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Paul Ryan’s plan for Medicare

By Jennie L. Phipps · Bankrate.com
Monday, August 13, 2012
Posted: 3 pm ET

On Saturday, presumed Republican U.S. presidential candidate Mitt Romney picked Rep. Paul Ryan, R-Wis., to be his running mate. Together they vowed to reform Medicare to help control its costs.

How would their plan affect most people currently retired or close to implementing their retirement planning?

Ryan is the author of the plan, which was spelled out in the 2012 Republican budget proposal. At that point, he said there wouldn't be any immediate change to Medicare for people currently 55 and older. The changes would begin in 2022, when the age of Medicare eligibility would begin to increase by one month every year until it reached 67 in 2033. Older Medicare recipients would have the option of remaining in the original program or converting to the new one.

If your retirement is more than 10 years away, by then Ryan proposes to entirely eliminate Medicare's traditional fee-for-service structure. He would instead enroll all beneficiaries in what policy wonks call a premium support system. That means, he would give every recipient a flat amount of money to use to buy insurance in the private marketplace. This amount of money would initially reflect the average amount the government is spending per Medicare recipient at the time the change is made. After that, it would be indexed for inflation.

Ryan and supporters of his plan argue that this approach not only would save money because it would encourage providers and insurers to hold down costs, but also it would give recipients more leeway in choosing the kind of insurance they want. For instance, you might choose a policy that pays for home care while limiting payments for in-hospital treatment.

Skeptics argue there isn't much evidence that private insurers will be as effective in holding down costs as traditional Medicare has been. They point to Medicare Advantage plans, which have a similar, flat-fee approach and cost more than traditional Medicare. But that's a hazy comparison because the Ryan plan is significantly different.

Until the details are clear, who knows how this plan would actually work. But indisputably the goal of Ryan's plan is to keep the government from being responsible for extreme costs. So the question is: If the government isn't paying, will Medicare recipients, insurance companies or both be required to pick up the tab for catastrophic and long-lasting ailments?

That's a dilemma and one of many serious questions about this proposal we deserve answers to before we go to the polls in November.

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15 Comments
Suzy!
August 15, 2012 at 12:37 am

This article is rather biased and doesn't mention that it will be Romney's plan that is put forward not Ryans. It also doesn't mention that Obama stole 7 billion from Medicare to fund Obamacare. That will begin to limit what medicare can provide. It also doesn't mention that for Romney's plan those 55 and above nothing will be changed. Why would you report about Romney's plan when it is not his plan that will be put forward?

secure
August 14, 2012 at 7:08 pm

Things are better in four years to the demise of the previous eight years. Could have been better with a working congress but they have been too busy trying to govern your religious beliefs and vagina.

John F
August 14, 2012 at 2:17 pm

Blue Cross not for profit?? You are quite out of date: "In 1994, the Blue Cross Blue Shield Association changed to allow its licensees to be for-profit corporations."

American3
August 14, 2012 at 11:26 am

@Gavino: Tell you what, we will stay away from *YOUR* Medicare. *YOUR* Medicare consists of about $58,000. I assumed you made $50k per year average for the last 40 years (quite generous assumption btw). Tax rate for you and employer is 2.9%. So, 50,000 x .029 = $1,450 then $1,450 x 40 = $58,000. After you have spent *YOUR* Medicare under my extremely generous assumptions, then me (the taxpayer) and Mr Ryan WILL tell you what medical services you can have. Doesn't government controlled medical care sound great?

I assume you know that $58k will only cover a couple of minor procedures or one heart attack or stroke. After that, you are spending other peoples' money. Do you see the problem with entitlements?

American3
August 14, 2012 at 11:14 am

@AmericanToo: You do know that Blue Cross/Blue Shield is not-for -profit, right? (I bet you did.) Our healthcare system should be a mixture of for-profit, not-for-profit, and charitable (think religious) organizations. Government involvement only creates a monopoly, for the government of course.

Please quote me the source for your $0.03. Is it the government reporting their own (unaudited) costs? Please remember government does not account for costs the same way private sector employers are required. For example, they do not set aside reserves for future pension and healthcare liabilities (and the promise GENEROUS benefits for retirees). They pay as you go. The government does not include the cost of equipment in their calculations either. They are part of their capital budget and not operating budget. Private companies are required to accumulate ALL of their costs. I could provide more examples of why it's an apples to oranges comparison but only accountants care. (I am one btw...CPA too.)

American got little wacky with the Columbia stuff, but the main point is valid. Democrats think government is the answer; libertarians/conservatives think government is the problem. I wish more Republicans actually were conservative, instead of liberals wearing red.

The simple (but long term) answer to all of this is supply. We need to encourage, i.e. subsidize, more people to become doctors, nurses, PT's, etc. We need to subsidize building hospitals and clinics. More supply *always* brings down the price of anything. Price controls (government answer) only leads to rationing. Do you remember the lines for gas in the 70's?

This is too long already. Medicare must be reformed or it will be broke. The only question is who, what, when, and how. LOL

gavino noriega
August 14, 2012 at 11:01 am

Why wait till the year 2022 to implement the Ryan plan. If you implement the plan in 2013 MEDICARE WOULD GO BROKE IN FOUR YEARS....STAY AWAY FROM MY MEDICARE .....PAUL.....

AmericanToo
August 13, 2012 at 11:30 pm

@American. The Republicans are only too happy to allow your health decisions to be controlled by for-profit insurance companies. We are capitalists, god**** it.

How do you like the Blue Crosses and their ilk making money by denying you the care you need? And to add insult to injury, the CEOs of the insurance companies are enjoying their vacations, courtesy of your unfortunate bout with cancer.

I know the folks who work for Medicare are not sailing around the world having a swell time on your healthcare dime. These workers live next door to you and me, and they are thankful for their jobs.

To administer your healthcare, these workers cost a measly $.03 of the American healthcare dollar. The insurance companies? How about nearly seven times that. Yes, that'd be 20% of every dollar.

That gets them some very fine vacations, American. You been sailing along the coast of St. Barts, now haven't you? In spirit you have, I am sure.

American
August 13, 2012 at 9:08 pm

Why would anyone want the government to control any of their business decisions yet alone our health care decisions? This is a prime example of the ideology differences of Democrats vs. Republicans. The current adminastration feels that they know what is best for us and therefore want to create more government to control the healthcare industry. Republicans want to allow the citizen to make their own decisions in regards to choosing what plan would best benefit them. The Obama adminastration hasn't created jobs, has invested our money in "Green" businesses that have gone bankrupt within a year (550 million for one venture alone) and they want us to turn over our healthcare decisions to them. I was on vacation last week and saw a news report that took place in a doctors office where there was a sign hanging when you walked that stated,"If Obamacare goes into effect, we will have to close our office within 6 months, etc...". This is real ! Does anyone truly believe that the government will be able to run the healthcare business any more efficiently than it handles our countries finances. Pres. Obama recently signed a Free Trade Agreement with Columbia. Columbia? Now we have another third world country expoting goods to our country undermining our own ability to create jobs because they don't have to pay taxes. Not to mention the cost of living is much lower there and they pay their employees virtually nothing to manufacture the goods. How do we compete? We don't ! The sole purpose of these agreements is to share the wealth with the world and bring America down from our high living. Wake up people. Don't let the government take more from us and give it to others. Obama is right when he says this election is about two different views on where America is headed in the future but he just isn't being honest on where he wants it to head. Your choice is more government (Democrat) or less government (Republican), plain and simple. It isn't black or white. It isn't liberal or conservative. Romney is being critisized for being a shrewd businessman and yet Obama is a complete bust as a businessman. Remember the words he himself said, " If things aren't better in four years, I don't deserve to be re-elected".

Dmitry
August 13, 2012 at 7:47 pm

All we have to do is convince medical doctors and hospital admins that they don't deserve to be highest paid in the world.
After that miracle is accomplished we can have affordable health care.

Bob Cronkhite
August 13, 2012 at 5:28 pm

Let's do nothing and go broke !! Good Idea ??