House Passes Budget with Medicare Overhaul

Last week, the House of Representatives passed a budget calling for a Medicare overhaul.  The budget, proposed by Rep. Paul Ryan (R-WI), Chairman of the House Ways and Means committee, would require future seniors to purchase health care as an out-of-pocket expense, with premiums subsidized by the government.

Under the new budget’s provisions, the Medicare system would transform into a premium support system in 2023, forcing seniors under age 55 to use their government contribution to either purchase insurance from various private plans or through the traditional fee-for-service Medicare.  The plan relies on use market-driven competition as the only regulatory means to control health care spending and risks that seniors will have less support in paying for even higher costs.

The budget could be potentially devastating for many future older Americans. According to WOW’s Elder Index, out-of-pocket health care costs already account for the second highest expense for older Americans, second only to housing.

For seniors, the budget means turning to more expensive, less efficient private insurers instead of Medicare.  According to Rick Foster, Medicare’s chief actuary, Medicare serves as a much better means to promote delivery system reforms, guarantee low reimbursement rates with health care providers and function with little administrative intervention. While the budget claims to minimize overall healthcare spending, it actually only shifts Medicare beneficiaries from fee-for-service Medicare into the private health care industry, resulting in virtually no containment of the spending. The costs will end up being covered by cash-strapped seniors or their families who cannot afford the care they require.

Experts predict that the budget will also force those enrolled in traditional Medicare programs to pay more for the same benefits.  Under the restrictions of the budget, private health care corporations may choose the healthiest potential beneficiaries, forcing the sick applicants to turn to the government.  In turn, this could mean that private health care providers could build up coverage appealing to healthier applicants and disregarding services that the very sick rely on.  Consequently, this could drive up the costs of Medicare, forcing the seniors enrolled in the government programs to pay even higher prices.

The budget passed the House with almost no bipartisan support.  Although the chances of the budget become a law remain unclear, and certainly not likely in this Congress, especially in light of their potential detrimental consequences to future generations of seniors, these changes, among many others with equally terrifying consequences, will likely play a large role in the upcoming election and budget discussions moving forward.

- Sahdia Khan
National Program Intern

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