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A guide to GOP proposals on Medicare

April 04, 2011|Mary Agnes Carey | Kaiser Health News

Amid the buzz about a possible government shutdown over this year's budget looms a more difficult question: What to do about entitlement programs, especially Medicare?

Politicians of all stripes have been decrying the nation's soaring debt and say that taming entitlements is crucial to curbing spending. So far, President Barack Obama hasn't proposed big changes. But some Republican leaders have called for a major overhaul of Medicare, a $520 billion program that covers nearly 47 million older and disabled Americans. Given the political peril involved in tampering with Medicare, the question is: How serious are the Republicans?

The answer: Plenty serious.

This week, House Budget Committee Chairman Paul Ryan of Wisconsin unveils his proposed budget for 2012. In an appearance on Fox News Sunday, Ryan refused to give final details of his proposal but said he would dramatically slow the growth rate of Medicare by adopting a fundamental change called "premium support." Ryan also said he would propose turning Medicaid, the state-federal program for the poor, into a block grant program. Altogether, he said, his budget save more than $4 trillion over 10 years.

House Majority Leader Eric Cantor, R-Va., said last week: "Most of us, 54 and younger, are not going to be able to enjoy the same type of programs that are in existence now."

With a presidential election coming up next year, some observers say it's unlikely anything big will happen involving entitlements before 2013, at the earliest, but that won't stop the debate. Here is a guide to some of the ideas being discussed, especially in Republican circles, on changing Medicare:

RAISING THE ELIGIBILITY AGE: The age for full Social Security benefits is now 66 and will reach 67 in 2027. Some analysts – including Ryan and Alice Rivlin, who was budget director for President Bill Clinton -- argue that it makes sense to slowly raise the Medicare eligibility age from 65 to 67. People are living longer and retiring later so they don't need Medicare as early as their parents did, they say.

How Much Would It Save? According to an analysis by the Congressional Budget Office, gradually increasing the Medicare eligibility age would save the federal government $125 billion over the next decade.

The Gain: People who are still working at 65 and get health insurance at work could stay on their employers' plans for another two years, thus slowing Medicare spending. Assuming the health law survives, people without job-related insurance would have more alternatives than they do now: They could buy coverage -- even if they are sick -- on the new exchanges being set up under the health law and may qualify for subsidies to help purchase insurance. Or, if they are lower income, they might be eligible for Medicaid, the state-federal program for the poor that will be expanded sharply in 2014. A gradual phase-in of the higher age requirement means that current beneficiaries and those near retirement would not be affected. "The impact of that takes a long time to hit," said Joe Antos of the conservative American Enterprise Institute.

The Pain: Health care costs that are now borne by Medicare for people 65 and 66 would be shifted to individuals, employers and states, according to a new report by the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

If the health care law were repealed, some people without employer insurance might not be able to afford coverage or get insurance at any price, especially if they had pre-existing medical conditions. Those people might delay needed treatments, which could eventually increase Medicare's cost to treat them.

"MORE SKIN IN THE GAME": Republicans, and some Democrats, have long thought that spending could be slowed if patients, including Medicare beneficiaries, had "more skin in the game" – in other words, put up more of their own money for health services. Some have suggested raising seniors' share of the Medicare Part B premium (which covers doctor visits and other outpatient services) from 25 percent to 35 percent and imposing co-payments for home health services or the first 20 days of a skilled nursing facility stay.

How Much Would It Save? The home health co-payment would save $40 billion over the next decade for the federal government; the skilled nursing co-pay would save $21.3 billion, according to the CBO. Increasing the beneficiary's share of Part B would save $241 billion over 10 years.

The Gain: Raising beneficiaries' share of Part B premiums would bring the program closer to its original 50-50 split between the federal government and beneficiaries, proponents say. And greater cost-sharing for services would discourage overuse of care, they add.

The Pain: Opponents say beneficiaries already spend a big chunk of their incomes on medical care. In 2006, one in four spent 30 percent or more of their incomes on health expenses; one in 10 spent more than half, according to the Kaiser Family Foundation.

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