Our guest blogger is Topher Spiro, the Managing Director of Health Policy at the Center for American Progress.

Earlier this week the Center for American Progress released an analysis of the Republican budget’s Medicare plan, which would provide vouchers to beneficiaries to purchase either a private health insurance plan or the traditional Medicare plan. We pointed out that new beneficiaries could end up paying as much as $1,200 more per year by 2030 and $5,900 more per year by 2050. Here’s a detailed explanation of where those numbers come from.

The nonpartisan Congressional Budget Office analyzed the Republican budget and estimated its effect on average Medicare spending per beneficiary. Under current law, or CBO’s “baseline scenario,” CBO projects that average spending will rise from $5,500 today to $8,600 in 2030 and to $17,000 in 2050. (CBO converted all dollar figures to 2011 dollars to remove the effects of inflation and ensure appropriate comparisons over time.) These numbers reflect the projected trend in health care costs over time.

But the Republican budget would limit the growth in Medicare spending per beneficiary to growth in the economy plus 0.5 percentage points. That growth rate is much slower than the projected growth rate under current law. As a result, under the Republican 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 key question is: where would these cuts in government spending per beneficiary come from?

For all its self-congratulation for specificity, the Republican budget never specifies how its cap on Medicare spending would be enforced. Under current law, the Affordable Care Act limits growth in Medicare spending to growth in the economy plus 1 percentage point. That cap is enforced by a specific mechanism—an independent expert panel—that creates a strong incentive for Congress to act. But Republicans have disavowed any such mechanism.

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. What’s more, converting all Medicare spending into vouchers means that it would be difficult to limit Medicare spending by any other means.

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.

Of course, Republicans would argue that competition under premium support would lower actual costs below current law levels. But there’s scant evidence that competition alone would lower health care costs substantially. Why? Simply increasing competition among insurers would have little effect without addressing underlying health care costs and competition among health care providers. And even if competition did lower costs, it would only lower the level of costs—not the growth in costs over time.

The upshot is that it’s highly unlikely that competition would come anywhere close to lowering actual costs to the amount of the vouchers. And if competition doesn’t end up lowering costs at all, beneficiaries would be on the hook for $1,200 by 2030 and $5,900 by 2050.

The Affordable Care Act has produced $2.1 billion in prescription drug savings for nearly 4 million seniors and people with disabilities who were enrolled in Medicare Part D in 2011, a new Obama administration report finds. The savings are the result of a provision in the health care law that provides a 50 percent discount for brand-name drugs and 14 percent discount for generic brands to Medicare beneficiaries in the so-called “doughnut hole.” Seniors can expect greater savings as the law completely closes the coverage gap over time.

The average Medicare enrollee will save approximately $4,181 from 2011 to 2021, while those with high prescription drug costs could save as much as $15,710 over the same period. Those with low drug costs should save roughly $2,964:

The report identifies three other sources of savings for Medicare recipients: 1) premiums for Part B physician and certain other services are expected to increase at a slower rate, 2) beneficiary copayments and coinsurance under Part A and B will increase more slowly because the Affordable Care Act slows the rate of growth in payments to hospitals and other providers, and 3) offer seniors preventive services at no additional cost.

Yesterday, the administration announced that a growing number of seniors are enrolling in Medicare Advantage plans and are paying lower premiums as compared to last year.

– Fatima Najiy

Rick Santorum promised to expedite the implementation of Rep. Paul Ryan’s (R-WI) Medicare privatization plan during a town hall in Northfield, New Hampshire this afternoon, saying that today’s seniors should receive a premium support subsidy to purchase coverage from private insurers. Ryan’s original budget proposal — which most House Republican supported — exempts current enrollees and doesn’t kick in until 2022. In that year, people turning 65 will receive a pre-determined “premium support” payment to purchase private insurance. But since the government’s contribution would be indexed to inflation and fall behind actual health care costs, by 2030 the proposal would “only cover 32 percent of a typical 65-year-old’s total health care spending.”

Proponents of the plan argue that opening up Medicare to greater private competition would ultimately lower health care costs, but today Santorum admitted that if the GOP’s “trust” in insurers’ ability to lower spending is misplaced, seniors will be forced to spend more on health insurance:

SANTORUM: In Medicare, we’re saying, trust the private sector to drive down costs and it’s a belief that that will happen. And if it doesn’t of course seniors will have to participate more in the increasing cost of health care. So there is a downside, I freely admit that.

Watch it:

In fact, there is very little evidence to suggest that private plans have or can do a better job of lowering spending. Medicare’s sheer size and bargaining clout have contributed to itsgreater success in controlling health care costs and have allowed it to introduce market innovations and payment reforms that were later adopted by private industry. Here is the per-beneficiary comparison:

As Paul Krugman points out, “if Medicare costs had risen as fast as private insurance premiums, it would cost around 40 percent more than it does. If private insurers had done as well as Medicare at controlling costs, insurance would be a lot cheaper.”