GOP Budget Would Privatize Medicare By 2021

Republicans have released a budget that would privatize Medicare, one of the most efficient and popular health care programs for American seniors. From Rep. Paul Ryan’s (R-WI) op-ed in the Wall Street Journal:

We preserve the existing Medicare program for all those 55 or older; and then, to make the program sustainable and dependable, those 54 and younger will enter a Medicare program reformed to work like the health plan members of Congress and federal employees now enjoy. Starting in 2021, seniors would receive a premium support payment equal to 100% of the Medicare benefit on average. This would be income related, so low-income seniors receive extra support, and high-income seniors receive support relative to their incomes — along the same lines as the president’s Medicare Part D proposal.

Watch Ryan describe the Medicare provisions:

Republicans are taking Americans under 54 out of Medicare and leaving them in the hands of private insurers. Americans under 54 would chose a new private insurance plan that provides a standard Medicare benefits package or some other managed care option. But how would this exchange control costs? “The health plan members of Congress and federal employees now enjoy” — the FEHB — does not do a very good job in managing prices. In fact, “the growth rate for FEHBP is virtually identical to that for private health insurance.”


Legislators had proposed ‘premium payment’ support back in the 90s — that is, subsiding the purchase of private coverage — and analysts have concluded that the only way to control costs is to provide a ‘premium payment’ that depreciates every successive year.

In other words, it may start at “100% of the Medicare benefits on average” in 2009, but it will diminish as health care costs increase. According an analysis by the National Academy of Social Insurance of the Breaux/Thomas premium support proposal, federal subsidies would not keep up with growing insurance premiums and could relegate “lower-income beneficiaries to lower-cost and possibly lower-quality plans”:

Moreover, if the costs of premiums were to rise more rapidly than beneficiaries’ incomes, people with limited resources might, over time, find themselves unable to afford higher-cost options (including FFS). Many of the Bipartisan Commission on the Future of Medicare members who opposed the Breaux/Thomas Proposal expressed concerns that this approach would undermine the basic protections offered by Medicare as a social insurance program, by relegating lower-income beneficiaries to lower-cost, and possibly lower-quality, plans.

So who benefits? Well, insurance companies do. Republicans are expanding the role of private insurers and by transferring Americans under 54 into a private plan, they’re killing off the Medicare system.


A Congressional analysis of a similar proposal (Breaux-Frist) concluded that premiums would increase for seniors in the traditional Medicare program:

[A] by-product of moving to the Breaux-Frist premium support system will be higher premiums for beneficiaries who remain in a government-run fee-for-service system than would be the case under current law. They estimate the total beneficiary premium under the Breaux-Frist plan in 2003 would be 47 percent higher than would be the Part B premium under current law in that year.


,The text of the GOP proposal explains that the “premium support payment” will be “income related.” But health insurance premiums rose much faster than earnings:

Between 2000 and 2007, premiums increased 78.3% while median worker earnings went up only 14.5%.