Richard (RJ) Eskow
Published: Thursday 22 March 2012
When Ryan and his staff instructed the CBO to calculate the impact of the Republican budget, they told its analysts that the GOP plan included an increase in the eligibility age for Medicare.

Three Hidden Time Bombs in the GOP’s Medicare Budget

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By now most people have heard some of the worst things about the Republican budget proposal - commonly called the "Ryan plan" and unironically described by the GOP as "the Path to Prosperity": That it decimates programs for middle class and lower-income Americans while giving even greater tax breaks to the rich - $3 trillion worth, in fact. That it guts education, research, and transportation while preserving tax breaks for Big Oil. That it undercuts Medicare with a voucher system that will be worth less and less with each passing year.

And that, despite all that, it would actually increase the deficit.

You'd think that pretty much covers it - but it doesn't. When it comes to Medicare, there are three more ugly facts about this plan that have yet to attract widespread attention - mostly because the Republicans have done their best to keep them secret:

1. They're secretly planning to raise the Medicare age.

It's not in House Budget Chair Paul Ryan's Wall Street Journal editorial, the one where he sneered at "some who would distort for political gain our efforts to preserve programs like Medicare" and said "our plan provides guaranteed coverage options financed by a premium-support payment." It's not in the summary description of the GOP budget, which it claims "strengthens health and retirement security by taking power away from government bureaucrats and empowering patients instead with control over their own care." It's not even in the full budget document itself, which is 99 pages long and contains a section entitled "Strengthening Health and Retirement Security."

So how do we know that the GOP wants to raise the Medicare eligibility age from 65 to 67? Because that's what Ryan and his staff told the Congressional Budget Office when they asked the CBO to calculate the impact of their plan. It's right there in the CBO report on the budget.

Here's the key sentence: "In addition, the eligibility age for Medicare would increase by two months per year beginning in 2023 until reaching age 67 in 2034."

That's right: When Ryan and his staff instructed the CBO to calculate the impact of the Republican budget, they told its analysts that the GOP plan included an increase in the eligibility age for Medicare. Apparently they didn't have room to mention that fact anywhere in their 99-page document, and didn't see fit to bring it up while they were spouting all that rhetoric about "preserving entitlement programs for the future."

The Republican Party intends to raise the Medicare age for people as they approach the costliest years for receiving health insurance, and they're keeping it a secret from the public. This change alone would indirectly cut Social Security benefits by as much as 45 percent, by forcing seniors to spend that much of their benefit check on additional health care costs.

And remember, the GOP wants to raise the eligibility age for Social Security too. The net effect of these two changes means that older Americans would be forced to keep working - or looking for work - at an age when their medical expenses would make hiring them prohibitively expensive for employers who offer health insurance. They would be forced to try purchasing health insurance on the open market.

Which gets us to our second dirty secret ...

2. Insurers will get to set their own rates.

The Ryan plan lets private, for-profit health insurers set their own rates - rates which, according to the Ryan plan, will determine the Federal budget for senior health. It doesn't say that, of course, but that's how it would work.

According the the GOP's proposal, "All plans ... would participate in an annual competitive bidding process ...The second least expensive approved plan ... would establish the benchmark that determines the premium support amount ... Program growth would be determined by the competitive bidding process ..."

What does that mean in English? That Medicare goes away, to be replaced by a system of private health insurance companies who'll be paid to provide services that are supposed to (but won't) resemble the level of coverage seniors currently receive under Medicare. That health insurers would submit their bids to provide those services once a year.

And then comes the surprising part: The Federal government's expenditures for senior health care will be determined by the private insurers themselves, because the second-lowest bid establishes what the government is willing to pay for health insurance.

How crazy is that? Private health insurance rates have been climbing at three and four times the rate of today's Medicare. They've shown no ability to restrain costs -- and have no motive to do so, since they make money the old fashioned way: on the mark-up. And now they - or the lowest bidder among them - will dictate what the government must pay.

The plan says so, very clearly. "As opposed to pegging the growth rate to a predetermined formula," the GOP document say, "competitive bidding offers the ideal means of harnessing the power of choice and competition to control costs, while also securing guaranteed affordability for patients." In other words, the Republican Ryan plan places budgetary control for a major government program in the hands of the very insurance companies that profit from it.

At least that's what it would do, if they didn't contradict themselves in the very next paragraph.

3. The GOP plan radically cuts per-person spending for Medicare.

Remember that sentence we just quoted, the one about not pegging the growth rate to a predetermined formula? They totally lied about that. The plan does peg the growth rate to a predetermined formula, and Ryan's staff were very specific about it in their instructions to the CBO: "Total spending would grow in subsequent years," the CBO was told, "with nominal growth in per capita GDP plus 0.5 percentage points per year."

That's a "predetermined formula." And it's important to note that "nominal growth in per capita GDP" is not the same as the the growth in per capita health care costs, which have risen much more quickly than general inflation or GDP. That amounts to a major cut in benefits every year.

It gets even worse. The "per capita GDP" applies to everybody in the nation, not the ever-swelling ranks of Medicare-eligible seniors. This gets technical, but here's what it means: After this formula takes effect in 2023, there will be much faster growth in the Medicare-eligible age group than in the overall population. By structuring their formula this way the Republicans have ensured that there will be dramatic benefit cuts, especially as the "age wave" of Baby Boomers retires in the 2023-2030 period.

The "predetermined formula" is itself a secret, since they said there wasn't one. And the way it's structured will lead to dramatic cuts in Medicare.

Three-Pronged Attack

While the contradictions and evasions make exact forecasts difficult, it's clear that the net effect of these three changes would be to create a budget-busting giveaway to rich insurance corporations while at the same time slashing health coverage for seniors. And this isn't some radical ideologue's manifesto: it's the Republican Party's official Medicare proposal.

One terrible plan, three dreadful secrets. Presidential candidate Mitt Romney has said very, very nice things about this budget. In fact, all of the GOP's leaders have been bragging about it. Since they're so proud of it, why don't they tell more people what it really does?



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ABOUT Richard (RJ) Eskow

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology.

I believe we DO need

I believe we DO need healthcare reform. But not at the expense of a mandate and possible jail time, if one does not buy health insurance.

In ref to what was written about sneaking in a raise in the age for Medicare...You MUST realize we are living longer! And raising the age requirement is not coming for a very long time. Most of us will be dead before it happens. And elder people like me will never see that age increase.

You must also realize..since the representatives in Washington, D.C. over the past 30 or so years have caused this debacle..this travesty of poor health care coverage.....

We will ALL ..not just some...have to tighten our belts to get our economy back to where it should be. We will ALL have to give up something! That is the old American way! It should be the American way now!

Cutting the budget across the board..evenly.. on all departments ...is the fairest way to go. And the only Presidential Candidate that calls for that is Ron Paul. He is a genius when it comes to the economy. Maybe someone will make him the Secretary of the Treasury and let him straighten out this mess we are in!

priceless22, where to start,

priceless22, where to start, you have all the status quo talking points.

Do you know that U.S. health care is currently the most costly in the world? And it is far from the most effective.

There is no possible jail time for escaping the mandate-another right wing lie.

Blue collar working men and women are not living longer-another right wing lie.

Cutting the budget will directly eliminate jobs in a time of need. This will not improve the economy in any way. All the Ron Paul/Republican plan will do is give greater tax cuts for the wealthy. This will make things even worse.

Norman Allen's picture

In a saner world, people like

In a saner world, people like Paul Ryan, the face of Social Darwinism would be hiding in shame and would be spitted upon. In our world, he has followers... OMG, what has happened to the good old USA?

Death Panels, Republican

Death Panels, Republican Style

Bop 'til ya Drop

But make room for another middle man to suck the life out of good governance

The Ryan Budget plan just

The Ryan Budget plan just solidifies my opinion of the REPUBLICAN party and the TEA-PARTY they both are incapable of telling the truth. Is it any wonder that Mitt Romeny is being called a LIAR by other Republicans, Democrats and the Media.

I cannot, and I will not ever vote for or support any REPUBLICAN or TEA-PARTY member who is running for any Elected Office in Government.

when did government

when did government involvement ever reduce the cost of anything? if health costs continue to escalate, in 22 years we will all be working to pay for our health with nothing left over to pay anything else . wards of the state

"when did government

"when did government involvement ever reduce the cost of anything?"

If you had universal healthcare coverage, you would be able to go to a proctologist and have your head removed.

Look around you at the rest of the civilised world and see how bad your healthcare system has always been in comparison to their's and especially in comparison to the obscene number of dollars spent.

Health insurance costs are

Health insurance costs are doubling in 3-4 years. If you are 55 and retire at 66 the voucher Ryan has will leave you short $22,000 for your premiums and that will come out of your $20,000 from social security. That is in 11 years, not 22.

I think 22 years is a major

I think 22 years is a major exaggeration. If Ryan has his way and you are 55 today you will get a $7500 voucher to cover your annual insurance bill of $30,000 leaving you short for anything other than healthcare after your first year of social security, and that's if you are in the healthiest 1%. That would be in 11 years.

Health care costs are less

Health care costs are less and the administrive costs are less and care is better on medicare than the free market health care insurance corporations that have given us the most expensive health care in the world with substandard care. Medicare needs to opened to all americans, and then we would have healthier population, our life expectancy would go back up, its been downgraded and did you know that. All the coutries with single payer guaranteed health care, their life expectancy went up

We should have medicare for

We should have medicare for all right now. The overall cost of health care could be drastically reduced.

Of course that would step on the toes of the health insurance industry that receives free money for shuffling paper while providing zero actual health care.

Medicare for all would

Medicare for all would definitely be cheaper. Taxing the 47% of our income that slips by could fund it pretty well. In fact we now pay 3.2% per worker matched by employers and we cover the sickest generation of Americans who ever suffered old age. If we all paid the medicare tax on our income the cost for the elderly would drop from 6.2% to 3%. In comparison it costs nothing to insure people from zero to 18 years, even less from 19 -35 years, and 20% as much for the 36 - 65 year olds as those 66 - 100.

Bozoadult is snap on about the shuffling paper and paying nothing. I paid $5200 to cover myself and my wife last year (premiums, copays, out of pocket) and we have a real good blue cross policy from our employer. We both had issues and they still made a profit, and we are still paying.

The people that think they are covered and don't want a change are either being paid to solicit or they are really, really misinformed.

mikwhi, you bought into the

mikwhi, you bought into the old Limbaugh-right wing-insurance industry meme that the government can't do anything as well as the private sector. You never for one moment suspect that your understanding has been crafted and formed by those that profit from the most expensive health care in the world.

We could have medicare for all for around 60% of what we pay now as a nation. We could include everyone too. The only ones that would suffer would be the 'care for profit' corporations and insurance companies. And why should insurance companies benefit, they contribute NOTHING. They are parasites.

Thank you, geof01. There is

Thank you, geof01.

There is plenty of status quo money out there invested to keep 'those people' really really misinformed. The Tea Party is exhibit "A".

"Keep your government hands off my medicare." LOL

Fortunately for the

Fortunately for the Banks/Wall Street and corporations, critical/objective reasoning are not in the lexicon of the majority of the idiot citizenry of the Fascist States of Amerika.

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