Medicare Cuts, ACA Repeal Proposed in Paul Ryan’s 2015 Budget Proposal

House Budget Committee Chairman Rep. Paul Ryan (R-WI) released the House GOP budget for fiscal year 2015, in a proposal that would reduce federal spending by $5 trillion. Ryan’s proposed “Path to Prosperity” contains controversial changes to Medicare and a proposal to eliminate the Patient Protection and Affordable Care Act (P.L. 111-148) (ACA). It also contains major changes to social safety net and low-income assistance programs.

Medicare Reform

Ryan’s Medicare reform proposal includes changes to the Medicare Part A Hospital Insurance Program, Part B Supplementary Medical Insurance Program, Part C Medicare Advantage Program, and Part D Prescription Drug Benefit, as well as premiums paid by qualified aged and disabled beneficiaries. Under the current system, Ryan contends, “Medicare is an open-ended, blank-check entitlement that operates under a rigid and bureaucratic fee-for-service payment system.”

Ryan’s proposal to overhaul Medicare includes changes that would provide for Americans who turn 65 on or after January 1, 2024 to choose between private insurance plans with government subsidies to help pay for the chosen policy’s premiums, or stay in traditional fee-for-service Medicare within what Ryan calls the “Medicare Exchange.” Seniors who are currently 55 or younger would be required to participate in the alternative system of “premium support,” under which a support payment would be paid by Medicare directly to the plan or the fee-for-service program to subsidize its cost. The program would operate in a manner similar to that of the Medicare prescription-drug benefit. Ryan emphasized that his proposal still gives seniors the choice of remaining in regular Medicare; however, seniors required to move to private plans may find themselves with different doctors and less coverage.

A long term solution to the “doc fix” is also offered as part of the proposed budget. Medicare’s physician reimbursement formula, called the “sustained growth rate” has threatened steep reductions in physician payments. The problem has been patched 17 times prior to 2014 with various increases in physician reimbursement, in a practice that is known as the “doc fix.” Ryan’s proposal “accommodates legislation that fixes the Medicare physician-payment formula for the next ten years so that Medicare beneficiaries continue to have access to health care,” instead of relying on it to be adjusted much more frequently.

ACA Repeal

Ryan’s budget contends that the Congressional Budget Office’s (CBO) “Budget and Economic Outlook: 2014 to 2024,’’ says the ACA will discourage work, along with other reasons, and therefore, it should be repealed. The budget reasons that people will receive smaller health insurance subsidies as they begin to earn more money, basically discouraging people from working. Another reason for repeal noted in the budget is the extra spending on Medicaid required by the ACA. According to the budget, the ACA adds even more liabilities to the budget due to the millions of new beneficiaries that the law drives into the program.

Ryan proposes to repeal the exchange subsidies provided under the ACA. He believes the subsidies undermine the competitive forces of the marketplace and that government mandates will drive out all but the largest insurance companies. If removed, Ryan notes, “repeal of the insurance subsidies and other exchange-related spending would save roughly $1.2 trillion over ten years.” This amount does not take into account other savings Ryan believes would be realized from a repeal of the ACA.

Safety Net Programs

Ryan’s budget proposal does not lay out a full welfare-reform plan, but proposes changes Ryan believes will take steps toward reforming these programs in an effort to encourage work, increase economic growth and jobs, and preserve the safety net. Included in the budget are what Ryan proposes are methods to: (1) allow states to customize Supplemental Nutrition Assistance Program (SNAP) to the needs of their citizens; (2) empower reformers at the state level to strengthen and secure Medicaid by allotting states a single amount of money to spend according to their needs; (3) address barriers to upward mobility; and (4) expand welfare’s work requirements.