Opinion: Ryan plan all about budget, but also health care overhaul

Opinion: Ryan plan all about budget, but also health care overhaul

By Bob Semro

Many people dont realize that the budget proposal put forth by Rep. Paul Ryan, R-Wis., passed by the U.S. House of Representatives in April, is the also the most significant piece ofhealth care legislation since the passage of the Affordable Care Act.

Even though the Ryan budget plan as now constructed is not likely to become law, it represents an official alternative and warrants real debate. Most of the conversation has centered on changes to Medicare, but the impact on other federal health care programs and the Affordable Care Act itself is even more profound.

Heres how the Ryan budget plan would affect the Affordable Care Act, Medicaid and Medicare.

The Ryan budget plan would repeal these provisions of theAffordable Care Act:

  • Individual responsibility: This provision requires most legal U.S. residents obtain health insurance. The additional insurance premiums collected through this provision would help private insurance carriers cover the costs of individuals with pre-existing conditions or poorer health. Repeal would end the most significant source of funding for provisions that require coverage of pre-existing conditions, guarantee of coverage regardless of health status, and forbid dropping of coverage because of a change in health status.
  • Health insurance exchanges: With one notable exception (a new Medicare exchange),the Ryan budget proposal would prevent the establishment of health insurance exchanges.
  • Medicaid expansions: The budget proposal would repeal provisions that would expand Medicaid coverage for most non-elderly people with incomes below 133 percent of the federal poverty level.
  • Funding cuts: Specific funding for temporary high-risk pools, which serve people with pre-existing conditions, re-insurance for early retirees, and many prevention and public health activities would be eliminated.
  • Small-business tax credits, low-income subsidies: Tax credits for small employers that offer health insurance would be eliminated, as would premium subsidies for lower income individuals and families.
  • Subsidies that would close the Medicare prescription drug donut hole: Subsidies for the coverage gap in Medicare Part D, also known as the Medicare Drug Benefit Donut Hole would be repealed.

Its worth noting that the non-partisan Congressional Budget Office (CBO) has said previously that the Affordable Care Act would help reduce the deficit in the long term.

The Ryan plan has a goal of balancing the federal budget by the year 2040. To do so, it also would initiate the most drastic restructuring of Medicaid and Medicare since the creation of those programs.

This restructuring would begin at a time when the number of uninsured Americans, as well as enrollment in Medicaid and Medicare, has hit an all-time high. According to the most recent Census data, the number of people without health insurance has increased to 50.7 million, largely as a result of the economic downturn. The number of people covered by Medicaid has increased to 42.6 million people, with another 43 million covered under Medicare.

In 2013, the Ryan budget would convert all federal funding forMedicaid into block grants. These state grants would be adjusted annually based only on the rate of inflation and population growth. History has shown that such formulas do not keep up with true costs, especially when it comes to medical and health care costs.

Thus, the proposal would clearly shift the cost burden to the states. According to the CBO, Federal payments to states under the proposal would be significantly lower than under current law. In order to maintain current Medicaid service levels, states would need to reduce spending in other areas, reduce benefits, limit eligibility or cut payment rates for doctors, hospitals and nursing homes.

In addition, Medicaid spending would not automatically increase to meet needs during economic downturns, as under current law. Under the Ryan plan, to meet increased demand in lean times, many states likely would have to reduce benefits or eligibility levels, out-of-pocket costs would rise for low-income Medicaid enrollees, and providers would confront more costs for uncompensated care.

Beginning in 2022, the Ryan plan would convert theMedicare entitlement system into a voucher system for people currently under the age of 55. The proposal would also gradually increase the age of eligibility for Medicare.

As an entitlement program, the Medicare program pays for a percentage of every doctor visit or medical service. Under the Ryan plan, health care coverage for seniors would be provided by private insurance, with the government paying a certain premium support for each enrollee.

According to the CBO, most beneficiaries who receive premium-support payments would pay more for their health care than if they participated in traditional Medicare. A private health insurance plan covering the standardized benefit would be more expensive currently than traditional Medicare. As a result, the CBO concluded, spending for a typical Medicare enrollee covered by the standardized benefit under the proposal would grow faster than such spending for the same beneficiary in traditional Medicare.

The Ryan proposal has been described as a serious effort to address the critical problem of the national debt. Its early in the process, but as it stands now, in terms of health care, the plan comes with significant costs for some of the most vulnerable Americans in our society.

Bob Semro is a policy analyst at the Bell Policy Center, a nonprofit, non-partisan policy research center based in Denver.

Opinions communicated in Solutions represent the view of individual authors, and may not reflect the position of the University of Colorado Denver or the University of Colorado system.