Republicans' 2012 budget plan alters Medicare, Medicaid
A Republican budget proposal for 2012, to be presented to Congress this week, seeks to save more than $4 trillion over the next 10 years and would dramatically alter how the government funds both Medicare and Medicaid.
The plan, prepared by House Budget Chairman Rep. Paul Ryan (R-Wis.), calls for Medicare to be funded by premium vouchers that would help defer the costs of people buying private insurance. It would also provide block grants for state Medicaid funding.
"Medicare and Medicaid spending will go up every single year under our budget. They don't just go up as much as they're going right now, because they're growing at unsustainable rates," Ryan said during an appearance Sunday on Fox News.
[See also: Medicare solvency: A matter of opinion?; White House eyes giving states flexibility in designing healthcare programs]
The proposed budget's Medicare voucher system would end direct payment to healthcare providers from the federal government and would instead provide health insurance vouchers – amounting to about $15,000 annually – that seniors would use to subsidize the cost of obtaining private insurance. Seniors with lower income or those who are less healthy would qualify for larger vouchers.
The plan is similar to one proposed by Ryan and Alice Rivlin, who served on President Barack Obama's Debt Reduction Commission and is a senior fellow of economic studies and director with the Brookings Institution. In recent testimony before the House Committee on Budget, Rivlin said the switch to a voucher system resembles that used now for Medicare Advantage, with a few important differences.
First, she said, the voucher system would be enhanced by a national Medicare Insurance Exchange, which would create greater competition among private insurers. Second, she said, the system would provide incentives for health plans to develop products that will help seniors save money.
"There are two reasons for shifting to a premium support model for Medicare. One is that the total subsidy would be controllable. Taxpayers would be making a defined contribution," Rivlin told the committee. "The other reason is that competition on a well managed exchange can be expected to attract beneficiaries to health plans that organize themselves to provide the most effective care at the lowest price."
Some say moving to overhaul the system creates considerable risk.
"All this does is shift the risk and burden of rising healthcare costs to seniors on Medicare," said the ranking Democratic on the House Budget Committee, Maryland Rep. Chris Van Hollen, in an interview with the Wall Street Journal. "You're on your own with the insurance industry."
The proposal for Medicaid is also a dramatic change in how the government funds the program. Under the current model, states receive matching funds from the government based on their Medicaid expenditures. The Ryan proposal would instead provide states with block grants that would allow each state to design programs and spend funds as they see fit.
Proponents for the change say the current system does little to help control costs and instead often encourages states to "game" the system – essentially spending more money on healthcare to qualify to a larger federal reimbursement.
Many governors have been seeking Medicaid block grants to help solve current budget woes, something that is not likely to happen under health reform and the current administration.
