Three Hidden Time Bombs in the GOP's Medicare Budget

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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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 claims it "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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