Analysis: Republican budget will cripple Medicare, Medicaid & children’s health insurance
Seniors, low-income families and children will bear the brunt of the gratuitous budget cuts proposed by House Budget Committee Chairman Paul Ryan (R-Wis.).
The House Republicans’ 2013 budget plans to reduce the deficit by slashing funding for Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) while giving a 10% tax break to corporations and millionaires.
“In essence, this budget is Robin Hood in reverse — on steroids,” said Robert Greenstein, president of the Center on Budget and Policy Priorities. “It would likely produce the largest redistribution of income from the bottom to the top in modern U.S. history and likely increase poverty and inequality more than any other budget in recent times.”
Moreover, the Ryan budget would repeal the 2009 health care reform and impose spending caps designed to gut any non-military government funding, such as highway repairs, college aid, public safety programs, food assistance for low-income families and seniors, and public health research.
What the Ryan budget would do:
- Cap Medicare spending growth at GDP plus 0.5%. The Domenici-Rivlin plan, from which Ryan derived his Medicare reform proposals, did not recommend such drastic spending cuts to Medicare. Instead, the Domenici-Rivlin plan proposed capping Medicare spending growth at GDP plus 1% to help the program stay on a sustainable path.
- Privatize and ration Medicare benefits for Americans born after 1958. Starting in 2023, seniors enrolled in Medicare will receive a voucher to purchase a private health plan or traditional fee-for-service plan through a health insurance exchange. Total yearly spending for a 65-year-old Medicare beneficiary will be capped at $7,400 in 2023 and $11,100 by 2050, according to the CBO. (The total Medicare spending per beneficiary averaged about $5,500 in 2011.) The CBO warned the possible consequences of such “substantial” cuts may include: “reduced access to health care; diminished quality of care; increased efficiency of health care delivery; less investment in new, high-cost technologies;” and higher out-of-pocket health care costs for seniors.
- Raise the Medicare eligibility age from 65 to 67 by 2034. The eligibility age will increase by 2 months every year starting in 2023. Given that Ryan’s budget would also repeal Obama’s health care reform package, millions of 65 and 66-year-old Americans would be forced to delay their retirement to keep their employer health insurance coverage, pay really high premiums if their pre-existing conditions don’t disqualify them from private insurance coverage, or go without health insurance for 2 years and pay thousands out-of-pocket for their prescription medications. Obama’s Affordable Care Act would have made it illegal for private insurance companies to deny coverage to people with pre-existing conditions and would have allowed the 65 and 66-year-olds to buy affordable coverage through their states’ health insurance exchanges.
Medicaid & Children’s Health Insurance Program
- Cut Medicaid and CHIP funding by half – from 2% of GDP in 2011 to 1% of GDP by 2050. Medicaid provides health care coverage to low-income Americans (11 million), seniors (4.6 million), and people with disabilities (8.8 million), and CHIP provides health coverage to 31 million children from low-income families. “The magnitude of the reduction in spending…means that states would need to increase their spending on these programs, make considerable cutbacks in them, or both,” according to the CBO.
- Convert Medicaid matching funds into block grants for states. While Ryan claimed federal block grants would “empower states…to tailor this program to meet the needs of their populations”, in reality the conversion would shift more financial risks to states. Currently, states participating in Medicaid are required to provide health coverage to certain vulnerable populations, such as families living in poverty and people with disabilities, and states would receive between 50% to 75% Medicaid cost reimbursements from the federal government. With the block grants, however, many states would end up paying a higher share of Medicaid spending just to keep up with growing health care costs or be forced to “make considerable cutbacks” in Medicaid programs. These cuts could include lowering reimbursement rates to doctors who treat Medicaid patients, imposing higher co-payments and deductibles on low-income Americans, restricting eligibility, or cutting back on the types of health services covered under Medicaid. All of these cuts would “reduce access to care” for the poor and the disabled, according to the CBO. The Medicaid cutbacks combined with the repeal of the Affordable Care Act will also likely increase the number of uninsured Americans, pushing up health care costs and raising insurance premiums for everyone else.
Non-defense discretionary spending
- Cut discretionary spending from 12.5% of GDP in 2011 to 3.75% of GDP by 2050. This will amount to a 70% reduction in the total discretionary budget, which funds both defense (56%) and domestic (44%) spending programs. “By comparison, [discretionary] spending has exceeded 8[%] of GDP in every year since World War II,” according to the CBO. Given that defense discretionary spending has remained above 3% of GDP since the 1940s, capping total discretionary spending to 3.75% of GDP will likely mean that nearly all non-defense programs will be terminated by 2050. The domestic spending programs facing elimination could include: veterans’ benefits, highway repairs, public health research (i.e. cancer research), and grants to state and local governments to fund public schools, community colleges, and state universities.
- Shift defense sequester cuts to domestic programs. As part of the debt ceiling compromise, the Budget Control Act of 2011 slashed $1 trillion from the total discretionary budget and capped the yearly discretionary spending growth at 2%. But if Congress fails to cut another $1.2 trillion from the entire federal budget by the end of the year, automatic across-the-board sequester cuts will befall yet again on the discretionary budget beginning in January 2013. As agreed by Republicans in August, $1.2 trillion sequester cuts will be split equally between to defense and non-defense discretionary budgets. However, Ryan’s budget would “reprioritize” the sequester by essentially shifting nearly all the cuts to non-defense programs. Erskine Bowles, who co-chaired the President’s bipartisan deficit reduction commission, told the Super Committee last year that any attempts to undo or change the sequester terms would be “disastrous.” Bowles explained, “I think people would look at this country and say, ‘You guys can’t govern.’ I think people would look at it and say, ‘You know what? They’re really not going to stand up to their long-term fiscal problems. This is not going to be a powerful country in the future.’ And they would think we were well on our way of becoming a second-rate power. I think it would be a disaster.” Obama said he would veto any legislation to reverse the sequester cuts.
- Reduce corporate taxes from 35% to 25% – nearly 3% below the OECD average. In comparison, the President’s tax reform would lower corporate tax rate down to 28% – in line with the OECD average of 27.8%.
- Reduce top personal income tax bracket from 35% to 25%. That means people making more than $388,000 a year will receive 10% tax break, and people making between $217,000 and $388,000 a year will receive an 8% tax break. However, people making less than $70,000 a year will see only a 5% tax cut.
- House Budget Committee: Fiscal Year 2013 budget
- House Budget Committee: GOP’s fiscal year 2013 budget (PDF)
- CSpan.org: Video of the House Republicans’ press conference (March 20, 2012)
- Congressional Budget Office: Long-term budgetary impact of paths for federal revenues and spending specified by Chairman Ryan (PDF)
- WhiteHouse.gov: Statement by White House Communications Director Dan Pfeiffer on the Ryan Republican Budget
- Dems.gov: Democratic caucus leaders: GOP budget deja vu all over again
- WhatTheFolly.com: Transcript: House Budget Committee Chairman Paul Ryan announces GOP’s 2013 budget
- WhatTheFolly.com: Transcript: Sen. Jeff Sessions claims GOP’s budget will take America from ‘decline to prosperity’
- Center on Budget and Policy Priorities: Statement of Robert Greenstein, President, on Chairman Ryan’s Budget Plan
- Center on Budget and Policy Priorities: Medicaid Block Grant Would Shift Financial Risks and Costs to States
- Center on Budget and Policy Priorities: CBO Shows Ryan Budget Would Set Nation on Path to End Most of Government Other Than Social Security, Health Care, and Defense By 2050
- Medicare.gov: Financing and reimbursement
- Bipartisan Policy Center: Domenici-Rivlin deficit reduction plan (PDF)
- Forbes.com: 2012 federal income tax bracket
- Rep. Paul Ryan’s website and contact information
- WhatTheFolly.com: Discretionary spending will face another round of cuts if the Super Committee’s plan fails
- WhatTheFolly.com: President Obama vows to block Republican efforts to undo automatic cuts
- WhatTheFolly.com: Transcript: Super Committee Sen. John Kerry’s Q&A on previous debt proposals
- WhatTheFolly.com: White House pushes for corporate tax reform
- WhatTheFolly.com: U.S. debt ceiling timeline 2011
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