Interest rates, job prospects and the White House budget proposal and then how conspiracy theories are changing and changing us.
Republican presidential candidate Mitt Romney’s selection of Paul Ryan as his running mate has led to new interest in the Wisconsin congressman’s budget. In its latest form, the Ryan plan changes Medicare from a system of guaranteed payments for seniors to one that uses “premium support” credits. These vouchers may be used to purchase private insurance or to join traditional Medicare. The Ryan budget also cuts Medicaid, keeps the Bush tax cuts and streamlines the federal tax code. Critics say it will end Medicare as we know it. Supporters say reform is necessary to save the program from bankruptcy. Diane and guests discuss the Paul Ryan budget plan and what it means for the future of federal entitlement programs.
- Mary Agnes Carey senior correspondent for Kaiser Health News.
- Grace-Marie Turner president of the Galen Institute, a research group focusing on free-market health care reform and tax policy.
- Jared Bernstein senior fellow at the Center on Budget and Policy Priorities, and former chief economist and economic policy adviser for Vice President Joe Biden.
- Damian Paletta reporter for The Wall Street Journal.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Republican vice presidential candidate Paul Ryan's budget would transform the Medicare system by replacing guaranteed payments to seniors with so-called premium support credits. Mitt Romney has signaled his support for the Ryan plan which also dramatically cuts Medicaid and changes the tax code.
MS. DIANE REHMJoining me to talk about what's in the Ryan budget, how it would reshape federal entitlement programs: Jared Bernstein of the Center on Budget and Policy Priorities, Mary Agnes Carey of Kaiser Health News, Damian Paletta of The Wall Street Journal and Grace-Marie Turner of the Galen Institute. I hope you'll join us, 800-433-8850. Send us your email to email@example.com. Follow us on Facebook or Twitter. Good morning and welcome to all of you.
MS. MARY AGNES CAREYGood morning, Diane.
MR. JARED BERNSTEINGood morning, Diane.
MR. DAMIAN PALETTAGood morning.
MS. GRACE-MARIE TURNERGood morning.
REHMDamian, let me start with you. I gather there were three versions of the Ryan budget plan. Give us a little summary of when and how they have evolved.
PALETTASure. In 2010, when Paul Ryan was the 40-year-old ranking Republican -- remember that was still when Democrats were in control of the House of Representatives -- he proposed in the spring this really sweeping overhaul of the federal budget. And, you know, it would have dramatic changes to Medicare, Social Security, the tax code.
PALETTAYou know, it did a lot of things that long-time conservatives have always wanted to do to those programs but maybe have been too nervous or gun-shy to propose, you know, private accounts for Social Security, a shift in Medicare towards a more kind of privatized format in big cuts and other entitlement programs. And a lot of long-time Republicans were really nervous. Here we go again with the Social Security stuff, you know.
PALETTAThey learned their lesson in 2005 with President Bush. The Medicare stuff is -- it was also, you know, caused a lot of anxiety because after all, Social Security and Medicare, they deal with, you know, our older generation, and those are the ones who vote in huge numbers, especially in states like Florida. So on the one hand, a lot of folks are nervous, but, on the other hand, this is when we saw the rise of the Tea Party.
PALETTAThey finally had a manifesto to hold on to and say, this is what we're for, you know, big cuts in government spending, an overhaul of these entitlement programs that over the years are supposed to gobble up more and more of our debt. And, you know, this is what we need to be for. So it kind of -- it was like lightning in a bottle, and it helped propel the Tea Party past the November elections.
PALETTAAnd so in 2011 when he was in control of the budget committee, he brought forward a new plan 'cause he had a lot more power and influence then. And it was very similar. There was some changes to the tax cuts, but one of the major changes is they backed away from the Social Security stuff 'cause they realize, we're in control now. We can't, you know, be poking the dragon in the tail. We got to be careful with, you know, what we're proposing. They did still propose the changes to Medicare, though, which maybe we can talk about some more. And then in...
REHMAnd then the third.
PALETTAYeah, and then so a couple of months ago, he proposed a new version, and he wanted to sort of go this -- he wanted this proposal to go head to head with the White House's budget proposal, and also, you know, big cuts in programs like Medicare, Medicaid and also food stamps, health care for children, a lot of caps on, you know, discretionary spending and other federal programs. He would expand actually defense spending beyond what the president wants to do. And so that's kind of the budget that we're all talking about now.
REHMAnd, Mary Agnes, he had Ron Wyden initially with him. It was kind of a joint proposal. Ron Wyden has now distanced himself from it. I gather it would spend $40 trillion over 10 years compared to the Obama budget that would spend $47 trillion in the same time period. Tell us about what his plan would do as far as Medicare is concerned.
CAREYPaul Ryan's plan would start in 2023. Medicare Fee-for-Service would also be -- would be in a Medicare exchange where private plans would also bid to get coverage, to have the seniors subscribe to those private plans. And then what would happen is, based on those bids, either the second lowest bid of the private plans or Medicare Fee-for-Service, whichever is lower, is the set amount, the fixed amount the government would provide per beneficiary for coverage.
TURNERAnd so if a beneficiary picked a plan that was more expensive, they'd have to pay the difference. If it's less expensive, they would get a rebate. But it's a departure from as Medicare exists now because in Medicare Fee-for-Service which covers about three-quarters of beneficiaries, the federal government pays all the cost to providing services. This would put a limit on what the federal government will contribute.
REHMAnd what would it do as far as defense spending goes?
PALETTAIt would expand -- it would, you know, the sequester that we've sort of talked about, the budget agreement that the Republicans and the White House agreed to last year has some hard cuts in defense spending that are said to kick in in January. And both sides are not trying to get out of that, but they sort of disagree about what you would replace the defense cuts with.
PALETTASo the White House still wants smaller defense budget for next year. They say, you know, we're winding down these to wars. We can deal with spending less money on what is really a large part of the federal budget. Republicans Paul Ryan and Mitt Romney have both said, no, we cannot cut defense spending. We got to keep investing in this. This is our national security. And so we need to have a larger budget there.
REHMAnd has Mr. Romney signed on to Mr. Ryan's plan, Mary Agnes?
CAREYHe's -- generally, they're on the same page. Both Gov. Romney and Congressman Ryan backed the idea of premium support, this limited amount that the government would spend for beneficiary. But yesterday, an interesting thing occurred. Gov. Romney said that he would not make the reductions in Medicare spending that are included in the health law and also included in Congressman Ryan's plan.
CAREYThese are the cuts to hospitals, to nursing homes and other providers. He said that he would not do that if he were elected. So that is a critical difference between the two.
REHMHow does that reshape the whole approach that Paul Ryan is suggesting?
CAREYWell, it's pretty interesting. It shapes it -- reshapes it a lot because Paul Ryan says he would use those changes in Medicare payment to shore up the Medicare program itself, and so if that money is gone, his program is more expensive. He can't do in Medicare what he would like to do. And also, these are cuts that in many instances providers have already agreed to.
CAREYThey came to the table during the debate over health care reform figuring it was sort of a done deal, and they wanted to cut the best deal they could get. But, you know, as looking at Washington, this is a very hard thing to negotiate, but Romney would not enact them.
REHMJared Bernstein, explain this concept of premium support because I think that's kind of critical to this whole Medicare (word?).
BERNSTEINSure. Sure, I will. Let me just say one thing before that...
BERNSTEIN...just to add some points to something Mary Agnes said. It's not quite correct to say that none of the changes that Paul Ryan proposes in Medicare or Romney for that matter would take place until 2023. By repealing the Affordable Care Act, there's some very important parts of Medicare. For example, something we call the doughnut hole, which we can get into in more detail, but it's basically help for seniors buying prescription drugs. That gets closed under the Affordable Care Act.
BERNSTEINEventually, it gets reopened under Ryan's budget. There are -- there's 30-plus million people who would get coverage through -- primarily through more Medicaid that you'll lose wellness visits. About 16 million seniors so far have taken advantage of free preventive care. You'd lose that as well. So I want to be clear about that. OK, premium support. Right now, Medicare is a guaranteed benefit.
BERNSTEINIf you have Medicare, you can see the physician of your choice as long as that person accepts Medicare, and most doctors treating seniors do. By the way, that's less the case for Medicaid. Under premium support, the government provides you with a fixed amount of voucher with which you can shop for your insurance coverage in two places as Damian said. It used to be one place.
BERNSTEINIt used to be just the private insurance market, but Paul Ryan along with Sen. Wyden came back and said, no, you can shop using your voucher in the private insurance market, or you can use that voucher to buy Medicaid, and as Mary -- I'm sorry -- Medicare and as a coverage. And as Mary Agnes explained, that's going to be key to the second lowest cost of insurance in your area. So, you know, you go down further in the weeds if you like. But that's the difference.
BERNSTEINAnd the critique of premium support is that unlike the guaranteed benefit that I started with for Medicare, if the value of that voucher doesn't keep pace with the costs of medical coverage, then it ends up shifting cost back on to the beneficiaries. At that point, if you want your Medicare or. for that matter. your private insurance and your voucher doesn't cover it, you're going to have to reach in to your pocket and pay the difference.
REHMAll right. And turning to you, Grace-Marie Turner, why do you believe that the Ryan budget changes Medicare for the better?
TURNERWell, we have a lot of evidence to show that first of all, we don't really have a choice not to reform this program. The typical beneficiary retiring today, a couple retiring today will have paid in about $149,000 in taxes over their working life to support their Medicare benefit. In their retirement years, they're expected to consume $351,000 in Medicare services. That's in constant dollars.
TURNERSo we have a gap of $200,000 over the retirement life of this couple that's going to have to be paid for by either more deficit spending or tomorrow's tax payers. We have 70 million people retiring into Medicare and baby boomers, 10,000 a day. So looking at how could we gain new (word?) -- and we have two programs that give us a great model.
TURNERThe Medicare advantage program, which a quarter of seniors have voluntarily enrolled in to get private coverage through the Medicare program, and the Medicare Part D prescription drug benefit program that is coming in at 46 percent under budget, the things that those two programs have in common is that seniors have been making choices from among competing private plans. And in both cases, we're seeing cost go down.
REHMGrace-Marie Turner, she is president of the Galen Institute. That's a research group focusing on free-market health care reform and tax policy. We'll take a short break here. When we come back, we'll talk about those 55 and older.
REHMAnd welcome back. Just before the break, I'm asking all of our guests what happens to those 55 and older if Gov. Romney is elected president and his view of Medicare goes into effect. Damian.
PALETTAWell, he and Paul Ryan have both said that their proposals would not affect anyone who's 65 and older or 55 and older within 10 years of qualifying for Medicare. However, if they -- I mean, there are several changes that would impact them, but one is if they repeal President Obama's health care law, a lot of the changes to Medicare that are set to go into effect would no longer go into effect. So that would have a huge impact on their...
PALETTAWell, Jared probably might have these...
BERNSTEINWell, I mentioned this doughnut hole, so prescription drug coverage would become more expensive. A lot of folks would lose their ability to get these free preventive care services. And I would say probably most importantly, the Affordable Care Act, according to the Medicare actuaries -- those are the guys who figure this kind of stuff out -- the Affordable Care Act added eight years to the trust fund of the Medicare program, the Medicare health insurance program,
BERNSTEINAnd it reduced the shortfall in that trust fund from about 4 percent of payroll to about 1 percent of payroll, meaning it reduced it by a factor of four. So it very much extended the life of the program thanks to these savings that we were talking about a few minutes earlier.
REHMAll right. Grace-Marie.
TURNERThe way it did this is by cutting payments to Medicare providers to the point that the Medicare actuary say 40 percent of them will go bankrupt over the long term because the payment rates are so low. And it's enforced...
REHMForty percent of health providers.
TURNERForty percent of Medicare -- either stop seeing Medicare patients, and it's enforced by this new independent payment advisory board, these unelected officials who are -- have the power of putting the thumbscrews in to make sure the cost stayed down. That's not the way we solve this problem.
PALETTAWhat's really interesting about this issue, you know, there's been fights about Medicare since it was put into place in 1965. But we're at a point in this country's history with a baby boom generation getting older, where between 9- and 10,000 people every day turn 65 and they still qualify for Medicare. There's about 50 million Americans who are covered by Medicare last year.
PALETTAAnd as Jared said, the trust fund that pays -- the largest trust fund for Medicare that pays a lot of benefits to hospitals is expected to exhaust all of its reserves in 12 years. So this is not a sort of theoretical, you know, pie in the sky debate we're having. This is a debate now on the campaign trail really that affects the lives of one out of every six Americans.
REHMAnd one thing that we've heard a lot on the campaign trail, Mary Agnes, is that Gov. Romney has said that President Obama has cut $700 billion from Medicare to pay for his health care program. Can you clarify that for us?
CAREYWell, it's important -- as Jared was just discussing, it's important to know a couple of things. There are additional Medicare benefits in the Affordable Care Act, the 2010 health law closing this gap in prescription drug coverage and more wellness benefits. And also looking at the reductions that were made to these providers, they will still get increases not as fast as they've gotten before.
CAREYAnd in many cases, there was evidence from government advisory panels that some of these providers, with all respect, were overpaid. So they are not touching the planned -- the health law does not touch the benefits per se. But there are concerns that will -- payment reductions to providers -- hurt access over time. That's a matter of great debate. But the -- there's a lot of evidence that is out there that some of these cuts were warranted.
REHMNow, we do have a clip from Gov. Romney in an interview he did recently, and I'd like to get an explanation on this.
GOV. MITT ROMNEYIf they're 45 years old and they show up and they say, I want insurance because I've got a heart disease, it's like, hey, guys, we can't play the game like that. You've got to get insurance when you're well, and so -- and then if you get ill, then you're going to be covered.
REHMSo pre-existing condition, Jared.
BERNSTEINSo pre-existing conditions are covered under the Affordable Care Act, so that's another very steep cost of repealing the Affordable Care Act. People with pre-existing conditions can, in the absence of the ACA, the Affordable Care Act, be rejected, much in the spirit of what the governor just said. And I think that's very problematic, nothing to do with Medicare, but I think very problematic.
BERNSTEINLook, I mean, I think what you're hearing there is something very important that gets to the core of this, a real seed issue for me, which is, does the government have a role to play in providing social insurance for people beyond their working years? So Medicare, you heard privatization of Social Security and earlier, Ryan idea, as Damian said. And I think that if you look at the budgets, I mean, you think they're actually fairly forthright about this. I don't think they would disagree with me.
BERNSTEINIf you look at the budgets of Romney and Ryan, what you see there is a real antipathy toward the kind of social insurance programs we have now, the guaranteed benefit for Social Security, the guaranteed benefit for Medicare. I completely agree with -- I think it was Grace-Marie's point that, without changes, those programs are unsustainable, totally agree with that. Such -- but there is a right way and a wrong way to make those changes. I would argue the Affordable Care Act is the right way. As you just heard, it doesn't hurt beneficiaries. It tries to find efficiencies in the delivery system.
REHMGrace-Marie, what about Medicaid? Let's talk about what the Ryan plan would do there.
TURNERWell, the -- Medicaid -- I served on the Medicaid Commission, 2005, 2006, and we heard testimony from all over the country that 14 different hearings. And everywhere we turn, we heard governors say, we could do so much better in covering more people more efficiently, getting more value from this program if we had more flexibility.
REHMSo you're talking about block grants.
TURNERWell, it can be block grants.
REHMTo the states?
TURNERThere are lots of ways to do this to give states more flexibility. There was a global allocation to Rhode Island, for example, that gave it three years that this is what we expect we're going to spend on Medicaid in your state over the next three years with escalations over each year. And we're going to give you the chance to see if you can spend that money more efficiently. And they have -- they're coming -- they're saving money for federal as well as state taxpayers. They're covering the same number of people, and they're getting better care to people.
REHMDamian, what's wrong with that?
PALETTAWell, it's a very popular idea, and it would save a lot of money over 10 years. The criticism of it often is that it would move a lot -- people don't know actually what would happen. But one thought is that it would move a lot of people out of Medicaid. They'd no longer be covered. And so...
PALETTABecause the states would have -- the states could kind of shape the program how they'd like it to look, and maybe some states feel like too many people are being covered by Medicaid right now or they need to focus their resources on one segment of their population over another.
CAREYIf the federal government reduces the amount of money it gives states from Medicaid, states have a variety of choices. They have to either come up with the money, and we know states are hard-pressed for that. They could -- under Congressman Ryan's plan, they could reduce eligibility. They could reduce benefits. They could cost shift, and that would be very problematic for a lot of Medicaid beneficiaries.
CAREYAnd there's been studies that the Ryan plan could reduce the number of Medicaid beneficiaries by 14 to 27 million over the next decade, that it could have a sizable impact.
TURNEROh, but the states, they're elected officials, too. They don't want to do this. They want to get better value in this program. There's huge ways in the Medicaid program because of all the different hopes that have -- the people have to go through, and their only tool right now is to pay doctors less and less. In California, the Medicaid program pays on average 38 cents for every dollar that a private plan pays, so people can't find a doctor to see them. So they go to hospital emergency rooms, which is more expensive.
TURNERThe states say, we can fix that. Florida has several counties that have a Medicaid reform program in which Medicaid beneficiaries of a certain population are able to choose from among private competing plans. They're happier. They're healthier. The state is saving money, and they have a more smooth transition then to private insurance.
REHMNow, here's a posting on Facebook from Gideon, who says, "The Catholic bishops felt compelled to send a letter to Congress saying the Ryan budget failed to meet the moral criteria of the church that the budget should help the least of these: the poor, the hungry, the homeless, the jobless."
TURNERAnd actually Congressman Ryan then asked Georgetown University, which took the lead on the letter, can he come talk to them? And I really encourage people to do a Facebook search or a YouTube search for that speech. It is profound and powerful. What he's saying is, if we don't make changes, we're not going to be able to take care of the most vulnerable people in the society.
BERNSTEINI just couldn't disagree more. I actually know that speech. That's where Rep. Ryan said, we don't have a safety net. We have a safety hammock. He believes that if you slash the heck out of programs for vulnerable people, programs that are already under the knife, that somehow these folks are going to pull themselves up by their bootstraps in the absence of employment in a tough economy, in the absence of the kind of supports that middle-class and upper-income people typically take for granted.
BERNSTEINLook, 60 percent of the budget cuts, of the spending cuts that Rep. Ryan puts in his budget fall on low-income programs. They fall on Medicaid. They fall on housing. They fall on food stamps.
REHMAll right. Hold on a minute.
BERNSTEINWhat -- one other very...
REHMGrace-Marie, do you agree with that?
TURNERAbsolutely not. What we can do is find more efficiency in those programs.
BERNSTEINOK. Look, everybody has...
TURNERWe can do a better job of delivering services.
BERNSTEINEverybody has a right to their own opinions, but not their own facts. And this is a fact. Now, you can argue that there will be, you know, efficiencies and fairy dust. Fine. But the fact is 60 percent of the cut is from low-income programs.
BERNSTEINNow, this is another fact: At the same time, this Robin Hood in reverse budget then not just makes the Bush tax cuts permanent, which favor high-income people, but it adds another $4.5 trillion in tax cuts on top of that, cutting the average tax liability of millionaires by $265,000. So it's not just that you're slashing at the bottom. It's that you're slashing taxes at the top as well.
PALETTAWhat's so fascinating, you know, Gov. Romney selected Paul Ryan to be his running mate just a few days ago, and the conversation has changed from kind of a petty mudslinging mess to a real substantive debate in this country about, you know, what do we want to do with these programs. How big should government be? And what's so hard about Medicare and Medicaid is that, you know, when you're talking trillions of dollars, that means nothing to someone in Iowa. But these are the most gut-wrenching decisions...
PALETTA...we have to make about the health care.
REHMDamian, let me ask you about the changes the Ryan budget would make to the tax code.
PALETTARight. He's proposed some changes to both the individual side and the corporate side. He wants essentially to lower the tax rates. From -- on the individual side, they would be lowered from, right now, I think there's, like, six or eight different tax rates to just two: 10 percent and 25 percent. Now, he would do that by getting rid of a lot of tax breaks that people enjoy, but he doesn't specify which ones he wants to get rid of. That's always the hard part. It's always easy to say...
REHMWhat about corporate rate?
PALETTAThe corporate rate, he would push down to -- from 35 to 25, which you can only really do, without losing a ton of revenue, by also getting rid of a lot of tax breaks.
REHMHe also talks about eliminating taxes on corporate gains.
PALETTAThat's right, and that's another thing that, you know, a lot of Republicans are in favor of.
REHMOh, sorry. Capital gains. Also dividends and interest, but the latest version doesn't say much about that?
PALETTAYeah. I haven't looked at it that closely, but that's something that's also kind of in the crosshairs of the debate right now.
REHMDamian Paletta, he's a reporter for The Wall Street Journal. And you're listening to "The Diane Rehm Show." We're going to open the phones, 800-433-8850, first to Raleigh, N.C. Good morning, Neal. You're on the air.
NEALThank you, Diane, and thank you for having this discussion. I am a Catholic small business owner in North Carolina. And you're -- you've got a fellow on there that was just trying to bully over one of the gals that was trying to respond to him, and I hope you can keep him in check. But...
NEAL...Pope Benedict has stated that, you know, debt is a serious problem. He's trying to respond to the issues in Europe. And if you can't sustain these programs, then you obviously have to look at them. And the problem is the president -- and I wished him well when he was elected -- but has shown a complete lack of leadership to address these problems. And as you've seen, coming into this election cycle, he completely ignored these unsustainable programs until it was brought up by Romney-Ryan.
NEALOne of your guests just said a few minutes ago that there's a right way and a wrong way to address these problems. And -- but the problem is the president has shown zero leadership in the last four budgets. He has completely ignored fixing these problems.
REHMNeal, thanks for your call. Damian.
PALETTAWell, he makes an interesting point. We haven't really talked much about the broader debt issue. You know, we're about $16 trillion in debt in this country now. The most fundamental difference between Gov. Romney and President Obama is that President Obama wants to raise taxes on the upper income. I mean, that would have a huge impact on future deficits if you can't have one, $1.5 trillion in -- more revenue come in.
REHMAnd, Grace-Marie, how do you feel about Paul Ryan's changes to the tax code?
TURNEROh, I -- if we don't make changes to our tax code, we are never going to become competitive internationally. We have the highest corporate income tax rate in the world. Other countries are looking at us and asking, why would you be doing this? Why would you be crippling your industries? We've just taxed the medical device industry under Obamacare. Basically, many companies are saying, that's going to take our whole research budget.
TURNERHow are we going to create -- produce new products? We've got to reform the tax code. It's full of deductions. Paul Ryan talks about crony capitalism. We've got to flatten the rates. We've got to lower the rates, flatten the base so that we don't have so many loopholes and the rich will have fewer loopholes.
REHMAll right. And, Jared.
BERNSTEINOK. First of all, addressing Neal's comments, I mean, look, Neal, it wasn't me who criticized -- well, it was me, but it wasn't just me who criticized Paul Ryan's budget and its impact on vulnerable people. It was the Catholic bishops. So I stand by their analysis. Secondly, I just have a fundamental disagreement with you about the president's dealing with a long-term challenge to our fiscal health, and that's Medicare.
BERNSTEINI mean, we've been discussing, I think, many of the comments made so far, particularly by Mary Agnes, in talking about the changes to the health care program. We have been discussing major cost savings in Medicare that came from the Affordable Care Act. That was something that happened well before this election got underway. So I would just think -- say you're wrong about that.
BERNSTEINAnd, thirdly, look, on corporate taxation, it is absolutely true. As Mary Agnes said, it's absolutely true. I'm sorry. It was Grace-Marie who said it. It's absolutely true: We have the highest statutory corporate tax rate. But then she started talking about the loopholes. When you factor all those loopholes, then we're about fourth from the bottom in terms of the effective tax, the actual tax rate that our corporations pay.
CAREYWhat I will add here is this is really a defining moment in the elections, I think in the history of our country, whether it's looking at tax rates or entitlement reform or Medicaid.
REHMTotally philosophical differences.
CAREYRight. Completely. And this is where voters need to engage. Which way do they want to go?
BERNSTEINAnd if I can say one thing, that's why I like the Ryan pick because I think the Ryan pick really crystallizes this debate. But it is incumbent on people like us and what you do here, Diane, to actually try to get to the truth about all this because there's so much noise in the cycle.
PALETTAAnd Paul Ryan is a real articulate spokesman for these visions. I mean, he's really thought through this stuff. He's a real number cruncher. He's not kind of a gavel-wielding legislator like you see in the back rooms of Congress. He's a real guy that knows the numbers and can talk about this stuff comfortably.
REHMDamian Paletta of The Wall Street Journal. Neal, thanks for your call. When we come back, more calls from Cincinnati, Florida, Houston and Silver Spring, Md. Stay with us.
REHMAnd here's an email which may crystallize the debate for us. It's from Roy in Illinois. He says, "When I retired at 55, I had to buy individual health insurance for me and my wife. We were relatively healthy. We got it for around $8,500 a year, including a high deductible. With the Ryan voucher plan, what might help insurance cost for, say, a 75-year-old with the kinds of health issues persons of that age have, diabetes, hypertension?
REHM"I expect insurance companies would charge $20-, $30,000 per year. The voucher, estimated to be $9,500, would not cover nearly that cost." Is Roy correct, Damian?
PALETTAWell, that's the -- unfortunately, that's an answer that no one really has because, you know, Chairman Ryan says, if you have this kind of marketplace of private insurance companies, competition will force them to drive down their cost and to offer really, you know, competitive services. Now, you know, President Obama feels much differently and says we'd essentially be turning our back on older Americans and making them shell more out of their pocket. We really don't know 'cause there's not an experiment that we can draw from.
TURNERWell, first of all, those are old numbers. I believe that the numbers now, the average value of the voucher would be about $15,000 a year. But, to his point, it would be adjusted for age, for income and for health. So somebody who's older and sicker and poorer is going to get more money. And the guarantee in the Ryan plan, the Ryan -- the plan that he developed with Sen. Wyden, everybody is going to be guaranteed a plan, and you're going to be guaranteed a plan that is going to be at least as good as traditional Medicare and maybe better.
BERNSTEINSo the question is whether you're guaranteed a plan. The question is -- that the emailer posed was, are you going to have to reach into your pocket and supplement that plan with your own income? Now, the Congressional Budget Office studied an earlier version of the Ryan plan and found that seniors would have to add about $6,000 out of pocket to achieve the same kind of coverage they have under Medicare. And here, I want to use an opportunity just to correct something that Grace-Marie said earlier.
BERNSTEINShe suggested that the Medicare Advantage programs, which are these kind of private alternatives to Medicare, save money, and it's a good example of competition. In fact, the opposite is the case. They have proven to cost, in 2010, 17 percent more than Medicare. So it's actually a good example of what I think Damian was kind of alluding to, this question of whether private competition actually works in this realm. At least in terms of Medicare Advantage, it pretty strongly goes the other way.
CAREYOne thing I wonder about this is that the government sets -- says this is the contribution that we will give, and insurers know that most seniors don't have money to go higher. How will the market respond? I don't think anybody can answer that. I mean, Jared's got a point. The earlier -- the 2011 plan from Congressman Ryan talked about how seniors would have to spend approximately $6,400 out of their pockets to get the amount of coverage that fee-for-service provided. But if insurers know government contribution is axed, how will they respond?
REHMAll right. And let's go to Charlie in Cincinnati, Ohio. Good morning.
CHARLIEHi, Diane. Long-time listener, first-time caller.
REHMI'm glad to have you with us.
CHARLIEMy question is how Medicare works traditionally versus the Ryan plan. And here's -- I'm going to use my mother as an example. She has a Medicare card that -- and her premium is paid for out of her Social Security payment. But her Medicare does not pay for all of her medical expenses, and she buys a private supplemental insurance that pays the rest of it. So that sounds to me like what the Ryan plan premium support payments are right now. I can't tell the difference. Does that make sense?
CAREYWell, what he's talking about is something called Medigap, which is supplemental insurance that people buy, right, Medicare beneficiaries can buy to wrap around. So if the plan that your mother had isn't -- as you explained, if it doesn't have enough benefits and you can afford Medigap insurance, then you can wrap around. I don't know if Paul Ryan has prohibited Medigap in his plan. I'm not quite sure how he addresses that.
CHARLIEWell, more specifically, my question is my mother gets a certain amount from the government right now to pay for Medicare, and then she goes out and buys the supplemental. Well, the Ryan plan is going to be the same thing, is it not, because he's going to offer a certain premium support plan. And if that's not enough for some people, they can go out and buy more private insurance.
BERNSTEINA couple of things. First of all, your mother wouldn't be affected because she's already on Medicare...
REHMWait a minute. How old is your mother, Charlie?
BERNSTEINI think she's over 65.
CHARLIEOh, she's 74.
BERNSTEINSo that's the first part.
CHARLIEI'm not worried about that.
BERNSTEINNo, I understand. But here's the thing, the only way someone like your mother who's 55 now and, you know, would face into the Ryan idea later, this premium would be effective under the scenario you just described is if the voucher is not enough for her to purchase the Medicare side of her current coverage, then she'd have to dig into her pocket and supplement it.
CHARLIEYeah, but that's what she does now.
BERNSTEINWell, no. I'm talking about the Medicare part, not the Medigap part. Right now, she has Medicare coverage, and she's covered, you know, under Medicare in kind of a guaranteed fee-for-service, as we say. Under premium support, if the voucher was inadequate to pay for how the market priced that part of her coverage -- not the Medigap part, that part -- she'd have to pay extra. And according to the CBO under some analysis of these types of plans, she'd have to pay as much as $6,000 more a year.
TURNEROne of the reasons that people have to purchase supplemental insurance for Medicare is because the program is full of holes. In regular insurance, you don't have to do that. You want an insurance plan that's going to cover your prescription drugs, your hospitalization, your doctor's visits. People have to buy supplementary insurance because Medicare is a faulty program. That is one of the reasons.
REHMAnd you're saying that Paul Ryan's plan is going to correct everything that's wrong with Medicare?
TURNERNo. What he's going to do is give everybody a chance to have the kind of private coverage that a quarter of seniors have already selected in Medicare Advantage where they're in private plans, where they have networks of doctors they can be sure that they'll see. Many of them actually have prescription drug coverage that's part of their plan, and they get better benefits.
TURNERAnd, actually, a new study published in the Journal of America Medical Association from three Harvard researchers found that the Medicare Advantage -- private Medicare Advantage programs came in at 9 percent below traditional Medicare.
TURNERSo they're getting better benefits for less money.
PALETTAOne of the big differences we haven't even talked about yet is that Paul Ryan and Mitt Romney want to raise the eligibility age for Medicare from 65 to 67, you know, over a long time...
TURNERWhich the president has also endorsed in concept.
PALETTAHe's kind of flirted with the idea but gone back and forth. But that's something that a lot of them -- I mean, as we've gotten older and the, you know, age of Americans gets older, it makes sense to a lot of people but also would have a real impact on folks that are 65, 66 and need that kind of care.
REHMCharlie, you can see how complicated this question is. Just watch and wait and read as carefully as you can. Thanks for calling. We've got several emails, like this one from J.A.: "Why is it that Republicans see the only fix to Medicare as cutting benefits and eligibility? The military budget is beyond huge, riddled with cost overruns on unnecessary armaments and yet somehow untouchable. Medicare needs more money. Get it from the bloated military budget." Damian.
PALETTAThat's -- it's something we hear in Washington a lot. That's a...
REHMAll the time.
PALETTAAbsolutely. I think the reason that Medicare is front and center is because it's -- so many members of the baby boom generation are moving into it. And the cost -- it's a point now where it spends more money than it brings in to revenue every year. So, I mean, everyone sort of acknowledges that something is going to have to be done. And presumably, the sooner you do it, the less painful some of the changes will have to be.
REHMAll right. Let's go to Tampa, Fla. As a matter of fact, Paul Ryan is going to be in Florida this weekend. Good morning, Ed. You're on the air.
EDGood morning, Diane. Thanks for taking my call.
EDI'm curious with the panel. Here's my situation. I was born in 1960, so I'm 52 years old. I'm retired from the military, so I now have TRICARE up until what point I move over into Medicare. Now, if they start moving the age stuff around, there's going to be a couple of generations of military retirees who are going to kind of fall into an abyss. And I'll take your answers off the air.
REHMWhat happens then, Mary Agnes?
CAREYWell, he's -- the -- I think one of the issues here is -- I'm not quite sure. Maybe some males can help...
REHMSixty-five, if you move...
CAREYOK. Female eligibility can help...
REHM...the eligibility to 67.
CAREYOne interesting thing here is if the Affordable Care Act were repealed, which is what Paul Ryan and Gov. Romney want to do, you wouldn't have these exchanges with someone who had a gap in their coverage between private -- between when they get off and when they get into Medicare. They wouldn't -- they might have a difficult time getting coverage if the thought is that the exchanges made coverage more affordable, and they can get it. But I see Grace-Marie shaking her head.
TURNERNo. The TRICARE will continue to be his health care, his health coverage until he qualifies for Medicare. Then Medicare becomes the primary, and TRICARE becomes the supplementary plan. That's the way it'll work.
REHMBut if you -- but hold on. If Paul Ryan's plan moves the eligibility age...
REHM...up to, say, 67, what happens when he loses TRICARE at 65?
TURNERThat's -- well, he won't. First of all, it'll be moved up one month at a time. So he's 52. He will probably mean that he'll qualify for Medicaid when he's 65 and one month. In that one month, TRICARE would -- it would continue to have TRICARE coverage until he qualifies for Medicare. He would not have gaps in coverage.
BERNSTEINSo Roy's challenge -- I see his challenge as less coming from his TRICARE, which I think is actually quite a comprehensive form of coverage and more coming from the premium support problem we've talking about. Since he's, what, 52, he's less than 55. That means he will not have the guaranteed benefit that Medicare currently provides its beneficiaries. Mary Agnes has underscored this point. And it's very important.
BERNSTEINAll those savings that we've been discussing from the Affordable Care Act are on the delivery side of the system. They don't affect beneficiaries. If, as I believe it will, the premium support voucher is too low to actually pay for a comprehensive program like Medicare for Roy, he will have to dip into his pocket and supplement that with out-of-pocket expenses.
REHMAll right. A caller in Silver Spring, Md. Good morning, Jody.
JODYGood morning and thank you for taking my call.
JODYI wanted to raise two issues quickly. One is that, earlier on the conversation, the projection was made that, as flexibility of the state level grows, elected officials in the states would have to respond to their voters in order to be held accountable for the changes they make in programs that offer people health care coverage.
JODYAnd I just wanted to point to the fact that I think there's an intersectionality there with the fact that voter ID laws and other kinds of laws that, you know, really do dampen the voting of certain groups don't give many groups that are at the least advantage the voice they need in those policies. And the second point I wanted to make is that I believe we now see at the state level what many governors and legislators are trying to do with contraceptive coverage, family planning.
JODYYou know, in Texas, for example, the governor basically eliminated the family planning program in the state, claiming that other clinics, state-level clinics, would pick up the "slack and research." Some of the state has shown, in fact, that those services simply do not exist.
REHMAll right. And let me just say we're going to be doing a program on voting rights next week. But let's talk about contraceptive rights, Mary Agnes, how it might be affected -- how they might be affected under the Ryan plan.
CAREYWell, if governors have more choice to cover contraception in Medicaid or not cover, I'm not quite sure how that deals with the current law, what their choices are. But that could -- if you block grant and lift certain requirements, then maybe that could be impacted as well. As the caller is talking about, she's already seeing some changes in states.
REHMJared, very briefly.
BERNSTEINVery briefly, the problem with block-granting Medicaid is that when you hit a recession, states' budgets get very hard hit, and they're unable to expand to meet the need. The only way Medicaid was able to meet the need in the Great Recession was thru federal support. Under block granting, you'd lose that.
REHMJared Bernstein, he's at the Center for Budget and Policy Priorities. And you're listening to "The Diane Rehm Show." And to Pittsburg, Pa. Good morning, William.
WILLIAMHi. I have a quick comment or a question. I'm not sure what -- I've heard a lot. I actually get Social Security disability, and I'm on -- I did Medicare. My girlfriend actually gets Medicaid, and we're disabled. What's going to happen to people like us that are under that age limit?
TURNERI think that -- I'm sorry.
REHMI want to let Damian to respond from a factual...
PALETTASure. Yeah, that's a great question. People that are on Social Security disability, after two years, they qualify for Medicare. If they're on, for example, supplemental security income, they would be getting Medicaid. I don't think that answer has been fleshed out yet in this campaign. I mean, Paul Ryan definitely has proposed some changes to SSDI, as we call it.
REHMWhat kinds of changes?
PALETTAWell, I think they want to have more sort of control. Right now, it's kind of a confusing system where you apply for benefits. The decision is made at the state level. You appeal to federal judges. There's about 1,500 of them, and they all have sort of different outlooks in how the program should be run. So there's been a lot of calls for streamlining of this program, which is very -- also very expensive. But they have not answered how the qualification would change if you're on SSDI into Medicare.
TURNEROne of the things that we learned during our hearings with the Medicaid Commission is how the current programs are currently making it most difficult for the most vulnerable. People -- dual eligibles, for example, people dually eligible for Medicare and Medicaid fall through so many holes in the system because the funding, it's duplicative, wasteful and they get worse care. That is an important consideration actually in the Affordable Care Act.
TURNERI'm very supportive of reform of the programs for dual eligible, and I think that will continue in any case. But we need to take better care of the most vulnerable who are falling through the cracks in the current system.
REHMAll right. I'm going to give you the last word, Jared. Very quickly, please.
BERNSTEINYou just heard a call from someone who very much depends on health for situations that sound very tough to me. There's disability, there's Medicaid, which implies poverty. If you follow the root of Romney and Ryan and really decimate the budgets that support these programs, I fear that the most vulnerable will be hit the hardest.
REHMJared Bernstein, Grace-Marie Turner, Damian Paletta, Mary Agnes Carey, very complicated topic. We'll do more on this between now and the election. Thank you, all.
TURNERThank you, Diane.
REHMAnd thanks for listening. I'm Diane Rehm.
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