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Obama: GOP Budget ‘Will Ultimately End Medicare As We Know It’

By Igor Volsky on April 3, 2012 at 1:28 pm

"Obama: GOP Budget ‘Will Ultimately End Medicare As We Know It’"

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President Obama described the Republican budget proposed by Rep. Paul Ryan (R-WI) as “laughable” during a speech at the Associated Press Luncheon on Tuesday and said that Ryan’s Medicare “premium support” plan would “end Medicare as we know it.” In a preview of his general election pitch, Obama argued that the GOP blueprint cuts essential government programs that help lower and middle class Americans in order to pay for tax cuts that primarily benefit the rich, before laying out his opposition to the party’s Medicare and Medicaid reforms.

“We’re told that Medicaid would simply be handed over to the states,” Obama explained. “But here’s the deal the states would be getting. They’d have to be running these programs in the face of the largest cut to Medicaid that has ever been proposed.” According to the Center on Budget and policy Priorities, the Ryan budget would reduce federal spending on Medicaid by $810 billion and would provide states with smaller “block grants” to run their health care programs. “A cut that according to one nonpartisan group would take away health care for about 19 million Americans,” Obama said, before turning to the GOP’s proposal to transform Medicare into a premium support structure:

OBAMA: Instead of being enrolled in medicare when they turn 65, seniors to retire a decade from now would get a voucher that equals the cost of the second cheapest health care plan in their area. If Medicare is more expensive than at private plan, they will have to pay more if they want to enroll in traditional Medicare. If health care costs rise faster than the amount of the voucher, as, by the way, they have been doing for decades, that’s too bad. Seniors bear the risk. If the voucher is not enough to buy private plan with bit specific doctors and carry need, that’s too bad. Most experts will tell you the way this voucher plan encourages savings is not through better care or cheaper costs. The way these private insurance companies save money is by designing and marketing plans to attract the youngest and healthiest seniors, cherry picking, leaving the older and sicker seniors in traditional Medicare where they have access to a wide range of doctors and guaranteed care, but that makes the traditional Medicare program even more expensive and raises premiums even further. The net result is our country will end up spending more on health care and the only reason the government will save any money is at — is because we have shifted it to seniors. They will bear more of the costs themselves. It is a bad idea. It will ultimately end Medicare as we know it.

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Indeed, a Center for American Progress analysis of Congressional Budget Office (CBO) data finds that new Medicare beneficiaries could actually end up paying as much as $1,200 more per year by 2030 and $5,900 more per year by 2050 for health care benefits. The Republican budget would shift these costs to beneficiaries by limiting the growth in Medicare spending per beneficiary to growth in the economy plus 0.5 percentage points — a rate that is much slower than the projected growth rate under current law.

As a result, under their budget, CBO projects that average spending would rise to only $7,400 in 2030 and to only $11,100 in 2050. Since the Republican budget would convert Medicare spending into vouchers, these dollar amounts would be the amounts of the vouchers, on average. In other words, “CBO projects that government spending per beneficiary would be $1,200 lower in 2030 (the difference between $8,600 under current law and $7,400 under the Republican budget) and $5,900 lower in 2050 (the difference between $17,000 under current law and $11,100 under the Republican budget).”

The Republican budget never specifies how it planst to enforce its cap on Medicare spending and in the absence of any other enforcement mechanism, it’s likely that the cap would be enforced by limiting the amount of vouchers provided to beneficiaries. After all, we know that capping the vouchers is the clear policy goal of Republicans—we need look no further than the budget they proposed last year. The vouchers, therefore, would likely be capped at CBO’s projected spending per beneficiary under the Republican budget: $7,400 in 2030 and $11,100 in 2050. And since these amounts would be much lower than actual costs, beneficiaries would be left to pay the difference.

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