CBO: GOP budget raises health costs for retirees

[April 06, 2011]  WASHINGTON (AP) -- Most future retirees would pay more for health care under a new House Republican budget proposal, according to an analysis by nonpartisan experts for Congress that could be an obstacle to GOP ambitions to tame federal deficits.

The fiscal blueprint would put people now 54 and younger in a different kind of health care program when they retire, unlike the Medicare that their parents and grandparents have known. Instead of coverage for a set of benefits prescribed from Washington, they'd get a federal payment to buy private insurance from a choice of government-regulated plans.

"A typical beneficiary would spend more for health care under the proposal," the nonpartisan Congressional Budget Office estimated in an analysis released late Tuesday.

The sweeping fiscal plan by House Budget Chairman Paul Ryan, R-Wis., would reduce total federal spending, deficits and debt, the budget office concluded. That means federal taxpayers would save money. But it would be tempered by a cost shift to future retirees.

The findings loom as a potentially big political headache for Republicans, who relentlessly criticized Medicare cuts in President Barack Obama's health care overhaul as part of their strategy to win back control of the House last fall. According to the budget office, the new GOP plan would leave most of those cuts in place.

GOP leaders want to quickly move the budget through the House, but it probably will hit a dead end in the Democratic-controlled Senate. A spokesman for Ryan says savings from the Medicare cuts would be plowed back into the program.

The budget office gave two reasons future retirees can expect to pay more. First, private plans would cost more than traditional Medicare because of such factors as higher administrative costs. Second, the federal contribution would grow more slowly than health care cost inflation, leaving a bigger gap for beneficiaries to pay.

Ryan calls his Medicare idea "premium support." Critics call it the voucher plan.

"The ball game in a premium support or voucher program is the level of support and how it is increased in the future, over time," said Drew Altman, president of the nonpartisan Kaiser Family Foundation, an information clearinghouse on the health care system. "If it is not increased adequately, then seniors will pay more or get fewer benefits."

The Ryan plan comes with other major health care changes:

• Obama's health insurance expansion to more than 30 million people who now lack coverage would be repealed.

• Medicaid, the federal-state program that covers low-income and severely disabled people, would be converted into a block grant program that gives each state a lump sum to design its own insurance plans. But the poor no longer would have a right under federal law to health care.

• The coverage gap in the Medicare prescription drug benefit would be brought back. Obama's health care law gradually eliminates the so-called doughnut hole. Ryan's plan repeals that provision, the budget office analysis said.

• Future retirees would see an increase in the eligibility age for Medicare, currently set at 65. Starting in 2022, the eligibility age would rise by two months each year until it reaches 67 in 2033.

• Jury awards in medical malpractice cases would be limited, helping to reduce the practice of defensive medicine by doctors fearful being sued. That would help lower health care costs.

Although Ryan's plan reduces spending by some $5 trillion over the next decade, that still wouldn't bring the federal budget into balance. He also calls for rewriting the tax code and for cuts across a broad swath of spending programs.

"What this plan tees up is a question about the role of government in our lives and in our health care system," said Mike Leavitt, former Health and Human Services secretary under President George W. Bush. "It boils down to two questions: How much can we afford and what role government should play. The U.S. is really alone in the world when we say we can afford an unlimited amount for all individuals."

The budget would recast health care programs that already cover about 100 million Americans, almost evenly divided between Medicare and Medicaid. That would make Obama's health care overhaul seem like baby steps.

At its most basic level, Ryan's idea would shift more of the risk from rising health care costs from federal taxpayers to individual beneficiaries, medical service providers and states, giving them all a powerful incentive to avoid waste and aim for quality and efficiency. If the theory works, it finally could start to slow the unsustainable rate of rising health care costs.

"Putting patients in charge of how their health care dollars are spent will force providers to compete against each other on price and quality," Ryan's plan says. "That's how markets work: The customer is the ultimate guarantor of value."

If it doesn't work, as the budget office suggests might happen, future Medicare beneficiaries, providers and states will feel the pain directly. That could send them right back to Washington clamoring for more subsidies.

For seniors already in the program and people within 10 years of retirement, Medicare would remain in place largely as it is now.

Then, starting in 2022, new beneficiaries no longer would have access the traditional program. Instead, they would get a fixed amount from the government to purchase private insurance.

The voucher would be adjusted so that if a person's health takes a turn for the worse, the federal payment would increase. Wealthier beneficiaries would get a lower subsidy, but lower-income seniors would get extra help with their out-of-pocket costs.

The Medicare proposal will get the widest scrutiny, since that program rivals Social Security as the foundation for a secure middle-class retirement. But the Medicaid changes are equally significant.

They would mean that poor people no longer would have a right under federal law to get health care through Medicaid. Instead, Washington would send each state a lump sum to spend on medical care, nursing homes and other health services.

Advocates are worried that states will not be able to offer vulnerable low-income people reliable protection. Medicaid payments to providers are already at rock bottom levels. States pressed for money in a future economic downturn might reduce payments to doctors and hospitals even more, and they might even freeze enrollment.

That would send more people to the emergency room looking for charity care.

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Online:

House GOP budget:
http://budget.house.gov/fy2012budget/

Congressional Budget Office:
http://www.cbo.gov/doc.cfm?index12128

[Associated Press; By RICARDO ALONSO-ZALDIVAR]

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