The nonpartisan Congressional Budget Office conducted a long-term
analysis of House Budget Committee Chairman Paul Ryan's 2012 budget
proposal and revealed some additional details not in the Republicans' news
conference Tuesday. For example, the plan calls for an increase of the
Medicare eligibility age to 67. The CBO notes the "substantial"
changes and adds a caveat in the cover letter to Ryan: "CBO has not reviewed
legislative language for your proposal, so this analysis does not represent a
cost estimate for legislation that might implement the proposal. Rather, it is
an assessment of the broad, long-term budgetary impacts of the proposal, with
results spanning several decades ..."
Below is an excerpt of the full CBO report:
Key Features of the Proposal
Chairman Ryan’s proposal,
as specified to CBO by his staff, encompasses changes to Medicare, Medicaid, the
major 2010 health care legislation, other government spending (excluding that
for Social Security), and tax law.
Medicare
Starting in 2022, the proposal would convert
the current Medicare system to a system of premium support payments and would
increase the age of eligibility for Medicare (On the basis of the
specifications provided by Chairman Ryan’s staff, CBO’s analysis included no
change in the sustainable growth rate mechanism for payments to physicians under
Medicare.) :
• Starting in 2022, the age of eligibility for Medicare would increase by two
months per year until it reached 67 in 2033.
• People who turn 65 in 2022 or later years and Disability Insurance
beneficiaries who become eligible for Medicare in 2022 or later would not enroll
in the current Medicare program but instead would be entitled to a premium
support payment to help them purchase private health insurance.
• Beneficiaries of the premium support payments would choose among competing
private insurance plans operating in a newly established Medicare exchange.
Those plans would have to comply with a standard for benefits set by the Office
of Personnel Management. Plans would have to issue insurance to all people
eligible for Medicare who applied and would have to charge the same premiums for
all enrollees of the same age. The premium support payments would go directly
from the government to the plans that people selected.
• The premium support payments would vary with the health status of the
beneficiary. In addition, the Centers for Medicare and Medicaid Services would
collect fees from plans with healthier enrollees, on average, and convey the
proceeds to plans with less healthy enrollees, on average, with the goal of
appropriately compensating plans for the health risks of their insured
population. This risk adjustment mechanism would be known as the risk review
audit and would be budget-neutral.
• The payment for 65-year-olds in 2022 is specified to be $8,000, on average,
which is approximately the same dollar amount as projected net federal spending
per capita for 65-year-olds in traditional Medicare (that is, the program’s
outlays minus receipts from the premiums enrollees pay for Part B and Part D,
expressed on a per capita basis) under current law in that year. People who
become eligible for Medicare in 2023 and subsequent years would receive a
payment that was larger than $8,000 by an amount that reflected the increase in
the consumer price index for all urban consumers (CPI-U) and the age of the
enrollee. The premium support payments would increase in each year after initial
eligibility by an amount that reflected both the increase in the CPI-U and the
fact that enrollees in Medicare tend to be less healthy and require more costly
health care as they age. (For example, projected net federal spending per capita
for all people age 65 and older in traditional Medicare would be about $15,000
in 2022, CBO estimates, in comparison with about $8,000 for 65-year-olds.)
• The premium support payments would also vary with the income of the
beneficiary. People in the top 2 percent of the annual income distribution of
the Medicare-eligible population would receive 30 percent of the premium support
amount described above; people in the next 6 percent of the distribution would
receive 50 percent of the amount described above; and people in the
remaining 92 percent of the distribution would receive the full premium
support amount described above.
• Beginning in 2022, the federal government would establish a medical savings
account (MSA) for certain beneficiaries with low income. (An MSA is an account
that holds deposits that can be used for medical expenses.) Eligibility for MSA
payments would be determined annually by the federal government on the basis of
income relative to the federal poverty thresholds. The amount of the
contribution in 2022 would be $7,800, and the annual amounts in subsequent years
would grow with the CPI-U.
• Eligibility for the traditional Medicare program would not change for
people who are age 55 or older by the end of 2011 or for people who receive
Medicare benefits through the Disability Insurance program prior to 2022. As a
result, the average age and average costs of enrollees remaining in the
traditional Medicare program would increase over time. However, enrollees’
premiums under traditional Medicare would be adjusted to equal what they would
be under current law—a so-called hold harmless provision. People covered under
traditional Medicare would, beginning in 2022, have the option of switching to
the premium support system.
Medicaid
The proposal would modify Medicaid as follows:
• Starting in 2013, the federal share of all Medicaid payments would be
converted into block grants to be allocated to the states. The total dollar
amount of the block grants would increase annually with population growth and
with growth in the CPI-U.
• Starting in 2022, Medicaid block grant payments would be reduced to exclude
projected spending for acute care services or Medicare premiums and cost sharing
paid by Medicaid.
• States would have additional flexibility in designing their programs.
2010 Health Care Legislation
The proposal would make
several changes to the Patient Protection and Affordable Care Act (or PPACA,
Public Law 111-148) and the health care provisions of the Health Care and
Education Reconciliation Act of 2010 (P.L. 111-152). In general, it would repeal
the provisions of those laws that deal with insurance coverage, including:
• The requirement that most legal U.S. residents obtain health insurance;
• The establishment of health insurance exchanges and the provision of
subsidies for certain individuals and families who purchase coverage through the
exchanges;
• The expansion of Medicaid coverage to include most nonelderly people with
income below 138 percent of the federal poverty level;
• The penalties on certain employers if any of their workers obtain
subsidized coverage through the exchanges; and
• The tax credits for small employers that offer health insurance.
The proposal would also change some other provisions of PPACA and the
Reconciliation Act:
• It would repeal the Community Living Assistance Services and Supports
(CLASS) program for long-term care insurance, as well as a number of mandatory
grant programs including funds for so-called high-risk pools, reinsurance for
early retirees, and prevention and public health activities.
• The proposal would repeal the provisions that created the Independent
Payment Advisory Board and that expanded subsidies for the “coverage gap” in
Part D (a range of spending in which many enrollees have to pay all of their
drug costs, sometimes called the doughnut hole).
Most of the other changes that PPACA and the Reconciliation Act made to the
Medicare program would be retained.
Tort Reform
Several changes would be made to laws
governing medical malpractice, including putting in place limits on noneconomic
and punitive damages.
© 2011 Henry J. Kaiser Family Foundation. All rights
reserved.