House Passes Budget Plan Shaking Up Medicare, Medicaid

March 30, 2012

March 30, 2012 — In the wake of this week’s Supreme Court hearings on the Affordable Care Act (ACA) that left its survival in doubt, the GOP-controlled House yesterday approved a budget that would repeal healthcare reform and partially privatize Medicare.

The measure comfortably passed in a 228-191 vote, but it faces impossible odds in a Democrat-controlled Senate, and a veto-wielding White House already has given it a failing grade.

Besides repealing the ACA, the bill would give new Medicare beneficiaries beginning in 2023 a choice between traditional fee-for-service Medicare and any number of approved private health plans. If a senior chooses to go with a private plan, the government would help him or her pay for it by giving the plan a “premium support payment.” Americans who are sick and poor would receive more assistance. In addition, the eligibility age would be gradually raised from 65 to 67.

House Republicans say the plan will save Medicare from going broke while Democrats say it will “end Medicare as we know it.” They predict that seniors would shoulder a far greater share of their healthcare costs, particularly because premium support payments to private insurers will not buy them the equivalent of the Medicare benefits they enjoy now.

Curb on Federal Healthcare Spending

The budget bill also would shake up Medicaid, which although operated by the states is funded mostly with federal dollars. The federal contribution to state Medicaid programs would take the form of block grants, which the GOP contends would give states more flexibility in running their programs.

The block grants would grow on the basis of general inflation and a state’s population, but not as fast as they would under current law, which also pegs federal Medicaid dollars to the volume, complexity, and cost of medical services, according to a 2011 analysis from the Congressional Budget Office (CBO). As a result, “the large projected reductions in payments would probably require states to decrease payments to Medicaid providers, reduce eligibility for Medicaid, provide less extensive coverage to beneficiaries, or pay more themselves.”

The proposed changes to Medicare and Medicaid and the Children’s Health Insurance Program would curb federal spending on healthcare. In 2023, it would represent 5% of the gross domestic product (GDP) under the House plan as opposed to 6.8% if healthcare reform goes forward.

All in all, the federal budget deficit would gradually shrink under the bill, taking into account other budget cuts as well as an overhaul of the tax code, according to the CBO. The federal budget deficit in 2023 would represent roughly 1.3% of GDP compared with 1.8% if the status quo prevails. By 2040, the federal budget would be back in the black.

Democrat Blowback

In May 2011, the Democrat-controlled Senate voted down a House budget plan that also would have block-granted Medicaid and turned Medicare into a premium-support program with no option for traditional Medicare.

A replay of last year’s vote is shaping up. Sen. Max Baucus (D-MT) said that the new House proposal, again crafted by Rep. Paul Ryan (R-WI), the chair of the House budget committee, would give tax breaks to millionaires at the expense of seniors and the middle class.

“I won’t let us break our promise to America’s seniors,” said Baucus, chair of the Senate finance committee, in a statement last week. “The Ryan plan would dismantle Medicare and would end our fundamental promise to America’s seniors to provide reliable, guaranteed, affordable health care.” 

The Obama administration released its own statement of castigation yesterday.

“House Republicans today banded together to shower millionaires and billionaires with a massive tax cut paid for by ending Medicare as we know it and making extremely deep cuts to critical programs needed to create jobs and strengthen the middle class,” the White House said.

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