How The GOP Plan To Kill Medicare And Medicaid Would Work

How The GOP Plan To Kill Medicare And Medicaid Would Work


Brian Beutler and Benjy Sarlin
April 5, 2011, 9:26AM

Rep. Paul Ryan (R-WI)
On Tuesday, House Budget Committee Chairman Paul Ryan (R-WI) will introduce a 10-year budget proposal that would over time eliminate Medicare and Medicaid and replace them with less generous health care plans for the elderly, poor, and disabled. The reviews are in, from experts and advocates, and it looks like there's gonna be a fight.

Phasing Out Medicare

Starting with Medicare, Ryan's critics attack his plan as a step back from the single-payer system that, despite looming financing problems, serves the elderly very well.

"There ought to be a TV show called 'That 90s Show,'" said David Cutler, a Harvard economics professor and one-time adviser to President Obama. "What Paul Ryan has in mind is to recreate the managed care era, do for the elderly what we rejected for ourselves."

Republicans will be loath to admit this, but the system Ryan has in mind for Medicare works a lot like dread 'ObamaCare,' too. He developed it in concert with Alice Rivlin, who used to run the Office of Management and Budget for President Clinton. They propose giving the elderly a menu of private insurance options (think the health care exchange) and then subsidizing those plans based on need (think insurance credits). Thus, in addition to all the questions Republicans will have to answer about the plan from experts and stakeholders, they'll have to explain why the health care law is terrible for working adults, but a great idea for retirees.

"I keep talking to Paul and trying to convince him of that," Rivlin told Ezra Klein recently. "But even if he agreed with me, he couldn't say so."

If the goal is to save the government money, Ryan's plan can work -- but not by figuring out cheaper, smarter ways to deliver health care to the elderly, but by dramatically curtailing benefits.

"Our existing efforts to privatize Medicare have failed," Jonathan Gruber, a leading health care economist, and architect of the health care law, said in an interview. "We don't have a good track record, but in principle it could be a good idea [but] the savings doesn't come from all the good things from competition -- it comes from cutting Medicare over time."

Princeton health care expert Uwe Reinhardt has called the plan "radical," for precisely this reason.

"[F]or all those older Americans who voted GOP last year because those nasty Democrats were going to cut Medicare, I have just one word," wrote New York Times columnist, and Nobel-winning economist Paul Krugman: "suckers!"

He's referring to ads like this one, which Republicans used to great effect to help win historic victories in the November midterms.

Those cuts were unpopular, but trivial compared to what Ryan's proposing.

Eliminating Medicaid

The reviews are even worse for Ryan's plan to turn Medicaid into a block grant program. Ryan would eliminate the federal parameters governing the program and instead have Washington send states lump sums of money to put towards health care for the poor. In some states, that will mean patients -- the poor, disabled and elderly -- will suffer dramatic benefit cuts, particularly during tough economic times.

Seventeen Democratic governors have signed a letter to congressional leaders strongly opposing the block grant idea. New York Gov. Andrew Cuomo (D) wrote a separate letter attacking the plan as well.

"It's a hidden way to cut Medicaid," Gruber said. "I don't see the argument for it at all."

AARP seems if anything more concerned about the Medicaid proposal than the Medicare plan.

"A wholesale overhaul of Medicaid to block grants would likely lead to reduced benefits and eligibility, resulting in powerful negative repercussions for the millions of Americans who rely on Medicaid for their health and long term care," Nora Super, AARP's director of federal government relations for health, tells TPM.

Medicaid is often conceived of as a less luxurious version of Medicare for the poor, but many elderly Americans benefit from both. The GOP has been at war with AARP over its support of the health care law.

The Bottom Line

Ryan's plan would succeed at taking huge amounts of national health care spending off federal books. And that will leave Democrats facing questions about how they propose to reduce health care costs. After all, that will have to happen one way or another if the United States wants to avoid a fiscal crisis in the coming years.

"The better way to do it is not to shift costs but to cut costs, especially in a sensible way," said Cutler, the Harvard expert.

That could include using government purchasing power to force provider costs down, changing the tax code, or even patent reforms. Cutler and other experts point out that some of the most promising cost-cutting ideas are built into the health care reform law as pilot programs, and if one or several of them turn out to be unusually effective costs could drop, health care cost inflation could decrease, and a fiscal nightmare scenario could be averted.

"If there are 27 ideas in the bill, all you need is one of them to work and then you've saved money," Cutler added. "It's a kind of interesting thing. You just need something that really really works and you can build on."

The problem, as Gruber pointed out, is that determining what works best isn't easy, and when you figure it out, politics gets in the way.

"The science is highly uncertain. We don't know on a large scale how to slow the growth rates of federal costs without harming health," he admitted. "Nobody's figured out how to take [working] examples and scale them up."

That's when politics get in the way. During the health care debate, for example, Congress angrily rejected a Preventative Services Task Force finding that mammograms for women between the ages of 40 and 49 shouldn't be automatic.

If all else fails, then blunter measures may be necessary.

"Medicare is a dominant player in the medical market place, and what it needs to do is find a way to use that market power to reduce its cost growth, but to do it in an evidence-based way," said Harold Pollack, a public health expert at the University of Chicago. "The idea that Medicare should be an open spigot to pay providers is insane."