How Deficit Reduction Plans Would Affect Medicare

Margaret Dick Tocknell, for HealthLeaders Media , April 20, 2011

The call for deficit reduction has hit a fever pitch in Washington, D.C. First, Rep. Paul Ryan (R-WI) presented his so-called “Path to Prosperity: Restoring America’s Promise” plan, then President Obama countered with a speech offering his version of a deficit reduction strategy. The numbers both plans throw around are almost too large to imagine. Forget millions. The focus here is billions and even trillions.

Rep. Ryan has played his cards well. He jumped out of the gate with a proposal to revamp Medicare spending and put that entitlement program in play for massive cuts. Obama hedged his bets. He made it clear that he will oppose GOP efforts to reduce the deficit by recreating Medicare but proceeded to propose his own set of reductions to the program. The difference, he explained, is that “their plan lowers the government’s healthcare bills by asking seniors and poor families to pay them instead. Our approach lowers the government’s healthcare bills by reducing the cost of healthcare itself.”

Medicare is a complicated program, and so are the proposals to reduce its costs. Let's take a look at how Medicare would be affected by elements of each plan. The table below is much as possible an apples to-apples comparison, but in some cases the two plans use different years to report savings or to introduce program changes. The figures were gleaned from the Ryan budget and Obama deficit reduction proposals.

How Proposed Deficit Reduction Plans Would Affect Medicare

Eligibility age

Maintain age 65

Age 65 until 2021; increase eligibility age by two months each year until it reaches age 67 by 2032.

Beneficiary spending

Cap Medicare spending/beneficiary to GDP plus 0.50 of a percent

Premium supports by 2021; support will vary by health, age and income of beneficiary; coverage though private health plans

Medicare cuts

No specific amount noted for Medicare

$30 billion FY2012-FY2021

Total Medicare spending in 2012

$1.1 trillion (includes Medicaid)

$950 billion

Total reduction in healthcare spending

$480 billion by 2023; additional $1 trillion by 2033

$2.2 trillion FY2012-FY2021, including $1.4 trillion from not implementing the ACA, $771 billion from Medicaid and $30 billion from Medicare

Affordable Care Act

Continues to be enacted


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1 comments on "How Deficit Reduction Plans Would Affect Medicare"

Susan Ward (4/20/2011 at 2:27 PM)
I have worked in the healthcare industry for many years, and am amazed at the bureacracy's attempts to control health care costs. All the elected officials think they are experts in healthcare, when it seems they actually know very little about it. With all the rules and regulations that are added to healthcare each year, has the quality of healthcare actually improved? It has gotten more expensive, and we have better technology, but has the actual care delivered improved? Implementation and compliance with all the laws, regulations and rules adds staff and costs health care providers money, which increases the cost of healthcare. Hospitals have as many administrative staff as they do direct care givers today, just to comply with all the mandated requirements. Then there is HIPAA. It costs hospitals and other health care providers a lot of money, but are patient records safe? It seems we have more breaches of confidential information today than we ever had before. Medicare is out of control because of the way it is administered. If the Medicare regulations were clear for everyone to follow, instead of written in vague language that can be interpreted many different ways, providers would not have difficulty understanding the billing policies. Would there still be people trying to bilk the system -absolutely. But go after the criminals, not the honest providers who want to do what's right, but can't get a straight answer from Medicare when they ask for clarification. Critics of the cost of U.S. healthcare compare our costs to the cost of healthcare in other countries. My question is this - do other countries have the endless regulations and rules that the U.S. has in place? I have never heard anyone address this question, but I think it deserves and answer. Thank you for allowing me to comment.




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