Medicare Cost Sinks Ryan Budget Plan

Now that Paul Ryan is his party’s presumptive vice presidential nominee, observers from across the political spectrum have dug into the Wisconsin Republican’s proposed federal budget and found it would not meaningfully restrain federal spending or reduce the deficit.

As so often happens with budget-making, Ryan’s problem, at least in part, is Medicare.

David Stockman, who was Ronald Reagan’s budget chief, wrote in The New York Times that “Mr. Ryan’s plan is devoid of credible math or hard policy choices.” Martin Wolf, the influential economics columnist for the Financial Times, wrote that “the Ryan plan is inadequate and incomplete. Over the long run, it is incredible.”

Ryan, chairman of the House Budget Committee, ordered the Congressional Budget Office to estimate his plan’s effect on the federal deficit. He also ordered the CBO to assume that under his plan federal revenue would rise from 15 percent of gross domestic product (the value of all goods and services produced by the economy in a year) to 19 percent in 2028. Ryan did not tell the CBO how that would happen.

Using Ryan’s unsubstantiated revenue projection, the CBO found that by 2022 Ryan’s plan compared with the office’s baseline forecast would amount to a single percentage point difference in the federal deficit’s share of GDP. Ryan’s plan wouldn’t balance the federal budget until 2030.

Writing in The Washington Post, Matt Miller, who worked in Bill Clinton’s budget office, said that Ryan’s own estimates show his plan would result in a $6 trillion federal debt over the next 10 years.

Ryan’s inability to overcome the debt any faster seems to be a function of two things. Taxes don’t keep up with spending, and the aging population continues to gorge itself on Medicare, the federal program to help older people with their medical bills. More than 50 million people receive Medicare benefits today.

Annual Medicare spending is expected nearly to double to almost $1 trillion in the next 10 years as medical inflation continues and more eligible people turn 65 years. Ryan’s plan doesn’t try to change Medicare or slow that spending until new beneficiaries become eligible for benefits in 2022. At that point, instead of paying medical bills, Ryan would have the federal government give beneficiaries a subsidy with which they could purchase private insurance.

Miller applauds Ryan for forcing a conversation about Medicare into the campaign. Among other things, he said, it might help Democrats get over the fantasy that merely raising taxes on a small fraction of our population (the wealthy) would be enough to maintain the lifestyle to which the nation has become accustomed.

AARP has joined the conversation with its “You’ve Earned a Say” program. You might have seen the television advertisements. The idea is that all working people have paid into Medicare and Social Security through payroll taxes and have thereby “earned a say in the future of these programs.” AARP has published an analysis of 15 Medicare proposals to help citizens make up their own minds.

On the pro side, AARP reports, Ryan’s premium support approach “is the best way for Medicare to stay within a budget, because it would give older people more control and choice over how that budget is actually spent.” At the same time, there is “a threat that the vouchers will not keep pace with rising health costs, threatening the elderly and disabled with increased health care costs they cannot afford.”

There are a lot of ways to solve the Medicare problem, and AARP has experts from Heritage Foundation, the Brookings Institution and other organizations address them.

Clearly there are people of means who could pay a higher premium for optional Medicare Part B (physician coverage) and Part D (prescription drug coverage) than the rest of us. That would shore up Medicare finances without burdening less affluent beneficiaries. However, there is the problem of deciding who is wealthy enough that they should pay more. AARP also warns that if wealthy people decide higher premiums for optional coverage aren’t worth it, they’ll drop out of those Medicare programs, which will leave fewer recipients paying premiums to cover ever-rising costs.

Medicare has been available to people without disabilities at age 65 since the program began in 1965. We could raise that to 66 or 67 over a period of years. AARP says that if Medicare benefits began at age 67 after a 10-year phase-in, Medicare costs would decline 5 percent over the next 20 years.

On the other hand, 5 percent isn’t much, and there are plenty of financially vulnerable people who have a hard time waiting to get Medicare until 65 right now.

This is the kind of a conversation that can give you a headache. It is also one that is critical to our nation’s future. So go get some aspirin. Or surrender the debate to the demagogues.

UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to www.abqjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page A6 of the Albuquerque Journal