House Republican plan would increase costs for Oregon seniors by $6,000 with health care vouchers instead of Medicare
Medicare is the federal program that provides health care to 46.5 million Americans (including 511,450 in Oregon) and remains one of the country's most popular but expensive programs. It's also something less obvious - a potent political tool that candidates use often to help their chances. It's especially true for embattled candidates looking for some medicine of their own. Which leads us to Rep. David Wu, the incumbent Democrat from Oregon's 1st district whose erratic behavior in the weeks before Election Day last year triggered the departure of several senior staffers and questions about his chances to win re-election in 2012. In an April 21 press release, Wu warned that seniors in his district would face $6,000 in higher annual health care costs if a Republican budget proposal is passed. 'Amazingly, House Republicans think they can get away with plans to increase costs for Oregon seniors by $6,000, issuing health care vouchers in order to give millionaires another $200,000 in tax breaks,' Wu says in his press release. It's an inflammatory statement designed to energize seniors and Medicare supporters to rally against the budget written by Rep. Paul Ryan, R-Wis. As a byproduct, Wu is also hoping that defeating the budget plan will bring votes his way in 2012. On May 5, 2011, senior Republicans conceded that a deal with Democrats on Medicare was virtually impossible. But let's examine the math behind Wu's suggestion. Ryan's proposal aimed to balance the budget by cutting spending $5.8 trillion over 10 years, reforming taxes and restraining the growth of the most costly entitlement programs - Medicare, Medicaid and Social Security. Right now, Medicare is a 'fee for service' program, which means if you qualify for coverage the program will pay your health care provider for each procedure or visit. Ryan wanted instead a subsidy that will pay part - but probably not all - the cost of a person's health care insurance. 'Beginning in 2022, all newly-eligible Medicare beneficiaries (i.e., individuals turning 65 as well as younger, disabled individuals becoming eligible for Medicare) would only have access to health coverage through private insurance plans, rather than through the current government-run Medicare program,' an analysis in April by the non-partisan Kaiser Family Foundation said. 'Under the new premium support system ... the government would make payments directly to private health plans on behalf of Medicare-eligible enrollees, rather than pay hospitals, physicians, and other medical providers directly for the services. ...If the government payments to plans on behalf of enrollees were insufficient to cover premiums and/or other costs, beneficiaries would be responsible for additional costs,' Kaiser says. This is where Wu's math comes in, with help from Kaiser and the Congressional Budget Office. Wu says the $6,000 higher cost per year is the difference between the amount of the federal voucher and the likely cost of health insurance purchased on the open market. CBO says that the most generous $8,000 voucher provided by Ryan's plan would cover 39 percent of the cost of the average private plan for a 65-year-old in 2022. Which means the plan actually costs about $20,500 and that beneficiaries would be on the hook for about $12,500 of the cost. According to calculations by the CBO and Kaiser, a typical beneficiary would have to pay $6,150 out-of-pocket in 2022 if Medicare essentially remains the same as today. Under Ryan's plan that out-of-pocket cost would have jumped to $12,500, which is an increase of $6,350. Ryan argues that Wu and other critics, including President Barack Obama, do not take into account the effect millions of new customers flooding a market will have. He figures competition will lower prices as insurers battle to capture new business underwritten with government subsidies. 'Medicare is projected to go bankrupt in just nine years unless we act to curb the relentlessly rising cost of health care,' Ryan wrote in an April 24 op-ed published by The Washington Post. 'This cannot be done with across-the-board cuts in Washington. It has to be done by giving seniors the tools to fight back against skyrocketing costs. That's why our budget saves Medicare by using competition to weed out inefficient providers, improve the quality of health care for seniors and drive costs down.' He and his allies also point out that Medicare costs are growing explosively and if not addressed the program will require deep cuts or higher out of pocket costs. Regardless of the uncertainties, there is strong evidence that people who reach age 65 in 10 years and begin using Medicare would certainly pay more under Ryan's plan than they would if they became eligible today. Is the difference $6,000 or more? Could it be less? The answer to each is perhaps. But given current knowledge and calculations $6,000 is a number that can be defended. For that reason, we rate Wu's claim Mostly True.
On May 5, 2011, senior Republicans conceded that a deal with Democrats on Medicare was virtually impossible. But let's examine the math behind Wu's suggestion. Ryan's proposal aimed to balance the budget by cutting spending $5.8 trillion over 10 years, reforming taxes and restraining the growth of the most costly entitlement programs - Medicare, Medicaid and Social Security. Right now, Medicare is a 'fee for service' program, which means if you qualify for coverage the program will pay your health care provider for each procedure or visit. Ryan wanted instead a subsidy that will pay part - but probably not all - the cost of a person's health care insurance. 'Beginning in 2022, all newly-eligible Medicare beneficiaries (i.e., individuals turning 65 as well as younger, disabled individuals becoming eligible for Medicare) would only have access to health coverage through private insurance plans, rather than through the current government-run Medicare program,' an analysis in April by the non-partisan Kaiser Family Foundation said. 'Under the new premium support system ... the government would make payments directly to private health plans on behalf of Medicare-eligible enrollees, rather than pay hospitals, physicians, and other medical providers directly for the services. ...If the government payments to plans on behalf of enrollees were insufficient to cover premiums and/or other costs, beneficiaries would be responsible for additional costs,' Kaiser says. This is where Wu's math comes in, with help from Kaiser and the Congressional Budget Office. Wu says the $6,000 higher cost per year is the difference between the amount of the federal voucher and the likely cost of health insurance purchased on the open market. CBO says that the most generous $8,000 voucher provided by Ryan's plan would cover 39 percent of the cost of the average private plan for a 65-year-old in 2022. Which means the plan actually costs about $20,500 and that beneficiaries would be on the hook for about $12,500 of the cost. According to calculations by the CBO and Kaiser, a typical beneficiary would have to pay $6,150 out-of-pocket in 2022 if Medicare essentially remains the same as today. Under Ryan's plan that out-of-pocket cost would have jumped to $12,500, which is an increase of $6,350. Ryan argues that Wu and other critics, including President Barack Obama, do not take into account the effect millions of new customers flooding a market will have. He figures competition will lower prices as insurers battle to capture new business underwritten with government subsidies. 'Medicare is projected to go bankrupt in just nine years unless we act to curb the relentlessly rising cost of health care,' Ryan wrote in an April 24 op-ed published by The Washington Post. 'This cannot be done with across-the-board cuts in Washington. It has to be done by giving seniors the tools to fight back against skyrocketing costs. That's why our budget saves Medicare by using competition to weed out inefficient providers, improve the quality of health care for seniors and drive costs down.' He and his allies also point out that Medicare costs are growing explosively and if not addressed the program will require deep cuts or higher out of pocket costs. Regardless of the uncertainties, there is strong evidence that people who reach age 65 in 10 years and begin using Medicare would certainly pay more under Ryan's plan than they would if they became eligible today. Is the difference $6,000 or more? Could it be less? The answer to each is perhaps. But given current knowledge and calculations $6,000 is a number that can be defended. For that reason, we rate Wu's claim Mostly True.