Shifting Health Costs Does Not Actually Lower The Growth Of Health Care Spending

Rep. Paul Ryan’s (R-WI) budget would find savings in the Medicare program by shifting a greater share of its costs to beneficiaries, who would receive a fixed “premium support” credit to go out and purchase health care in an exchange of private health care plans. According to the Congressional Budget Office, under the Ryan plan, “a typical beneficiary would spend more for health care…[because] private plans would cost more than traditional Medicare.” ”This would more than double out-of-pocket health-care spending by a typical senior to $12,500 per year.”

Ryan’s isn’t the only proposal to lower the growth in Medicare spending that’s asking seniors to pay more, and that’s precisely what has health care advocates so concerned. They point out that nearly “half of Medicare recipients have incomes at or below 200 percent of poverty — $21,780 for an individual, $29,420 for a couple” and that many simply can’t afford to spend more on health insurance:

Only 5 percent of Medicare beneficiaries have incomes of $80,000 or above, a figure that includes any income from a spouse. As for the 47 percent who are at or close to poverty, on average they are already spending nearly a fourth of their budgets on health care, according to an analysis of Medicare survey data by the Kaiser Family Foundation.

“There’s this impression that there’s a great deal of wealth among the Medicare population, this image of wealthy seniors playing golf and enjoying their retirement years,” said Tricia Neuman, director of the Kaiser Family Foundation’s Medicare Policy Project. “But while some are lucky to do so, many are living on a fixed income, struggling to make ends meet…with really limited capacity to absorb rising costs.”

Last week, the LA Times’ Noam Levey observed that saving costs by shifting them from the federal government to beneficiaries — once seen as taboo — has become all the rage in Washington, with pundits eagerly applauding the bold “leadership” and “tough decisions” of such proposals. They would do well to note, however, that many of the beneficiaries being asked to pick up the costs have less than $50,000 in savings, and that shifting costs don’t actually address the problem of unsustainable health care costs — it only does what it says, shifts them.