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House Speaker Paul Ryan Proposes a Privatized Medicare System

Paul Ryan announced during an interview with Fox News about his plans to create a privatized Medicare program.

By Vera Gruessner

House Speaker Paul Ryan announced in an interview with Fox News Channel several days after the presidential election that the Republican-controlled Congress and White House will look to create a privatized Medicare system and cut funding from Medicare as well, according to the Los Angeles Times.

Affordable Care Act

Under Ryan’s plan, seniors would receive vouchers from the federal government to cover the premiums that commercial health payers would charge. The problem with the plan to privatize Medicare for the elderly deals with the fact that the costs of private health insurance coverage often grows faster than that of Medicare, which means seniors will be left with higher medical expenses than in decades past.

“Well, you have to remember, when Obamacare became Obamacare, Obamacare rewrote Medicare, rewrote Medicaid. If you are going to repeal and replace Obamacare, you have to address those issues as well,” Ryan said during the Fox News interview.

Ryan also stated the following: “What people don’t realize is, because of Obamacare, Medicare is going broke,” the Washington Post reported. This statement is a fallacy because the Patient Protection and Affordable Care Act was actually able to extend the lifespan of the Medicare program.

In particular, the Medicare program as a whole is not ‘going broke.’ Since Medicare Part A is financed by 1.5 percent in payroll taxes among workers and employers as well as 2.9 percent among the self-employed, long-term financing of Medicare Part A will see some significant pressures now that the baby boomer population has begun retiring.

READ MORE: Medicare Advantage Premiums Drop 13% Due to Affordable Care Act

“Working-age adults fund Medicare, through payroll taxes and income taxes. However, growth in the retiree population coupled with lower fertility rates is causing the ratio of workers to Medicare beneficiaries to shrink,” Michael Thompson, Chairperson of the American Academy of Actuaries Medicare Subcommittee, told “Fewer workers will be paying into the system to support the growing number of retirees. The Medicare program has helped provide access to health care for the nation’s retiree population, but more needs to be done to ensure the program is sustainable in the long-term.”

Thompson also offered some solution policymakers can take to address the depleting Medicare Part A program.

“Policy makers should explore the various options available to improve its long-term sustainability. Taking action sooner rather than later would allow 1) the existing funds to be extended longer, 2) the changes to be less drastic, 3) more systemic changes (e.g., in healthcare delivery) to take hold sooner and 4) future generations of beneficiaries to know and plan for what to expect in their retirement years.”

The latest research shows that the trust fund for Medicare Part A will likely be depleted by 2028. This is clearly problematic but the federal government will still be able to cover 87 percent of the program’s spending in 2028.

Claiming that the Affordable Care Act has negatively impacted the lifespan of the Medicare program is inaccurate because the healthcare law required a 0.9 percent payroll tax among wealthy Americans making above $250,000 per couple or $200,000 per individual. The Affordable Care Act was meant to bring in $63 billion for the Medicare Part A trust fund between 2010 and 2019.

READ MORE: How the SMART Act Resolved Medicare Secondary Payer Issues

Ryan’s plan for a privatized Medicare system may include expanding the privately-managed Medicare Advantage programs and bringing forward a premium-support platform in which seniors healthcare coverage would be handled through commercial payers.

Instead of keeping a single-payer federal program, Ryan proposed moving seniors into a privatized Medicare model where federal subsidies would help them afford private health insurance. This type of system is similar to the one used on the public health insurance marketplace today where younger adults with low-income are provided a federal subsidy to purchase coverage among commercial health plans.

The Republican Party is looking to change some major aspects of public healthcare coverage around the nation. In June 2016, House Speaker Paul Ryan released a replacement plan for the Affordable Care Act called A Better Way: Our Vision for a Confident America.

The replacement plan involves allowing health payers sell their products across state lines, incorporating health savings accounts, and bolstering high-risk pools. Also, Ryan’s plan looks to increase the Medicare eligibility age to 67. The financial details of this replacement plan, however, were lacking, Kaiser Health News reported.

When it comes to repealing the Affordable Care Act, A Better Way called for ending Medicaid expansion efforts in the 31 states that have undertaken this project. This means that millions of low-income Americans who received coverage through Medicaid expansion would be losing it. The replacement plan did not address how these individuals would be able to have insurance. Health coverage of these populations may fall to the states.

READ MORE: Rising Specialty Drug Prices Plague CMS, Medicare Beneficiaries

Over the coming year, the Republican-controlled Congress and White House may pursue different strategies for public health insurance programs including creating a privatized Medicare system. Private healthcare payers may need to address how to manage an additional rise in their membership population if seniors are left with a privatized Medicare program.


Dig Deeper:

How Medicare, Medicaid, and CHIP Guide the Health Payer Industry

The Progress and Challenges of the Affordable Care Act


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