Ryancare vs. Obamacare: The Future of Medicare is at Stake

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When Mitt Romney named Paul Ryan as his vice-presidential nominee, the Medicare battle jumped to the front and center of election 2012.

First introduced in 2010, "The Ryan Budget" is a bold plan that attempts to reduce the deficit by drastically cutting spending-which some claim will "cripple" Medicare.

So what is the truth?….

Ryancare vs Obamacare

Though the plans differ in ideology, Obamacare and Ryancare actually have some similarities.

In Ryan's plan, new enrollees after 2022 would have to choose between a private insurance plan and Medicare, making Medicare the "public option" that was so opposed in Obamacare.

Ryan's plan gives Medicare enrollees vouchers to choose from competing private insurance plans offered on a Medicare exchange. These exchanges closely resemble the exchanges in Obamacare that some Republican governors have refused to participate in.

And both plans basically "cut" the program by over $700 billion and set a growth cap on Medicare spending at GDP levels plus 0.5%.

The difference in the plans is how these cuts are made and why.

As Ezra Klein of the Washington Post says, "Democrats believe the best way to reform Medicare is to leave the program intact but vastly strengthen its ability to pay for quality. Republicans believe the best way to reform Medicare is to fracture the system between private plans and traditional Medicare and let competition do its work."

The only problem is that neither of these plans may do enough to fix Medicare.

The biggest misconception with Ryan's plan is that current senior citizens will be faced with outrageous healthcare costs.

That is simply not true.

Here are the main facts for Ryan's Medicare plan:

  • The plan will not affect anyone over the age of 55- Ryan's policies on Medicare would not go into effect until 2023 and he would most likely help repeal the majority of Obamacare.
  • The age of eligibility for Medicare would increase by two months every year until it reached 67 in 2033.
  • Medicare beneficiaries would get voucher payments to buy private insurance plans- This allows private insurers to compete with Medicare and is the most controversial aspect to the plan. Here a voucher would cover the lowest or second-lowest plan offered on this new exchange. If beneficiaries want a more expensive plan, they'll have to pay the difference out of pocket.

Ryan's plan can be summed up by premium support and competitive bidding. Ryan expects seniors to receive exactly the same benefits that they do now, but along with the traditional Medicare program, they would enjoy the option of choosing among a selection of government-approved private insurance plans.

But is competition really the best answer for Medicare?

The average annual per-capita spending growth rate through 2019 is projected at 3.1% for Medicare, compared with 4.9% for private insurance plans, according to the non-partisan Kaiser Family Foundation.

"We may be reaching the point now where Medicare healthcare expenses are growing no more quickly than growth of the economy overall," John Rother, chief executive officer of the National Coalition on Health Care told Reuters.

The Congressional Budget Office (CBO) projects that under Ryan's budget, Medicare spending for new enrollees in 2050 would be 35%-45% less than under the current system. The caveat, they say, is that this could cause an increase in out-of-pocket spending for seniors, less quality of care and reduced access to health care.

Obamacare's Central Control

Much has been made about what exactly the $700 billion reduction from Medicare means under Obamacare.

According to the CBO, the ACA's 10-year cuts include $415 billion in fee-for-service payments to healthcare providers, $156 billion in reduced payments to Medicare Advantage plans, $56 billion to hospitals, and $114 billion in other numerous miscellaneous cuts.

President Obama claims these cuts are adjustments to unnecessary payments and do not affect patients, but critics claim the cuts to Medicare just fund Obamacare.

"The money you paid for your guaranteed health care is going to a massive new government program that's not for you," Romney contends in a new campaign ad.

The President wants to examine exactly what "quality" healthcare is, figure out how to pay for quality and not volume, and third be able to update Medicare to reflect these findings.

This will be done through several boards most notably a panel of 15 appointed government officials, called the Independent Payment Advisory Board (IPAB). Over time, the idea is that IPAB can be used to scale back the costs of Medicare, determining what types of procedures and treatments that Medicare will and will not pay for.

The panel is another controversial aspect of Obamacare, one that has repeatedly faced attempts to have it abolished.

"We are also very concerned about the power of the IPAB to cut payments to physicians. The sole function of the IPAB is to cut spending with little guarantee of maintaining quality, access, and scientifically proven care." Dr. Elaine C. Jones, government relations committee co-chair of the American Academy of Neurology told Internal Medicine News. "There may be no physician representation on the board either. These elements are concerning and unacceptable."

The American Medical Association has also voiced concerns that the IPAB would not have any active physicians on the board due to a requirement that members have no outside employment.

Perhaps the most difficult thing to understand with both plans is the reliability of outcomes. Both plans contain projections with long-term timeframes that are at best guesses.

Each plan will take years to even go into effect and even longer to measure their success.

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  1. David Thiel | August 22, 2012

    Such a one sided liberal leaning article. And you say you print the truth?? Klein of Wash. Post quote!!! HA! You could not have written "the truth" in such a left sided piece–

    Money morning Newsletter is certainly off my screen

  2. annecink | August 27, 2012

    I'm a senior who will begin getting Medicare in 16 months. As much as I look forward to that, I am not blind to the deficiencies in the plan. The problem isn't simply in finding a way to pay the premiums. Until politicians and bureaucrats admit that it covers TOO MUCH, TOO EASILY, Medicare (and Medicaid) will remain headed for that financial cliff! Changes must be made in THE STUFF they pay for. Politicians refuse to say "NO"!
    Medicare makes it too easy for seniors to get too many procedures. Joint replacements, Viagra, Cadillac style motored scooters, etc. etc. ect., – all examples of the "plan gone wild"! Over the years, due to pressure from various lobbying groups, Medicare became a Pay-ALL PLAN. This would be great, if we could afford, but we can't! We are broke!

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