The House Budget Committee approved two bills in early May that would prevent discretionary sequestration while keeping $16 billion in cuts to mandatory programs. That action drew the attention of The Center on Budget and Policy Priorities, a self-described nonpartisian research and policy institute that is keeping a watchful eye on Congress as it tackles Medicare-related reform proposals. The Center jumped at the opportunity to address the measures. 

Speaking out in protection of America’s more vulnerable citizens, the Washington, D.C.-based Center said the bills put into place a package that is “strikingly unbalanced in how it affects different parts of the budget and, in particular, programs for low- and moderate-income people.” 

The Center claims that the bills, which are not expected to survive the Senate, cut $11 billion from Medicare.             

The Center was founded in 1981 to analyze federal budget priorities, with particular emphasis on the impact of various budget choices on low-income Americans. With about 120 people on staff, it works at the federal and state levels on fiscal policy and public programs, the Center aims to shape public debates over Medicare and other issues and to help ensure that policymakers consider the needs of low- and moderate-income families and individuals in these debates. 

“The basic problem we have with the proposal is that, like previous House budget actions, it is extremely unbalanced,” said Paul Van de Water, one of the Center’s senior fellows. “This package relies entirely on spending reductions to reduce deficits and does not include anything at all in the way of broad-based tax increases.”

As House Republicans target Medicare benefits as part of their deficit-reduction plan, the Center is squarely focused on bringing to light any casualties these actions may make of low- and moderate-income Americans.

House Budget Committee Chairman Paul Ryan (R-Wis.) has been directly in the line of fire. Ryan’s various Medicare reform proposals all involve either partially or fully converting the program to a premium support system. Beneficiaries would receive a credit to buy insurance on the private market, making up the difference in cost if they choose more expensive plans and pocketing the savings if they choose cheaper plans. 

The Wyden-Ryan proposal, by Ryan and Sen. Ron Wyden (D-Ore.), introduced in December 2011, would also preserve traditional Medicare as a choice for seniors, but that bipartisan compromise was not an option in Ryan’s original Medicare reform proposal.

In December 2011, the Center decried the Wyden-Ryan proposal, saying it wouldn’t do enough to protect beneficiaries’ financial burden and wouldn’t produce meaningful savings. Then the Center came out vehemently against Ryan’s proposed fiscal 2013 budget plan.

The Center argues that premium support would create a two-tier system in which affluent beneficiaries would receive the most advanced and recent medical care because they could buy comprehensive coverage by supplementing the premium support payment with their own money. On the other hand, those of fewer means could only afford the most basic coverage that the premium support buys, leaving many medical treatments out of reach.

“Under the premium support system, the payment might not be sufficient to cover as much of the cost of Medicare,” said Van de Water. Beneficiaries “could be left with higher premiums or co-payments.”

Van de Water also points out that in a premium support system, traditional Medicare would likely attract a less healthy pool of enrollees, while private plans would attract healthier enrollees. That could, in turn, cause traditional Medicare costs to rise to the point of making the system financially unviable.

Furthermore, private insurance plans “have proven much less effective in the past in driving cost control on their own, and which have often looked to Medicare to institute cost containment measures first and then followed suit,” Van de Water wrote in an article.

Traditional fee-for-service Medicare delivers health care services more economically than private insurance because it has low administrative costs and it uses its bargaining power to contain payments to providers, the Center believes. Growth rates in spending are also lower for Medicare than private health insurance premiums. Between 1970 and 2009, Medicare spending per enrollee grew by an average of 1 percentage point less each year than comparable private health insurance premiums, according to the Center.

Supporting the Affordable Care Act, the Center believes that cost containment needs to come in the form of limiting payments to providers in the short term, and in the long term finding ways to more efficiently deliver health care, Van de Water said.

“There are two approaches” to lower Medicare costs, Van de Water said. “One shifts the risk to beneficiaries. The other one is what we support, which would maintain the guaranteed benefit.”

--By Susan Pasternak/For The Medicare NewsGroup