wring most of the costs out of the program by having the federal government cut payments for enrollees. Future participants could expect higher premiums because private health plans are generally more expensive than Medicare.

Ryan also wants to deal with Medicaid, the government health program for low-income people, but in a different way. Starting in 2013, the federal portion of all Medicaid payments would be handed over to the states to allocate as they see fit. Federal payments for the program also would be reduced. That means the states -- most of which are broke and desperately seeking ways to trim their budgets -- would either have to skimp on coverage or pick up a larger share of the costs. I suspect I know which option they would choose.

However moderate Ryan may sound, in other words, his ideas for reforming these mandatory spending programs are alarmingly radical. They amount to a snuff job on two of this country's most important -- and successful -- government programs. Because while experts across the political spectrum agree that Medicare needs fixing, only those with a deep ideological animus toward such entitlements favor handing it over to the very private insurers that are largely to blame for the soaring cost of health care. As analysts at the Center for Budget and Policy Priorities, a Washington think-tank, write:

Targeting federal health spending without similarly controlling private health spending would harm those who are the most vulnerable. Growth in health care costs is not driven by factors that are unique to Medicare and other federal health programs. To the contrary, for 30 years, per-beneficiary spending in Medicare and Medicaid has grown at rates nearly identical to those for the overall health care system.
Besides, there's no reason to think Ryan's plan would be any more effective in controlling Medicare costs than what the Obama administration has already set up under the Affordable Care Act passed in March. The law ensures that growth in Medicare spending will slow if it exceeds targeted levels. Longer term, it also would limit growth in Medicare spending per recipient to the rate of GDP growth plus one percentage point.

Some in the media appear to think Ryan's proposals are novel. They're not. His goal of crippling Medicare is perfectly in synch with the principles former House Speaker Newt Gingrich laid out in 1994 in the GOP's "Contract with America." Here's what the Georgia Republican had to say about Medicare in early 1995 one day after assuming the congressional post, according to an article at the time in Health Alliance Alert (no public link):

We need to transform Medicare into another system.
Or, in short, "deal" with the program. The messenger changes, but the message remains the same. Indeed, the current fear-mongering about deficits is akin to the "Harry and Lousie" ads that Republicans used at the time to torpedo health care reform. Like Gingrich, Ryan's ersatz attacks on spending are a front for his real foe -- government itself. After all, if Ryan really wanted to take a bite out of the nation's spiraling deficit, he wouldn't support extending the Bush-era tax cuts to the wealthiest one percent of U.S. households.

There's just one problem -- one that's almost certain to sink any effort to privatize Medicare, not to mention halt deficit hawks in their tracks. As Marion points out, the large majority of Americans oppose cutting programs such as Medicare, Medicaid and Social Security to shrink the deficit.

Presumably that's because, unlike Ryan, millions of Americans can't afford it right now. Unemployment hovers around double-digits, real income is falling and any wealth related to owning a home has long since vaporized. Also unlike Ryan, it seems, most people don't labor under the delusion that reducing the deficit requires reducing government.

A final point. As you consider proposals to hack away at Medicare and other entitlements, it's important to keep in mind who, exactly, would be affected. The average Medicare recipient is already poor and spends much of their income on paying for health care. Curbing Social Security benefits, as the Simpson-Bowles and Rivlin-Domenici plans advocate, would make any reduction in Medicare benefits even harder for such people to tolerate. Notes the CBPP:

This has been the missing element in the entitlement/deficit reduction debate: Warren Buffet is not the typical Medicare beneficiary. Instead the prototype is an older woman with multiple chronic illnesses living on an income of less than $25,000 who spends more than 15 percent of her income on health care. It is the people on these programs and the realities of their lives that have been left out of the discussion.
No doubt Ryan would agree.

Thumbnail from Wikimedia Commons, CC 2.0; interior image from Flickr user WisPolitics.com

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    Alain Sherter covers business and economic affairs for CBSNews.com.