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House Passes Paul Ryan's Disastrous Medicare Plan

 
 
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In a 235-193 vote, the House passes Paul Ryan's Medicare "reform" plan today. All Democrats voted against it, as did 4 Republicans --  Reps. Ron Paul of Texas, Walter Jones of North Carolina, David McKinley of West Virginia, and Denny Rehberg of Montana.

This will die in the Dem-controlled Senate before it even reaches a presidential veto, but the point was to shift the debate to the right, making the already regressive recommendations of the co-chairs of the Simpson-Bowles commission seem reasonable in contrast.

The Center for Economic Policy and Research offered this analysis of the Medicare provisions:

Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 for someone turning age 65 in that year. It would rise in step with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)

According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit (Figure 1). This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)

According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65.

Furthermore, the portion of income going to health care costs will increase through time according to the CBO analysis. This is due both to aging of individuals and to increasing health care costs through time. As noted insurance for older beneficiaries will cost more than insurance for younger beneficiaries, but Representative Ryan's voucher would still only pay the same amount for their care. This means that if the average 80-year-old cost twice as much to insure as the average 65-year-old, then the premium that would come out of a seniors' pocket would be twice as large. This implies that if the program had been in effect for 15 years in 2030 then the average senior would be paying $41,400 for a Medicare equivalent insurance package in 2030, 25 percent more than the medium earner's benefit in that year.

 

AlterNet / By Joshua Holland

Posted at April 15, 2011, 8:56am