Ryan-Wyden Premium Support Proposal Not What It May Seem

Likely Would Shift Substantial Costs to Beneficiaries, Threaten Traditional Medicare, and Produce Few Savings

By Paul N. Van de Water

December 16, 2011

The proposal for Medicare premium support by House Budget Committee Chairman Paul Ryan (R-WI) and Senator Ron Wyden (D-OR) differs in key respects from how many media reports are describing it.[1] Despite claims to the contrary, it likely would shift substantial costs to beneficiaries rather than protect them from such cost increases, could lead to the demise of traditional Medicare over time rather than preserve it, and likely would produce few savings.

Shifts Costs to Beneficiaries

Its sponsors say the proposal would avoid shifting health costs to beneficiaries, but that’s not so.   It would replace Medicare’s guarantee of health coverage with a flat payment that beneficiaries would use to help them purchase either private health insurance or traditional Medicare.  It also would limit the growth in spending per beneficiary to the growth of gross domestic product (GDP) plus one percentage point (presumably on a per capita basis).  But health care costs have risen faster than that for several decades and, as Chairman Ryan acknowledged at a December 15 briefing, if that faster rate continues, the amount of the government’s premium support payment to beneficiaries would be cut back — with more of the costs of coverage shifted to beneficiaries — unless Congress intervened and made offsetting cuts elsewhere within Medicare.