Budget Conference an Excellent Opportunity
to Examine Rep. Ryan’s ‘Entitlement’ Proposals
Editor’s Note: Another gigantic battle seems
eminent as Republicans are expected to continue
their efforts to cut the entitlement programs of Social Security,
Medicare and Medicaid. This is a look at the strategy of Paul Ryan, GOP
House Budget Chairman; 10th Anniversary for Center for American Progress
- see video
Oct. 24, 2013 - At the 11th hour, Congress bought itself some time
to find a sensible path forward - a path that a majority in both houses
can support and the president can sign. This should be an opportunity to
step back from the partisan struggle and look at the budget options and
alternatives that people on both sides bring to the table.
Committee Chairman Paul Ryan (R-WI), who will lead the negotiations for
the House, has indicated that “entitlement reform” will be at the top of
his agenda. Committee members should listen carefully to what he has to
say and encourage him to provide more details than he has so far offered
on how his proposed savings would be accomplished and how they would
affect program beneficiaries and their families.
Rep. Ryan is correct in saying that if we are going
to reduce the deficit through spending cuts, we have to take the lion’s
share of those cuts from entitlement programs, specifically the three
major retirement programs: Social Security, Medicare, and Medicaid. As
an August report from
the Center for American Progress shows, even before Baby Boomers started
turning 65, these three programs accounted for all of
the real per capita growth in federal spending over the past quarter
Spending for discretionary programs - which are what we normally
think of as the government, with its 15 departments and several dozen
independent agencies - has declined by 4 percent since 1988 when adjusted
for inflation and population growth. Spending for Social Security,
Medicare, and Medicaid, however, has doubled over that same timeframe.
Spending on actual government activities now accounts for only 30
percent of federal spending, while the checks Washington sends to
retirees, bond holders, and other beneficiaries make up the remainder.
Speaker Boehner says on ABC that the fight in
Washington is really about the growth in the senior citizen population…
the important goal is reducing entitlement spending; may push for cuts
that President Obama earlier suggested
Looking forward over the next 10 years, Social
Security, Medicare, and Medicaid will grow even more rapidly, simply
because the elderly population will be growing so rapidly while
discretionary programs are already slated to shrink dramatically.
discretionary spending accounted for 9 percent of gross domestic
product, or GDP, in 1988 - the last year of the Reagan administration - but
accounts for only 7 percent today. The Congressional Budget Office, or CBO, projects that
this number will drop to 5.5 percent by 2023. CBO also forecasts that
federal spending will reach 23 percent of GDP by 2023 and 24 percent
later in that decade - all because of the cost of retirement programs and
the interest we will pay on the borrowing necessary to support them.
Rep. Ryan’s proposal for changes in the tax law
will result in revenues equal to only 19 percent of GDP, so we will have
a deficit of about $1 trillion - or more than 4 percent of GDP - by 2023. To
close that 4 percent gap without raising revenues, we will have to pare
back these three big retirement programs by close to $1 trillion a year.
That will be about one-third of what we are projected to be spending on
those programs by that year.
If we made those savings across the board, hitting
each program and beneficiary by the same amount, we would have to cut
the average monthly Social Security check from about $1,270 to $830.
Medicare would need to cut costs in the only way it can, reducing the
portion of elderly medical costs covered by the program and passing the
costs that are no longer covered on to the beneficiaries. Younger
retirees now pay an average of about $350 a month in out-of-pocket
medical expenses not covered by Medicare. That amount might easily
double if payments made by Medicare were cut by one third.
Rep. Ryan and his colleagues have promised not to
touch Social Security, which means they have to make much bigger cuts in
Medicare and Medicaid. Based on CBO’s analysis of
Rep. Ryan’s proposal in 2011, current retirees would not be affected by
the proposal, but those turning 66 after 2023 would be included in the
CBO believes that because Rep. Ryan would put new
beneficiaries under private insurers, the cost of their health care,
including insurance premiums, would be about 40 percent to 50 percent
higher than the expected cost of health care under Medicare by 2023.
Furthermore, CBO estimates that the voucher Rep. Ryan would provide to
new beneficiaries would cover only 39 percent of the total health costs
under the plan, leaving beneficiaries to pick up the rest. As
out-of-pocket costs for current beneficiaries ages 65 to 69 currently
average about $350 per month, CBO estimates that out-of-pocket expenses
for new beneficiaries in 2023 would jump to about $870. That would leave
a typical Social Security beneficiary with only about $500 each month
from his Social Security check to meet living expenses other than health
Rep. Ryan has made numerous changes to his plan to
try to address some of these issues, but CBO has not rescored these
proposals either in terms of the savings that they would achieve or the
impact that they would have on beneficiaries.
Equally big problems exist with respect to the
reductions that Rep. Ryan proposes in federal support to state Medicaid
programs. A CAP analysis of
his first Medicaid proposal two years ago indicated that the burden that
would be handed over to the states would far outstrip state capacities
to generate the additional revenues necessary to sustain current
Medicaid services. This has a number of implications that deserve
For one, Medicaid covers the cost of 54 percent of
all child deliveries and an equal share of prenatal and postnatal care.
Failure to provide such care not only threatens the lives of expectant
mothers and their unborn children but could also be the most expensive
budget cuts in history, since such care has proven to dramatically
reduce low-weight births, birth defects, and other chronic conditions
that can dramatically impact government payments under a variety of
programs. Equally problematic is the fact that two-thirds of Medicaid
payments go to cover the health care of elderly and disabled people, who
can’t pay the out-of-pocket costs required under Medicare as it now
Rep. Ryan appears to be adding an additional burden
on Medicaid because of the increased out-of-pocket payments that he
would force Medicare beneficiaries to assume. More would be forced onto
Medicaid, and beneficiaries would be forced to turn to Medicaid earlier
in their life. But simultaneously, he is greatly reducing federal
payments to the states to cover Medicaid costs.
The majority of Medicaid funds that are spent for
the elderly and disabled are spent paying the high cost of long-term
care. Medicaid is in fact the long-term care program for all Americans
when everything else fails. Could it possibly continue to play that role
at the funding levels that Rep. Ryan is proposing? How would Medicaid’s
inability to provide long-term care to all who need it change lives not
just for the elderly but for their children and their grandchildren as
well? Are they prepared to assume that burden as part of the Republican
approach to deficit reduction?
The new round of budget talks gives the country a
chance to delve into these issues. Is there really support for these
proposals, or have the words “entitlement reform” helped shield
proposals from the scrutiny they deserve? It would be a great
dereliction of responsibility for Congress to move in the direction of
these policies without a clearer understanding of how much money they
would actually save and - equally importantly - how they would impact
beneficiaries. It would also be irresponsible for Congress to reject
them without a full hearing and without the public’s understanding as to
whether this is the right path forward.
Rep. Ryan deserves his day in court, and his
colleagues in Congress, as well as his fellow citizens, should be all
ears for the occasion.
Scott Lilly is
a Senior Fellow at the Center for American Progress.
Scott Lilly is a Senior Fellow at American
Progress who writes and researches in a wide range of areas including
governance, federal budgeting, national security, and the economy. He
joined the Center in March of 2004 after 31 years of service with the
United States Congress. He served as clerk and staff director of the
House Appropriations Committee, minority staff director of that
Committee, executive director of the House Democratic Study Group,
executive director of the Joint Economic Committee, and chief of staff
in the Office of Congressman David Obey (D-WI).
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