Medicare Q&A

Saving Medicare

The Path to Prosperity’s major proposals to save and strengthen Medicare:

  • Save Medicare for current and future generations while making no changes for those in and near retirement. For younger workers, when they reach eligibility, Medicare will provide a Medicare payment and a list of guaranteed coverage options from which recipients can choose a plan that best suits their needs. These future Medicare beneficiaries will be able to choose a plan the same way members of Congress do. Medicare will provide additional assistance for lower-income beneficiaries and those with greater health risks.

  • Stop the raid on Medicare from the President’s health care law. Any current-law Medicare savings must go to saving Medicare, not financing the creation of new open-ended health-care entitlements.

  • Ensure that the cost of frivolous litigation is not passed on to consumers in the form of higher health-care premiums by capping non-economic damages in medical liability lawsuits.

  • Fix the Medicare physician payment formula for the next ten years so that Medicare beneficiaries continue to have access to health care.

Q: I am currently receiving or will be receiving some time in the next ten years health coverage through Medicare. Will I see my benefits change?

A: No. The Path to Prosperity includes no changes for those 55 and older. This budget protects and preserves this critical program for those in or near retirement.

Q: I am currently 54 years old or younger. Will Medicare be there for me?

A: Yes. The Path to Prosperity preserves and strengthens Medicare for those 54 and younger by personalizing the Medicare benefit with guaranteed coverage options, giving future beneficiaries the same kinds of plans enjoyed by members of Congress. Starting in 2022, new beneficiaries will be given the ability to choose from a number of competing plans that are certified by Medicare and required to offer you coverage.

Personalized Medicare will subsidize the cost of the plan you choose with a payment that is equal to the amount the current Medicare system pays on average per beneficiary, with annual cost-of-living adjustments in the payment after that. While the payment grows for everybody, additional assistance is provided to lower-income seniors and to those whose health conditions deteriorate. To ensure the program’s sustainability, rather than harsh rationing from a bureaucracy in Washington, personalized Medicare is built around one of strongest cost controls ever devised – competition.

By giving you the power to choose among competing plans, personalized Medicare adds a level of cost control, customization and quality to your health security that the current Medicare system will not be able to achieve.

Q: What will happen if health-care costs continue to rise as fast as they have been rising lately? Will I still be able to afford care?

A: Yes. One of the biggest reasons health-care costs have been rising so fast lately is that government programs such as Medicare and Medicaid suffer from flaws that cause health-care costs to rise much too fast. They are open-ended spending programs – meaning that there are no meaningful controls on program costs. And because Medicare and Medicaid account for nearly 50 cents of every dollar spent on health care in the United States, these rising costs are causing inflation throughout the system.

Inflation throughout the system, in turn, is driving government spending on health care even higher. This is why a broad consensus of non-partisan economists and experts say that the U.S. government is heading for a crisis caused by excessive spending and debt.[1] Failure to take action and save these programs poses the greatest threat to the health and retirement security of America’s seniors.[2]

This doesn’t have to happen. We can fix these programs with common-sense reforms. Double-digit inflation in the cost of health care doesn’t have to be a fact of life. Frankly, we should refuse to accept it. Personalized Medicare helps solve a problem that affects everyone – the problem of relentlessly rising health-care costs in America.

Q: I’ve heard people say that this plan “ends” Medicare. Is that true?

A: No. This budget saves Medicare. According to the non-partisan Congressional Budget Office (CBO), Medicare will go bankrupt in 2020 unless we do something to save it.[3] Similarly, the Trustees for Medicare say that “Without corrective legislation… the assets of the [Medicare] trust fund would be exhausted within the next 7 to 19 years.”[4] The Path to Prosperity protects Medicare for current and near retirees and saves it so that benefits will be available for future retirees when they need them. Failure to take action and save these programs poses the greatest threat to the health and retirement security of America’s seniors.[5]

Q: You’ve put forward your solution. How would others solve this problem?

A: This Path to Prosperity is the only serious plan put forward that saves Medicare. The alternatives involve massive tax increases, large benefit cuts, or the intrusion of federal government bureaucrats into treatment decisions that are properly left to doctors and patients. According to the non-partisan Congressional Budget Office, if we don’t take action to save Medicare, taxes “would reach higher levels relative to the size of the economy than ever recorded in the nation’s history”[6]

The CBO has also written that if we continue to deny the problem, “a growing federal debt would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.”[7]

Much higher interest rates on government debt would translate into much higher interest rates on mortgages, credit cards and car loans. Facing the inability to borrow at a reasonable rate in the market, the government would have to slash spending indiscriminately to narrow its large fiscal gap. Promises to current retirees would be broken, and tax rates would be raised across-the-board, without regard for the economic consequences. In such a crisis, the Federal Reserve may also face rising pressure to step in and “monetize” the government’s debt – essentially printing money to buy up the public debt that private investors refuse to finance. This would soon lead to a destabilizing inflation, wiping out the savings of millions of Americans, and hitting seniors the hardest.

Some Democrats want to try another solution to the problem of runaway costs in Medicare. In the health care law enacted last year, they created something called the Independent Payment Advisory Board, or IPAB – an unelected board of “experts” tasked with squeezing savings out of Medicare through formulaic rationing. One-size-fits-all decisions to restrict certain treatments punish beneficiaries by hitting all providers with across-the-board cuts, with no regard to measures of quality or patient satisfaction. The Path to Prosperity would eliminate IPAB. Rationing care from Washington bureaucrats is not the answer to fixing Medicare. Empowering individuals and personalizing Medicare is needed to ensure this program is stable and secure for current and future beneficiaries.

Q: Didn’t the new health care law improve Medicare’s solvency?

A: No. The new health care law raided Medicare to fund a new health care entitlement. Its supporters, including the President, claimed that it improved Medicare’s solvency and paid for the new entitlement at the same time. This claim is false. Medicare’s chief actuary testified before the House Budget Committee that the Medicare savings had been double-counted.[8]

The Path to Prosperity stops the raid on Medicare and ensures that any current-law Medicare savings go toward saving Medicare. It is crucial that we ensure Medicare’s solvency into the next decade if we want to protect the current arrangements of those in or near retirement.

Q: I’ve heard that this budget cuts $30 billion from Medicare in the next 10 years. If no one over 55 is affected, how is that possible?

A: The Path to Prosperity produces $30 billion in estimated Medicare savings over the next ten years by advancing common-sense solutions such as curbs on abusive and frivolous lawsuits. Medical lawsuits and excessive verdicts increase health-care costs and result in reduced access to care. When mistakes happen, patients have a right to fair representation and fair compensation. But the current tort litigation system too often serves the interests of lawyers while driving up costs.

Q: Does this budget reinstate the so-called Medicare “donut hole”?

A: This budget repeals the Democrats’ health-care law, including provisions that increase prescription-drug prices for everyone. In fact, the CBO confirmed that the law’s new requirements will drive up health-care costs, at odds with claims made by its proponents. In a letter to Chairman Ryan last fall, CBO stated that “[The] increase in prices would make federal costs for Medicare’s drug benefit and the costs faced by some beneficiaries higher than they would be in the absence of those provisions,” and that “the premiums of drug plans will increase along with the increase in net drug prices, so the premiums paid by beneficiaries will increase slightly.”[9] Like the rest of this costly new entitlement, provisions that increase prescription-drug prices should be repealed.

The real threat to seniors’ health care is the fact that Medicare is going bankrupt. The current trajectory of government spending on health care is unsustainable. Without changes, according to the CBO, the Medicare program collapses in 2020.[10] Comparing any plan to save Medicare with the status quo means comparing real solutions to a false reality. This budget protects Medicare for current seniors by averting any disruptions and saves the program for future generations by providing a personalized Medicare program – like the one members of Congress enjoy – with more support for low-income beneficiaries and those with higher health costs and reduced subsidies for high-income beneficiaries.

Q: What about the Medicare “Doc Fix” that our nation’s physicians have been promised so they can continue serving seniors?

A: The Path to Prosperity recommends a 10-year “Doc Fix” in the form of a reserve fund that does not add to the deficit. We have to stop spending money we don’t have, and this proposal will allow us provide higher compensation levels for Medicare physicians without adding to the nation’s debt. You can’t improve health care in America by bankrupting our children.

For more information:

The Path to Prosperity Preserves the Medicare Guarantee

    


[1] Testimony of all four witnesses before the U.S House, Committee on the Budget. Lifting the Crushing Burden of Debt. Hearing, March 10, 2011 http://budget.house.gov/HearingSchedule/#03102011 (accessed April 8, 2011).

[2] Congressional Budget Office. Long-Term Analysis of a Budget Proposal by Chairman Ryan. April 2011 http://cbo.gov/doc.cfm?index=12128 (accessed April 8, 2011).

[3] Congressional Budget Office. March 2011 Medicare Baseline. March 18, 2011 http://www.cbo.gov/budget/factsheets/2011b/medicare.pdf (accessed April 8, 2011).

[4] U.S. Department of Health and Human Services. Center for Medicare and Medicaid Services. 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance (HI) and Supplemental Medical Insurance (SMI) Trust Funds. August 5, 2010 https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf (accessed April 8, 2011).

[5] Congressional Budget Office. Long-Term Analysis of a Budget Proposal by Chairman Ryan.

[6] Ibid.

[7] Ibid.

[8] Foster, Richard S. Testimony before the U.S House, Committee on the Budget. The Fiscal Consequences of the New Health Care Law. Hearing, January 26, 2011. http://budget.house.gov/HearingSchedule/#New%20Health%20Care%20Law (accessed April 8, 2011).

[9] Congressional Budget Office. Letter to Congressman Paul D. Ryan. November 4, 2010 http://www.cbo.gov/ftpdocs/116xx/doc11674/11-04-Drug_Pricing.pdf (accessed April 8, 2011).

[10] Congressional Budget Office. March 2011 Medicare Baseline.