Ryan-Rivlin Plan for Medicare & Medicaid Reform

[M Paquette]

The actual bill is to be introduced next week. The Congressional Budget Office did a preliminary analysis last November. I suspect there may be some political interest in the bill, so I'm starting this thread here rather than let it run amuck in the Health & Early Retirement Forum.

www.cbo.gov/doc.cfm?index=11966 (6 page PDF document)
Key Features of the Proposal
MEDICARE
People who turn 65 in 2021 or later years would not enroll in the current Medicare program but instead would receive a voucher with which to purchase private health insurance.

Although the voucher system would not be implemented until 2021, the amount of the voucher would be calculated by taking the average federal cost per Medicare enrollee in 2012 (net of enrollee premiums) and growing that amount at the annual rate of growth in GDP per capita plus one percentage point.

• While the voucher program is being phased in, the voucher amount would be adjusted downward to reflect the fact that eligible individuals would be younger and less costly than the average Medicare enrollee.

Affected Medicare enrollees who are also eligible for full Medicaid benefits (“dual eligibles”) would no longer receive assistance from Medicaid with their Medicare premiums and cost-sharing; instead the federal government would establish a medical savings account for them and make an annual contribution to it. The amount of the contribution would be calculated by starting with $6,600 in 2012 and growing that amount at the rate of GDP growth per capita plus one percentage point.

Starting in 2021, the age of eligibility for Medicare would increase by two months per year until it reached 67 in 2032.

Eligibility for the Medicare program would not change for people who are currently 55 or older; as a result, the average age and costs of enrollees remaining in the current Medicare program would increase over time. However, enrollee premiums under Medicare would be adjusted to equal what they would be under current law.

The proposal would modify Medicare’s cost-sharing provisions and change the amount of the cost-sharing requirements that can be covered by supplemental insurance provided through Medigap policies. All of the amounts specified below are for 2013 and would be indexed in subsequent years to growth in spending per beneficiary for services covered by Parts A or B of Medicare.

• Cost-Sharing Rules — Beginning in 2013, modify cost-sharing rules:  Establish a single deductible of $600 for services covered under Parts A or B;
• After satisfying the deductible, impose 20 percent coinsurance for all services covered under Parts A or B; and
• Establish a catastrophic cap (zero cost sharing) after accruing $6,000 in cost-sharing obligations for A&B services (the $600 deductible counts toward the $6,000).
• Medigap Changes — Beginning in 2013, restrict Medigap coverage of cost sharing by:
• Requiring the beneficiary to be subject to a $500 deductible;
• Requiring the beneficiary to spend at least $2,750 before being subject to a catastrophic cap; and
• Limiting coverage of cost sharing between the deductible and a catastrophic cap to 50percent of Medicare’s cost-sharing requirement.

MEDICAID
Starting in 2013, the federal share of all Medicaid payments would be converted into a block grant to be allocated among the states. The total block grant would increase annually along with currently projected growth in the Medicaid population and with growth in GDP per capita plus one percentage point.

The federal government would fund the incremental costs of the Medicaid expansion that was enacted in March through 2020 as under current law (CBO estimated that those costs would total roughly $500 billion over that period); in 2021, those costs would be added to the block grant amount and the block grant would subsequently grow at the same rate specified above.

OTHER PROVISIONS
Several changes would be made to laws governing medical malpractice, including limits on noneconomic and punitive damages; those changes (and their effects on the federal budget) are described in CBO’s October 2009 letter to Senator Hatch.

The CLASS program for long-term care insurance would be repealed. (Because the program will collect premiums in excess of benefits payments during the 2011-2020 period, repealing this provision would increase deficits during the first 10 years.)

[fisherman]

I am waiting for someone much smarter than me to respond to how this effects those paying in that are under 55. I am listing one concern to start the conversation by the much smarter posters than me.

The one thing that sticks out to me as a big questions is we younger folks will get a check to buy health insurance at 67 not 65 for a product that does not exist today. I really wonder if a private Insurance company will create and write such a policy that we would have any hope of paying for as the voucher would probably not go far towards the costs of the actual product. We who buy private insurance today on our own know how much it costs as you age and I can only imagine the cost at 67 let alone now needing to fund two more years 65 and 66 and of course this is on top of the repeal of the current law.

This appears to be putting all the cost on those under 55 which is our kids too as they will not have the benefits their parents enjoyed.

[explanade]

Hmm, the under 55 voters going to like the prospect of buying private health insurance at the age of 65?

So the people already on Medicare or about to get Medicare has no reason to oppose this politically and since they're avid voters, they're trying to split the electorate.

[ziggy29]

Quote:

Originally Posted by fisherman This appears to be putting all the cost on those under 55 which is our kids too as they will not have the benefits their parents enjoyed.

We know all too well that when old-age entitlement programs start to look financially tenuous, it's the younger folks who need to be ready to bend over.

[samclem]

The Ryan-Rivlin proposal has been kicking around for awhile. The last version I saw left me wondering about how those with pre-existing conditions would fare. Under the plan (which might have been modified--we'll know early next week when the whole proposal is published), folks would get age-adjusted vouchers, but the vouchers would not vary based on health status. The vouchers could be used to purchase insurance within the "exchanges" (where insurers have to accept all comers) or outside the exchanges. In addition, the plan featured high-risk pools for those with pre-existing conditions. Observations: High risk pools haven't worked very well to date. Also, if the vouchers can be used inside or out of the exchanges, all the healthy people will buy cheap insurance outside the exchanges and the exchanges will be the ghetto for those who are sick, and insurance there will be expensive.

The possible fixes:
-- Make the vouchers usable only inside the exchanges (where insurers can't turn people away or charge higher fees for people in poor health)
or
-- Vary the size of the vouchers given to each individual based on health condition. This was proposed by Larry Kotlikoff (sp?), and would require a whole government bureaucracy to do these assessments on people.

But, overall I think giving people vouchers to use in shopping for their insurance and care is a much more promising approach to reducing costs than the present approach of simply reducing the amount the government will pay for various procedures. That's just not going to work--we already have to throw extra money at the system every year just to keep it working (the doc fix), so why are we pretending we'll suddenly get a backbone and hold the line on costs? And where will we find providers to give medical care at below the present Medicaid rate? We won't.

Quote:

Originally Posted by fisherman This appears to be putting all the cost on those under 55 which is our kids too as they will not have the benefits their parents enjoyed.

Nobody is going to be getting the same government benefits their parents enjoyed under any plan I've seen. And, rest assured there will be future cuts for those in the "traditional" Medicare program.

Maybe we could offer folks truly traditional Medicare as an option. "The Medicare program began in 1965. If you would like to remain in traditional Medicare rather than take a voucher, that option is open to you. You will receive full funding for all medical procedures and pharmaceuticals that were included in the Medicare program as it was originally conceived in 1965." I'll bet there wouldn't be many takers.

[GregLee]

I'm against it. I don't pretend to understand the details or how it will work out fiscally, but my impression is that it is an attempt to control government costs in a way that makes it seem that no current voters for current politicians will think they are losing anything very important. Prospective costs to voters are put off far enough into the future that few, it is hoped, will muster the energy to oppose the bill. While I appreciate the artfulness with which the melange of provisions is concocted, all the same, it's just legislative BS. The thing is, health care has become more and more important to us, and more and more expensive. There isn't any legislative magic that will change that. We just have to grit our teeth and pay the bill.

[ziggy29]

Quote:

Originally Posted by GregLee I'm against it. I don't pretend to understand the details or how it will work out fiscally, but my impression is that it is an attempt to control government costs in a way that makes it seem that no current voters for current politicians will think they are losing anything very important. Prospective costs to voters are put off far enough into the future that few, it is hoped, will muster the energy to oppose the bill.

Translation: Everything intended to deal with Medicare, Social Security and public pension reform only seems to affect people who are young enough that the legislators don't fear them.

Heaven forbid sacrifice should be shared across *all* age groups.

[samclem]

Quote:

Originally Posted by GregLee We just have to grit our teeth and pay the bill.

Impractical. The costs can be controlled and they must be.



Approx 20% of GDP is the historical average of ALL US government spending (SS, defense, Medicare, Medicaid --everything). We have to face this structural problem, we can't just keep spending more. There's a limit to "crazy," and it will be better if we act before our children or our bondholders lower the boom.

[GregLee]

Quote:

Originally Posted by samclem We have to face this structural problem, we can't just keep spending more. There's a limit to "crazy," and it will be better if we act before our children or our bondholders lower the boom.

Why can't we just keep spending more? What is the limit to "crazy" and how do you know?

[Ready-4-ER-at-14]

I read this as means testing the people who will be left in the old system and suck them dry over time. As the last of the baby boomers become really sick, they could essentially price everyone out of that system since the total cost for everyone comes from within that group. It seemed particularly ominious for the people currently about 55 as they will be in the old system but at a different (higher>) cost basis. But maybe I am missing something?

[fisherman]

Here is one that really fits the boards orientation. How would you plan for retirement in this environment? By this environment I mean if this was to be enacted. I do not know how to estimate my cost after age 65 or 66 or 67 whichever it ends up to be at this point so I have no idea how much is needed. Since only 19% of Private Company employees now have retiree Health Care available this is going to be important to many folks that are not government workers.

[samclem]

Quote:

Originally Posted by Ready-4-ER-at-14 I read this as means testing the people who will be left in the old system and suck them dry over time.

I don't see anything here that indicates the situation for those in traditional Medicare (i.e. those over 55 now) would be any different than the situation right now. I don't think there's any difference in the likelihood of means testing.

Quote:

Originally Posted by Ready-4-ER-at-14 It seemed particularly ominious for the people currently about 55 as they will be in the old system but at a different (higher>) cost basis. But maybe I am missing something?

Those in the old system continue to get the traditional Medicare (with the likely decreases in allowable charges, just like today). No vouchers, etc. Those younger than 55 (right now) will get vouchers when they get to 65, 66, 67--whatever.

[ziggy29]

Quote:

Originally Posted by fisherman Here is one that really fits the boards orientation. How would you plan for retirement in this environment? By this environment I mean if this was to be enacted. I do not know how to estimate my cost after age 65 or 66 or 67 whichever it ends up to be at this point so I have no idea how much is needed. Since only 19% of Private Company employees now have retiree Health Care available this is going to be important to many folks that are not government workers.

Not to mention that many retiree health insurance deals and on the job health insurance terminate at age 65 with the assumption that Medicare kicks in then. How many of these employers will voluntarily extend that from 65 to 67 in this era of ruthless cost cutting? Will this create a "hole" in coverage for those aged 65 or 66?

Like the talk of increasing the SS retirement age up to (as much as) 70, there are unintended consequences that can make this a really bad idea.

[donheff]

I don't understand the pools. Are these insurers required to take all Medicare comers? And are the plans limited to Medicare or are these just vouchers to remain in an Obamacare plan? Since the GOP wants to kill Obamacare I would have to assume these are some sort of Medicare only, no pre-existing conditions denial plans. If so the plan costs would have to be astronomical. I can't remember the specific amount but some ungodly amount of the total US health care bill is for seniors - that is why Medicare is so expensive in the first place.

[samclem]

Quote:

Originally Posted by ziggy29 Not to mention that many retiree health insurance deals and on the job health insurance terminate at age 65 with the assumption that Medicare kicks in then. How many of these employers will voluntarily extend that from 65 to 67 in this era of ruthless cost cutting? Will this create a "hole" in coverage for those aged 65 or 66?

"Luckily," whether the present health care law survives or not, it's highly unlikely there will be a significant number of employer-provided health care plans still around in 2021 when the Medicare eligibility age would start to go up. There are plenty of indications that employers are already making plans to dump their employees into the exchanges as soon as 2014. It's one of the good consequences of the new law--employers will be out of the health care biz. It cuts employer's costs (even after any fines) and it allows eligible people to get the government subsidy checks. It's likely that the real costs (of all these subsidy checks) will be far higher than the CBO estimates, which is another reason the taxpayer costs for this program will greatly exceed what we were promised.

[plex]

So it would abolish Medicare/Medicaid, but not fix the primary problem of costs at all? Sounds like a DOA plan, just some hand-waving to make it look like they are doing something.

[samclem]

Quote:

Originally Posted by plex So it would abolish Medicare/Medicaid, but not fix the primary problem of costs at all? Sounds like a DOA plan, just some hand-waving to make it look like they are doing something.

Why do you say it does not address costs? There are a lot of potential gripes about this approach, but I sure don't see how failure to address the cost of medical care for seniors is one of those gripes. It ties the available government money for senior medical care to GDP growth ("the money's not endless, this is the share we're going to spend on medical care for old people."), and it creates a mechanism whereby the users of the service (patients) can shop for the insurance plan with the best value. This competition is how we control costs and continually improve the goods and services we get in virtually every other part of our lives (food, cars, electronics, etc).

[M Paquette]

Quote:

Originally Posted by plex So it would abolish Medicare/Medicaid, but not fix the primary problem of costs at all? Sounds like a DOA plan, just some hand-waving to make it look like they are doing something.

No, no. It doesn't abolish them. They simply turn into private insurance plans, with the original Medicare/Medicaid payout replaced with a simple subsidy indexed to GDP + 1%. (Indexing to inflation, or worse, medical inflation would defeat the purpose of reducing government exposure to rising medical costs.)

It is fundamentally an interesting experiment in altering the demand side of medical care. Supply side, is of course, left as is. Note that the experimental animals cannot opt out unless they are sufficiently wealthy to self-insure.

The plan is very likely to be dead on arrival, much like 'cut 100 billion' campaign promise, or the earmarks ban.

[samclem]

Quote:

Originally Posted by M Paquette . . . (Indexing to inflation, or worse, medical inflation would defeat the purpose of reducing government exposure to rising medical costs.)

. . .rising medical costs fueled by (wait for it) . . . ever increasing amounts of government money. Just as higher education costs and home prices were driven up by buckets of gummint money.

Turning down the spigot seems a logical approach. The details, however, are certainly subject to debate.

Quote:

Originally Posted by M Paquette The plan is very likely to be dead on arrival . .

Agreed. There's no forcing function yet. DC won't get serious until the folks who hold our debt start asking for higher rates due to the risk they are taking. Then things will get interesting.

[haha]

Quote:

Originally Posted by samclem Why do you say it does not address costs? There are a lot of potential gripes about this approach, but I sure don't see how failure to address the cost of medical care for seniors is one of those gripes. It ties the available government money for senior medical care to GDP growth ("the money's not endless, this is the share we're going to spend on medical care for old people."), and it creates a mechanism whereby the users of the service (patients) can shop for the insurance plan with the best value. This competition is how we control costs and continually improve the goods and services we get in virtually every other part of our lives (food, cars, electronics, etc).

This sort of program would be very effective applied to the entire population. Applied only to seniors, it will just deprive them of access to qulaity care. Two tier medicine- it is saying to practitioners- you can practice in the free market for younger people, or in this price controlled market for seniors. Oh golly, how can I decide? Do I want to drive a Mercedes or take the bus?

Ha