After initially offering a proposal that would convert the existing Medicare system into a voucher program, Rep. Paul Ryan (R-WI) has recently backed away from the v-word and has instead begun referring to his proposal as “premium support.” But today, after a speech at the American Enterprise Institute (AEI), Ryan clarified to the Washington Examiner’s Phil Klein that “premium support” is essentially a euphemism for voucher:

KLEIN: You’ve made a point of drawing a distinction between vouchers and premium support. Now, while I get the mechanical difference, that they wouldn’t be a voucher that people would then purchase insurance with, it would go to the plans that they choose, but though there is a mechanical difference, it is hard to see what the effective economic difference would be.

RYAN: It achieves a similar scoring result. So, they achieve the same kind of savings path. My Roadmap does have vouchers, but I worked with Alice Rivlin…we agreed on a structure that is not the voucher structure, but is a premium support structure. So it mechanically works a lot different and CBO calls it not a voucher, but premium support. The whole point is it works more like programs people are already familiar with. It works like the Part D benefit seniors are familiar with, it works like the Federal Employee Benefit Plan, that I’m very familiar with as a federal employee and it’s important to make these distinctions, I think….from a budget standing standpoint…it achieves the same result.

Watch it:

First, it’s good to hear Ryan agree that his premium support proposal is almost identical to a voucher in all but the most mechanical of ways — sending the voucher to the insurer rather than the beneficiary would also help decrease instances of fraud and probably save extra money — and as such it will provide seniors with a predetermined amount to purchase private coverage: $8,000 in 2022. All of the financial risk is shifted from the federal government to the beneficiaries and if premiums suddenly increase, seniors would have to pay the difference between the rise in premiums and the $8,000 contribution, making coverage unaffordable. (And it will be increasingly so since the voucher does not keep up with health care spending.)

Secondly, Ryan can continue to say that this system is identical to FEHBP or Medicare Part D, but that won’t make it any more true. Both D and FEHBP reflect increases in premium levels. Ryan, meanwhile, is constraining the rate of growth — seniors will only get a predetermined amount — regardless of the actual growth of costs.

Rep. Paul Ryan (R-WI) is arguing that his plans to reform Medicare and Medicaid would give seniors more control over their health care decisions, all the while lowering federal expenditures and preserving the integrity of the social safety net. Beginning in 2022, seniors will purchase coverage from a variety of private insurers, which will receive a set “premium support” from the federal government. States, meanwhile, will depend on a block grant that would be lower than the present federal match and would require some states to either increase spending or reduce services and/or eligibility.

In both cases, seniors and states would have to shoulder more of the risks and costs of coverage, as economic risk will be shifted from a broad spectrum of society onto individual beneficiaries and states. Below are seven consequences of Ryan’s Medicare and Medicaid budget proposals:

MEDICARE

1. SENIORS WILL PAY MORE FOR THE SAME BENEFITS: Ryan claims that lower income seniors would receive more assistance, but under the budget, seniors who will be forced to choose from an array of private insurers would still have to pay more for the same amount of coverage than if they simply stayed in the traditional Medicare program. Private insurers carry extra cost, as a comparison of traditional Medicare and private insurers in Medicare Advantage demonstrates. Both operate under the same rules and enroll the same population, but according to the Congressional Budget Office, traditional Medicare spends less than 2 percent of expenditures on administrative costs, while private plans in Medicare Advantage spend approximately 11 percent on additional expenditures like profits. As the CBO concluded, “future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.” Moreover, lower income seniors generally have poorer health and therefore need more care. Currently, they are charged higher out of pocket costs by private insurers in Medicare Advantage that traditional Medicare. [CBO, 12/2006, 11/2010, Commonwealth Fund]

2. INSURERS WILL LIKELY CHERRY-PICK THE HEALTHIEST ENROLLEES: Insurers would be encouraged to design policies that attract a healthier segment of the Medicare population by either advertising certain health benefits (like gym memberships) while under promoting benefits (like cancer treatment) that would enlist sicker applicants. This would lead to an “adverse selection” problem in which healthier beneficiaries will gravitate towards certain plans, increasing the costs for sicker individuals who need a broad range of services. [KFF, 2/2002]

3. COSTS WILL INCREASE IN TRADITIONAL MEDICARE: Ryan claims that seniors would have “freedom to choose a plan that works best for them” — including the existing Medicare program– but historically, private plans participating in Medicare have enrolled healthier than average enrollees, leading the traditional health care plan to experience adverse selection that causes premiums to increase. If healthier enrollees opt out for private plans in great numbers, most beneficiaries will be priced out of their existing coverage. According to researchers at the Kaiser Family Foundation, a premium support scheme would “result in a large erosion of the Medicare fee-for-service program,” despite government attempts at adjusting risk selection. [KFF, 2/2002]

4. SENIORS WILL NOT BE ABLE TO EASILY ‘CHOOSE A PLAN THAT BEST SUITS THEIR NEEDS’: Ryan claims that he will provide seniors with “a list of guaranteed coverage options,” but seniors may have a hard time choosing and discerning between different health care plans, potentially enrolling in a plan that does not work well for them. According to a recent study of private options in Medicare Part D, “older adults were less likely to identify the plan that minimized their total annual cost and were likely to mistakenly think they had chosen the lowest-cost plan.” [Health Services Research, 5/26/2009]

5. SENIORS WILL NOT HAVE THE SAME EXCHANGE AS MEMBERS OF CONGRESS: Ryan constrains the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government’s contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula “is known as the ‘Fair Share’ formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.” The difference is that the GOP’s proposal provides seniors with a set amount of money that, in order to reach the kind of savings he’s advertising, would have to depreciate every successive year — even as health care costs increase. Also, because the Medicare population is older and sicker than the FEHBP population, health insurance funds will make efforts to limit benefits and their payouts. [OPM]

MEDICAID

6. BLOCK GRANTS WOULD DESTROY MEDICAID: States would receive an annual federal appropriation that would be less than current projected growth of the program, forcing state governments to make up the difference by increasing spending or (more realistically) capping enrollment, cutting eligibility, limiting mandatory benefits and lowering provider reimbursements. As the CBO put it in examining Rep. Paul Ryan’s (R-WI) Medicaid block grant proposal: “reducing federal payments for Medicaid relative to currently projected amounts would probably require states to provide less extensive coverage, or to pay a larger share of the program’s total costs, than would be the case under current law.” [CBO, 11/2010]

7. VITAL SERVICES ENDANGERED Despite its problems, Medicaid provides vital long-term care and acute care services to elderly and disabled beneficiaries efficiently (in fact, two-thirds of program costs are spend on seniors and people with disabilities). After controlling for health status (since Medicaid enrollees tend to have greater health care needs), it costs more than 20 percent less to cover low-income people in Medicaid than it does to cover them in private health insurance. The program also protects low-income Americans from uncontrollable out-of-pocket costs charged by private insurers and “covers services not usually covered in private health insurance.” In 2011, over 69.5 million Americans will benefit from the program and according to a recent Kaiser Family Foundation poll, 59 percent of the American people said Medicaid was either “very important” to them or their families or “somewhat important.” An Urban Institute policy brief also concluded that on a per enrollee basis, “growth in Medicaid spending (the national average, not necessarily specific states) is slower than both growth in national health expenditures per capita and increases in private health insurance premiums.” [Families USA, KFF, 4/05/2011, Urban]

Rep. Paul Ryan (R-WI) compares his Medicare premium support reform to the Federal Employees Health Insurance Plan (FEHBP), a government-run health care exchange that gives federal employees a wide choice of private health insurance coverage. “We’re moving Medicare into a system that is identical to the system I have as a Congressman and all federal employees have” Ryan told CBS this morning, stressing that seniors will have the same kinds of private options “that members of Congress enjoy.” He makes this point more fully in this morning’s Wall Street Journal:

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.

It’s the same rhetoric that Democrats used to sell the health care exchanges that are part of the Affordable Care Act, but in Ryan’s case the comparison doesn’t hold up. Ryan is constraining the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government’s contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula “is known as the ‘Fair Share’ formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.” The difference is that Ryan’s proposal provides seniors with a set amount of money that, in order to reach the kind of savings he’s advertising, would have to depreciates every successive year — even as health care costs increase.

Ryan’s other selling point about increased assistance to lower income Americans is similarly misleading because seniors who will be forced to choose from an array of private insurers would still have to pay more for the same amount of coverage than if they simply stayed in the traditional Medicare program. Private insurers carry extra cost, as a comparison of traditional Medicare and private insurers in Medicare Advantage demonstrates. Both operate under the same rules and enroll the same population, but according to the Congressional Budget Office, traditional Medicare spends less than 2 percent of expenditures on administrative costs, while private plans in Medicare Advantage spend approximately 11 percent on additional expenditures like profits. As the CBO concluded, under Ryan’s plan, “future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.”

In other words, the savings that Ryan is boasting about would come from shifting more of the cost of health benefits to the beneficiary and moving seniors into less efficient health care coverage (and then leaving those costs for seniors to shoulder).

Throughout the health care debate, Republicans attacked reform as a raid on Medicare because it cut $500 billion from the program. But now as Rep. Paul Ryan (R-WI) introduces a new budget plan that would privatize Medicare completely, Republicans will have to square their previous attacks against ‘Obamacare’ with their endorsement of Ryan’s plan. This morning on NBC’s today show, RNC Chairman Reince Priebus audaciously tried to have it both ways — criticizing Obama for cutting Medicare subsidies while endorsing Ryan’s Medicare-busting proposal:

PRIEBUS: [Obama] has completely trashed Medicare by raiding it by $500 billion to provide us a government-run health care program that nobody wants. [...] I think even the hardest Democrats would agree that if we don’t get serious about where Medicare, and Social Security and Medicaid are going in this country, then we are about to walk off a fiscal cliff. [...]

Paul Ryan and Speaker Boehner introducing a serious as a heart attack budget this morning that will tackle $6 trillion over the next ten years in spending in this country. It’s the Republicans that are serious about these issues. It’s the President that’s filling out NCAA brackets, going to the Jonas Brothers and golfing and not tackling any of these issues and only criticizing Republicans.

Watch it:

Preibus is not the only Republican to criticize Democrats for cutting Medicare:

- SPEAKER JOHN BOEHNER (R-OH): “Democrats are peddling talking points that are directly contradicted by their actual legislation. They are holding a press conference to pat themselves on the back for ‘protecting’ Medicare, even though their government takeover of health care bill would cut seniors’ Medicare benefits by $500 billion. Are you kidding me?” [10/30/2009]

- MAJORITY LEADER ERIC CANTOR (R-VA): “It’s paid for on the backs of seniors, which cuts Medicare by over $500 billion.” [Fox and Friends, 11/4/09]

- REP. PAUL RYAN (R-WI): “In order to pay for the trillion dollar health care overhaul making its way through Congress, hundred of billions of dollars will come from new tax hikes, hundreds of billions of dollars will be borrowed, and hundreds of billions of dollars will be cut from Medicare. I realize that the President promised not to cut Medicare benefits, but the proposed bills do exactly that. [10/1/2009]

- REP. DAVE CAMP (R-MI): “And let me just say, seniors’ health is too important to risk on one gigantic bill that cuts a half a trillion dollars in Medicare, that’s being drafted in secret behind closed doors.” [10/28/09]

Indeed, the two approaches are very different. Ryan would cut Medicare by simply “reducing the amounts that the federal government would pay for enrollees on a per capita basis” — i.e. cutting the federal government’s contribution to the program and shifting those costs on the individual. The Affordable Care Act slows growth in the program by eliminating overpayments to private insurers, getting rid of waste in the program and slowly phasing in payment adjustments that encourage providers to deliver care more efficiently. As a result the law extends the life of the Medicare trust fund by 12 years and allows seniors to retain all of their guaranteed Medicare benefits.