How the GOP Budget Plan Would Transform Medicare

Traditional Medicare would remain for those 55 and older, with private insurance subsidies for younger people.

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The House GOP's 2012 proposed budget has launched the loudest shot to date against the current form of Medicare and other retiree health benefits. Stating that the nation no longer can afford the skyrocketing deficits of its major entitlement programs, the budget proposals would dramatically change Medicare.

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The current program would be joined by a new approach to retiree health coverage that would apply to everyone who is now 55 or younger. They would select private healthcare insurance plans, and the government would provide premium support payments to those plans. Current Medicare rules would continue to govern government healthcare for anyone older than 55.

The plan will likely be judged "dead on arrival" by many Democrats and liberal groups, some of whom began issuing opposition statements even before the plan's formal release. "This proposal would shift costs to consumers, increasing their out-of-pocket spending," according to an assessment from the nonprofit Medicare Rights Center. "Voucher amounts under these proposals would not be enough to buy coverage as good as Medicare's. Some experts question whether, as time goes on, voucher amounts would be sufficient to buy comprehensive coverage at all."

The House Budget Committee's "Path to Prosperity," is attributed primarily to its chairman, Wisconsin Rep. Paul Ryan. It is light on details of the Medicare changes but lays out these major elements of the shift.

• The new program would not begin for more than 10 years, and thus would apply to those who begin turning 65 in the year 2022.

• It would provide an unspecified annual "premium support" subsidy from the government, and those funds would be used to help buy guaranteed private insurance coverage for their medical needs.

• The "single payer" form of Medicare would end for these younger beneficiaries, but would continue for anyone now receiving Medicare and who is older than 55.

• Current Medicare recipients and people ages 55 to 64 would still have the choice of using the new premium supports instead of sticking with traditional Medicare.

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"This is not a voucher program, but rather a premium-support model," according to the House document. "A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost. The premium-support model would operate similar to the way the Medicare prescription-drug benefit program works today. The Medicare premium-support payment would be adjusted so that wealthier beneficiaries would receive a lower subsidy, the sick would receive a higher payment if their conditions worsened, and lower-income seniors would receive additional assistance to cover out-of-pocket costs."

Direct healthcare subsidies and vouchers have long been a conservative and Republican favorite. While strongly opposed by most liberals and Democrats, the uncontrollable deficits in the program have created growing support for big changes. By removing open-ended payments for healthcare, a fixed subsidy limits federal spending and thus may lend itself more easily to cutting federal deficits.

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President Barack Obama's National Commission on Fiscal Responsibility and Reform, proposed many Medicare changes, although nothing as drastic as a voucher program. However, another widely respected set of reform proposals recommended letting consumers choose traditional Medicare or buy health coverage from private insurers with government support payments. That set of proposals came from a bipartisan group headed by former New Mexico Sen. Pete Domenici and Alice Rivlin, an economist and former top government budget official.

Ryan has worked with Rivlin on other deficit-reduction plans, and also served on the Obama commission. While Democrats are certain to oppose his proposals, there is growing acceptance that Medicare and other entitlement programs are bankrupting the country in their current forms.

The Medicare Rights Center noted in a fact sheet that nearly half of all Medicare consumers have annual incomes of $20,000 or less and that 80 percent of Medicare beneficiaries older than 65 depend on Social Security for at least half of their incomes. Even with Medicare, it said, median out-of-pocket healthcare spending rose from 11.9 percent of income in 1997 to 16.2 percent in 2006.

Twitter: @PhilMoeller