The Paul Ryan Budget Plan

The Republicans in both houses of Congress are now on the record as voting for a budget prepared Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, which abolishes Medicare as we know it. The Ryan plan attacks the deficit by lowering taxes paid by the wealthy and makes the Bush tax cuts permanent.
Ryan’s plan to demolish Medicare would save the government billions of dollars by shifting the burden of paying for medical care from the government to the senior citizens who would have been covered by the current program.

The way Medicare works today, the government pays for all approved medical care for senior citizens. Let’s say that you need to have heart bypass surgery. The surgeon will bill Medicare for the cost of the surgery, which might be in the tens of thousands. Medicare will approve a percentage of that bill and pay the surgeon. Most surgeons will accept as full payment the amount paid by Medicare, but if there is a deductable or amount in excess of the Medicare amount, many seniors are able to pay it by taking-out Medicare-Plus insurance. That insurance is low in cost and affordable for most senior citizens.

Under the Republican plan put forth by Representative Ryan, the government will no longer make Medicare payments for people 55 years old and under at the time of the legislation. When those people become eligible for Medicare, there will be no Medicare for them. They will have to purchase private health insurance. The government will assist people earning less that $80 thousand per year by giving them a voucher to help pay for health insurance. For people earning over $80 thousand, the voucher will be half the amount, and even less for people earning over $200 thousand per year. The voucher amount will be pegged to the cost of living.

There is one basic problem with the Ryan plan. The cost of health insurance is rising at a rate far higher than the cost of living. In ten years, when the 55-year-old generation reaches eligibility for Medicare, the cost of health insurance will be more than double the amount provided in the Ryan budget. Sure, this will save the government billions of dollars, but it will deprive millions of seniors of health care during that period of their lives when they are most in need.

According a new survey by the Kaiser Family Foundation, health insurance premium are going up much faster than overall inflation and workers’ wages. By the survey’s calculation, increases over the next decade would translate to the average policy for a family costing in the neighborhood of $24,000 a year.

While Medicare may be an expensive program, the solution is not to eliminate it. There are ways to lower the cost of Medicare without the drastic kind of demolition envisioned by the Republican budget. President Obama has offered a proposal which would lower the cost of Medicare by lowering the cost of the terribly wasteful (private insurance) Medicare Advantage program. There are many other steps that can be taken without lowering the benefits to seniors.

Supposedly, the impetus for the Ryan/Republican budget comes from the huge deficit which was initially incurred during the Bush Administration due to tax cuts for the wealthy, two wars, and the Medicare Part D Drug program. Because of Republicans’ refusal to allow the Bush tax cuts to expire, the deficit has continued to rise during the Obama Administration. Ryan’s solution to the deficit is to—cut taxes! Yes, Ryan and the Republicans want to cut the tax rate on the wealthy and on corporations from 35% to 25%. They also want to make the Bush tax cuts for the wealthy permanent! Needless to say, Ryan intends to reduce the deficit and support this reduction in revenue by cutting programs for the poor, disabled, and aged. His proposed cuts include $2.17 trillion in reductions from Medicaid and related health care; $350 billion in cuts in mandatory programs serving low-income Americans (other than Medicaid); and $400 billion in cuts in low-income discretionary programs.

The Nobel Prize laureate and economist, Paul Krugman, says the Congressional Budget Office, “finds that a large part of the supposed savings from spending cuts would go, not to reduce the deficit, but to pay for tax cuts. In fact, the budget office finds that over the next decade, the (Ryan) plan would lead to bigger deficits and more debt than current law."

The United States is now approaching the most dangerous financial catastrophe in its history. If Congress does not approve an increase in the debt limit by August 1, the country will go into default and the economy will be shattered. It appears that the Republican Party, driven by Tea Party fervor, will demand spending cuts as outlined by the Ryan budget. One can only hope that the American people will let their representatives know that that plan cannot form the basis of any reasonable budget compromise.