Medicare, Medicaid Are Targets in GOP's 'Path to
Prosperity' That Shifts More Costs to Seniors
Democrats say it cuts medical care to the “most
House Budget Committee Chairman
Paul Ryan, R-Wis., presents outline of "Path to Prosperity"
budget for 2012
April 5, 2011 – The
Republicans sent shock waves through millions of older Americans that
depend on Medicare or Medicaid with their 2012 budget proposal today
that is named “Path to Prosperity,” which appears to shift more of the
cost of healthcare back to the senior citizens. Democrats immediately
challenged the plan, saying it would result in medical care cuts to the
nation’s most vulnerable Americans.
Here are excerpts from the GOP
"Path to Prosperity" 2012 budget proposal by the Kaiser Health News
Staff as presented April 5, 2011 by House Budget Committee Chairman Paul
Repairing a Broken Medicaid
System - Major proposals
• Secure the Medicaid benefit
by converting the federal share of Medicaid spending into a block grant
tailored to meet each state’s needs, indexed for inflation and
population growth. This reform ends the misguided one-size-fits-all
approach that has tied the hands of so many state governments. States
will no longer be shackled by federally determined program requirements
and enrollment criteria. Instead, they will have the freedom and
flexibility to tailor a Medicaid program that fits the needs of their
• Improve the health-care
safety net for low-income Americans by giving states the ability to
offer their Medicaid populations more options and better access to care.
Medicaid recipients, like all Americans, deserve to choose their own
doctors and make their own health care decisions, instead of having
Washington dictate those decisions for them.
• Save $750 billion over ten
years, contributing to the long-term stabilization of the federal
government’s fiscal path and encouraging fiscal responsibility at the
Medicaid, the program created
in the 1960s to provide health-care coverage for the poor, is coming
apart at the seams. The open-ended nature of the program’s financing
structure has created rapidly rising costs that are nearly impossible to
check. In 1966, the first year of the program’s operation, total costs
were $400 million. By 2009, the total cost of administering Medicaid had
soared to $378.6 billion. Absent fundamental reform, costs are expected
to continue climbing and are expected to reach a total of $840 billion
Under Medicaid, state
governments and the federal government share the cost of providing
medical services to low-income families. But a flawed federal-state
matching formula has fueled runaway state spending – and the results in
terms of state debt are plain to see. Medicaid is now the largest
line-item on most states’ budgets – surpassing even education – and
accounted for 22 percent of total state spending in 2010.
Meanwhile, much of the federal
government’s share of the spending is wasted because the bureaucracy
cannot provide adequate oversight of this open-ended program: Medicaid’s
improper payment rate is over 10 percent, more than three times the
amount of waste that other federal agencies generate. This translates
into $33 billion worth of waste each year.
Medicaid’s current structure
gives states a perverse incentive to grow the program and little
incentive to save. The federal government pays an average of 57 cents of
every dollar spent on Medicaid. Expanding Medicaid coverage during boom
years is tempting and easy to do – state governments pay less than half
the cost of such expansions. Yet to restrain Medicaid’s growth, states
must rescind a dollar’s worth of coverage to save 43 cents.
Moreover, states are not given
adequate flexibility when it comes to achieving those savings –
one-size-fits-all federal mandates tie their hands with regard to
coverage options, and many times the only way states can achieve savings
is through formulaic cuts to medical providers. This is why so many
doctors refuse to take Medicaid – states have reduced their
reimbursements below what the market will bear.
For doctors who see Medicaid
patients at below-market reimbursement rates, losses are shifted to
non-Medicaid patients.21 The cost-shifting that occurs from government
rationing remains a significant contributor to health inflation, which
in turn puts quality, affordable health coverage out-of-reach for an
increasing number of Americans.
At the same time, federal
spending has followed the same exploding trajectory as states. The
Congressional Budget Office estimates that federal spending on Medicaid
will grow annually by 7 percent from nearly $260 billion in 2012 and to
nearly $560 billion within the next ten years. Should this problem
continue to be ignored, two outcomes are inevitable: significant cuts in
benefits and massive tax increases.
Resources and Proposals On Curbing Medicare
By Kaiser Health News
As lawmakers prepare for a new round of
battles over health care spending, Kaiser Health News offer
resources on various proposals to control Medicare costs.
"Path to Prosperity" 2012 Budget Proposal
All Americans will pay more
because of this broken Medicaid system – and not just in higher taxes.
Because Medicaid’s reimbursement rates have been ratcheted down to
below-market levels, the care that Medicaid patients receive is often
substandard. Recent studies have indicated that Medicaid patients are
more likely to die after coronary artery bypass surgery, less likely to
get standard care for blocked heart arteries, and more likely to die
from treatable cancer, than those with other coverage options. By some
measures, such as in-hospital death rates following major surgeries,
Medicaid patients fared even worse than the uninsured.
Medicaid has fostered a
two-tiered hierarchy within the health-care marketplace that stigmatizes
Medicaid enrollees, and its perverse funding structure is exacerbating
budget pressures at the state and federal level, while creating a
mountain of waste. With administrators looking to control costs and
providers refusing to participate in a system that severely
under-reimburses their services, Medicaid beneficiaries are ultimately
left navigating an increasingly complex system for even the most basic
procedures. Absent reform, Medicaid will not be able to deliver on its
promise to provide a sturdy health-care safety net for society’s most
The key to the welfare reform
of the late 1990s was Congress’s decision to grant states the ability to
design their own systems. It is now time to grant them the same
flexibility with regard to Medicaid.
Stopping the Abuse Of
Medicaid By Repealing The Health Care Law
One of the most problematic
aspects of the health care law enacted last year is that it puts an
additional 20 million Americans by 2019 into a Medicaid system that is
Medicaid is failing the 50
million Americans it already serves. A growing number of physicians and
hospitals will no longer accept large numbers of Medicaid patients, as
federal and state governments have reduced reimbursement rates to the
point where doctors are losing money every time a Medicaid patient walks
through their doors. Pushing even more people into this broken system
will only put additional strain on those provider networks that are
still willing to take Medicaid patients. The result will be poor-quality
care and long waits for vulnerable citizens.
Medicaid is putting too much
strain on federal and state budgets as it is. State budgets are strained
to the breaking point by a Medicaid system that doesn’t work, and the
federal government’s share of the burden is unmanageable. The new health
care law would make this problem worse by increasing federal spending by
$627 billion over the next decade, according to CBO. And according to
Medicaid’s non-partisan chief actuary, state spending is projected to
grow to over $327 billion by 2019.
The new law makes bad
incentives worse, not better. Making matters worse, the federal
government will temporarily pay 100 percent of the costs of new
enrollees, reducing incentives for states to control Medicaid costs.
This window of more generous federal funding will encourage states to
add as many new people to their Medicaid rolls as they can while the
federal government is picking up the tab. However, states will
eventually be on the hook for additional costs.
The way forward in Medicaid is
to follow the reforms included in this budget, not expand a broken
program. Repealing the new law and replacing it with true,
patient-centered reforms will better serve Medicaid patients while
contributing to solvency of federal and state budgets.
Offering states more
flexibility for their Medicaid beneficiaries will remove the stigma
Medicaid recipients face, and allow them to take advantage of a range of
options available. Several of the nation’s governors have made
innovative proposals to fix Medicaid. This budget encourages further
efforts in this direction.
Saving Medicare - Major
• Save Medicare for current
and future generations while making no changes for those in and near
retirement. For younger workers, when they reach eligibility, Medicare
will provide a Medicare payment and a list of guaranteed coverage
options from which recipients can choose a plan that best suits their
needs. These future Medicare beneficiaries will be able to choose a plan
the same way members of Congress do. Medicare will provide additional
assistance for lower-income beneficiaries and those with greater health
• Ensure that the cost of
frivolous litigation is not passed on to consumers in the form of higher
health-care premiums by capping non-economic damages in medical
• Stop the raid on the
Medicare trust fund that was going to be used to pay for the new health
care law. Any current-law Medicare savings must go to saving Medicare,
not financing the creation of new open-ended health-care entitlements.
• Fix the Medicare physician
payment formula for the next ten years so that Medicare beneficiaries
continue to have access to health care.
With the creation of Medicare
in 1965, the United States made a commitment to help fund the medical
care of elderly Americans without exhausting their life savings or the
assets and incomes of their working children and younger relatives. In
urging the creation of Medicare, President Kennedy said that such a
program was chiefly needed to protect, not the poor, but people who had
worked for years and suddenly found all their savings gone because of a
costly health problem.
Created with the mission of
providing health coverage for America’s retirees, Medicare’s structural
imbalance threatens beneficiaries’ access to quality, affordable care. A
flaw in the structure of the program is driving up health care costs,
which are, in turn, threatening to bankrupt the system – and ultimately
Unless Congress fixes what’s
broken in Medicare, without breaking what’s working, the program will
end up causing exactly what it was created to avoid – millions of
American seniors without adequate health security and a younger working
generation saddled with enormous debts to pay for spending levels that
cannot be sustained.
The Medicare program attempts
to do two things to make sure that all seniors have secure, affordable
health insurance that works. First, recognizing that seniors need extra
protection when it comes to health coverage, it pools risk among all
seniors to ensure that they enjoy secure access to care. This budget
strengthens and enhances this aspect of Medicare so that seniors will
have more health-care choices within the same stabilized risk pool.
Second, Medicare subsidizes
coverage for seniors to ensure that coverage is affordable.
Affordability is a critical goal, but the subsidy structure of Medicare
is fundamentally broken and drives costs in the opposite direction. The
open-ended, blank-check nature of the Medicare subsidy drives
health-care inflation at an astonishing pace, threatens the solvency of
this critical program, and creates inexcusable levels of waste in the
Politicians’ repeated efforts
to patch this problem without reforming the structure of the subsidy
have amounted to one failure after another. Time and again, Congress has
applied band-aids to control costs by reducing the rate at which doctors
and hospitals are reimbursed for treating Medicare patients. These
repeated fee reductions have had two consequences: Providers have either
increased the volume of services they provide for each condition,
leading to waste, fraud and abuse; or they have stopped accepting
Medicare patients, limiting access for seniors.
Despite these repeated fee
reductions, the rising cost of Medicare has continued unabated. Today,
Medicare spending is growing at a rate of 7.2 percent every year. This
is more than twice as fast as this nation’s economy is growing. The
unchecked growth of the Medicare program cannot be sustained –
eventually, it will threaten not just the affordability of coverage for
seniors, but also the security that comes with knowing that coverage can
be obtained at any price. Letting government break its promises to
current seniors and to future generations is unacceptable.
The reforms outlined in this
budget protect and preserve Medicare for those in and near retirement,
while saving and strengthening this critical program so that future
generations can count on it to be there when they retire.
This budget ends the raid on
the Medicare trust fund that began with passage of the new health care
law last year. It ensures that any potential savings in current law go
to shore up Medicare, not to pay for new entitlements. In addition to
repealing the health care law’s new rationing board and its unfunded
long-term care entitlement, this budget stabilizes plan choices for
This budget also achieves
savings by advancing common-sense curbs on abusive and frivolous
lawsuits. Medical lawsuits and excessive verdicts increase health care
costs and result in reduced access to care. When mistakes happen,
patients have a right to fair representation and fair compensation. But
the current tort litigation system too often serves the interests of
lawyers while driving up costs.
This budget fixes the Medicare
physician payment formula for the next ten years so that Medicare
beneficiaries continue to have access to health care. It provides for a
reimbursement system that fairly compensates physicians who treat
Medicare beneficiaries while providing incentives to improve quality and
Finally, this budget will save
Medicare for future generations, protecting those in and near retirement
from any changes while forging for younger workers a Medicare program
modeled on the system of affordable, quality health coverage options now
enjoyed by members of Congress.
Premium support – a better
way to deliver secure benefits
Starting in 2022, new Medicare
beneficiaries will be enrolled in the same kind of health care program
that members of Congress enjoy. Future Medicare recipients will be able
to choose from a list of guaranteed coverage options, and they will be
given the ability to choose a plan that works best for them. This is not
a voucher program, but rather a premium-support model.
A Medicare premium-support
payment would be paid, by Medicare, to the plan chosen by the
beneficiary, subsidizing its cost. The premium-support model would
operate similar to the way the Medicare prescription-drug benefit
program works today. The Medicare premium-support payment would be
adjusted so that wealthier beneficiaries would receive a lower subsidy,
the sick would receive a higher payment if their conditions worsened,
and lower-income seniors would receive additional assistance to cover
Stopping the Raid On
Medicare By Repealing The Health Care Law
The health-care law last year
was emblematic of the wrong way to fix the problems with Medicare.
First, it raided the program to fund a new, unsustainable, open-ended
health-care entitlement. Second, it created a government panel with the
power to save money by rationing care and restricting access to
The federal government cannot
spend the same dollar twice. The trillion-dollar overhaul of the U.S.
health-care sector enacted by the last Congress was filled with gimmicks
and double-counting to hide its true cost. The most egregious example of
this was the way the overhaul’s supporters claimed that it would both
shore up the Medicare trust fund and offset the cost of the expensive
new health-care entitlement that the new law created.
The President himself
announced that the new law "actually added at least a dozen years to the
solvency of Medicare," while also claiming that it wouldn’t add to the
deficit. But at the House Budget Committee’s first hearing of the year,
Medicare's chief actuary, Rick Foster, testified that it would be
impossible for the new law to do both unless the savings were
"Both will happen as a result
of the same one set of savings, under Medicare," Foster explained. "But
it takes two sets of money to make it happen… when we need the money to
extend the Hospital Insurance Trust Fund, we have a promissory note… and
Treasury has to pay that money back. But they have to get it from
somewhere. That’s the missing link."
Rationing is an inferior
solution to Medicare’s problems. There are two ways to control health
care spending: Give bureaucrats more control to ration care, or give
patients more power to reward providers who deliver high-quality,
low-cost care (and deny business to those who fail to provide quality,
The new health care law
empowers bureaucrats at the expense of patients and providers, setting
up an unelected board of “experts” – the Independent Payment Advisory
Board, or IPAB – tasked with squeezing savings out of Medicare through
formulaic rationing. One-size-fits-all decisions to restrict certain
treatments punish beneficiaries by hitting all providers of the same
treatment with acrossthe- board cuts, with no regard to measures of
quality or patient satisfaction.
This budget would eliminate
IPAB and stop the raid on Medicare. Then, after ensuring that
current-law savings go to shore up Medicare for those in and near
retirement, this budget makes sure that the program is there for future
generations by adopting a better way to control costs – through true
choice and competition, ensuring that patients and doctors are at the
center of health care in the United States.
This approach to strengthen
the Medicare program ensures security and affordability for seniors now
and into the future. First, it ensures security by setting up a tightly
regulated exchange for Medicare plans. Health plans that choose to
participate in the Medicare exchange must agree to offer insurance to
all Medicare beneficiaries, to avoid cherry-picking and ensure that
Medicare’s sickest and highest-cost beneficiaries receive coverage. This
reform builds upon the bipartisan Rivlin-Ryan Medicare reform plan
advanced in the President’s Fiscal Commission in 2010.
While there would be no
disruptions in the current Medicare fee-for-service program for those
currently enrolled or becoming eligible in the next ten years, all
seniors would have the choice to opt into the new Medicare program once
it begins in 2022. No senior would be forced to stay in the old program.
This budget gives seniors the freedom to choose a plan that works best
for them and guarantees health security throughout their retirement
These reforms also ensure
affordability by fixing the currently broken subsidy system and letting
market competition work as a real check on widespread waste and
skyrocketing health-care costs. Putting patients in charge of how their
health care dollars are spent will force providers to compete against
each other on price and quality. That’s how markets work: The customer
is the ultimate guarantor of value.
For too long in the Medicare
system, the federal government, not the patient, has been the customer –
and the government has been a clumsy, ineffective steward of value.
Controlling costs without limiting access or sacrificing quality has
proved to be an impossible task for government bureaucrats. In a vain
attempt to get control of the waste in the system, Washington has made
across-the-board payment reductions to providers without regard to
quality or patient satisfaction. It hasn’t worked. Costs have continued
to grow, seniors continue to lose access to quality care, and the
program remains on a path to bankruptcy. Absent reform, Medicare will be
unable to meet the needs of current seniors or future generations.
In health care, as in any
other economic arrangement, control of money is power. When it comes to
controlling health-care costs and saving the nation from bankruptcy, the
question is: Who gets the power? One centralized federal government, or
50 million empowered seniors holding providers accountable in a true
marketplace? Patient power will always serve the needs of the people far
better than bureaucrats managing the decline of a government-run system
on the verge of bankruptcy.
Reform aimed to empower
individuals — with a strengthened safety net for the poor and the sick —
will not only ensure the fiscal sustainability of this program, the
federal budget, and the U.S. economy. It will also guarantee that
Medicare can fulfill the promise of health security for America’s
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