House GOP Budget Would Repeal ACA, Voucherize Medicare

March 12, 2013

In a replay of the 2012 presidential campaign, House Republicans today released a proposed budget for fiscal 2014 that would repeal the Affordable Care Act (ACA), partially privatize Medicare, block-grant Medicaid, and when all is said and done, reduce the federal deficit by $4.6 trillion over 10 years, leading to a balanced budget in 2023.

Congress has "to fix our entitlements and to grow our economy" to avoid a debt crisis, said Rep. Paul Ryan (R-WI), who chairs the House budget committee, in an introduction to the document.

"By living beyond our means, we're stealing from the next generation," said Ryan. "By promising a higher standard of living today, the federal government is guaranteeing a lower standard of living tomorrow."

The GOP budget, which also advocates lower taxes and a smaller federal government, reiterates stances taken by Mitt Romney and Ryan, his vice presidential running mate, in their unsuccessful bid for the White House last fall.

The Democratic response to the Republican proposal echoed the party's 2012 campaign rhetoric. Senate Majority Leader Harry Reid (D-NV), said today that Ryan's "extreme budget" calls for "more tax breaks for the wealthy, an end to Medicare as we know it, and draconian cuts to education and other programs." The Obama administration, which seeks a combination of tax hikes and spending cuts, issued a statement saying that the budget would reduce the deficit at the expense of the middle class while sparing the wealthy.

The Republican and Democratic positions on entitlement reform, taxation, and deficit reduction have been as fixed and ferociously defended as World War I trenches through the presidential election, the fiscal-cliff crisis at the end of 2012, and unsuccessful efforts to avoid automatic, across-the-board budget cuts called sequestration that took effect March 1. The stalemate promises to continue as Senate Democrats are expected to release a budget plan later this week said to reduce the deficit by $1.85 trillion over 10 years, in part by raising roughly $1 trillion in new taxes. The Republican-controlled House can vote down any budget passed by the Democrat-controlled Senate, and vice versa. And President Obama can veto anything he dislikes.

In the short term, the dueling budgets could set the stage for a temporary compromise to fund government operations beyond March 27, when a continuing appropriations resolution expires, and undo sequestration as well.

Competition as a Cure for Medicare

Consistent with its position since 2010, the House GOP budget calls for the repeal of the 3-year-old ACA, and several provisions in particular:

  • Medicaid expansion : "It puts more people into a broken system," stated the Republican proposal.

  • Exchange subsidies : The ACA mandates that individuals obtain health insurance coverage and provides those in financial need with premium subsidies. House Republicans maintain that federal subsidies, together with the individual mandate and restrictions on what health plans can be purchased, will "weaken the private-insurance market."

  • Independent Payment Advisory Board (IPAB) : Republicans claim that IPAB, created to curb the growth of Medicare spending, will ration healthcare. The law forbids IPAB from doing that very thing.

The GOP budget spends considerable ink on overhauling Medicaid and Medicare, but none of the proposals appear to be new.

Republicans want to curb the growth of Medicaid spending by turning an open-ended federal contribution to state programs into a fixed block grant adjusted for inflation and population growth. In addition, states would receive more leeway in running their Medicaid programs, a contrast to what the budget plan calls a "misguided, one-size-fits-all approach" now in place. Critics of block-granting Medicaid point out that states would be tempted to cut benefits and provider reimbursement when an economic downturn swells Medicaid rolls and federal assistance does not increase on a commensurate basis as it does now.

Perhaps the most controversial healthcare plank of the House GOP budget is giving Americans born in 1959 and later a choice between traditional fee-for-service Medicare and a private Medicare plan, like those now offered under Medicare Advantage. The private plans must at least match traditional Medicare in terms of benefits. Medicare would provide a "premium-support payment" that Americans could spend on their choice of plan. Democrats say it amounts to a voucher, although the payment would go straight from the government to the health plan, as opposed to going through the individual.

Sicker seniors would receive a higher payment. At the same time, means-testing would jack up Medicare premiums for high-income seniors.

The premium-support payment would be pegged to a so-called benchmark health plan, which would be either the second-least-expensive private plan, or traditional Medicare, whichever costs less. Seniors who pick a plan costlier than the benchmark would have to make up the difference. If they choose a plan beneath the benchmark, the government would pay them a premium rebate.

Republicans believe this exercise in marketplace competition will succeed in controlling Medicare costs where government regulations and price controls haven't. In the past, Democrats have predicted that seniors would bear a heavier share of their healthcare costs in this arrangement, particularly because premium-support payments — in their analysis — will not buy them the equivalent of current Medicare benefits if they choose a private plan. During the 2012 presidential election, Obama warned that if Republicans have their way, seniors would be "at the mercy of insurance companies."

The House GOP budget contains one more favorite healthcare reform — caps on noneconomic and punitive damages in medical malpractice cases. Democrats have opposed such caps because they supposedly weaken a citizens' constitutional right to a trial by jury, which sets damages.

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