The House Budget Resolution for Fiscal Year 2015, H. Con. Res. 96, introduced by Budget Committee Chairman Paul Ryan (R-WI), was passed by the House of Representatives on April 10, 2014.  It would end traditional Medicare, make it harder for seniors to choose their own doctors, and increase health care costs for both current and future retirees.  The House Republican budget ends traditional Medicare and achieves savings for the federal government by shifting costs to Medicare beneficiaries.


Privatizing Medicare with Vouchers/Premium Support Payments


Beginning in 2024, when people become eligible for Medicare they would not enroll in the current traditional Medicare program which provides guaranteed benefits.  Rather they would receive a voucher, also referred to as a premium support payment, to be used to purchase private health insurance or traditional Medicare through a Medicare Exchange.  The amount of the voucher would be determined each year when private health insurance plans and traditional Medicare participate in a competitive bidding process.  Seniors choosing a plan costing more than the average amount determined through competitive bidding would be required to pay the difference between the voucher and the plan’s premium.  In some geographic areas, traditional Medicare could be more expensive.  This would make it harder for seniors, particularly lower-income beneficiaries, to choose their own doctors if their only affordable options are private plans that have limited provider networks.


The Ryan budget proposal calls for private plans to provide benefits that are at least actuarially equivalent to the benefit package provided by fee-for-service Medicare.  This gives private companies the ability to tailor their plans to attract the youngest and healthiest seniors, even if payments are “risk adjusted” to take health status into account, which would leave traditional Medicare with older and sicker beneficiaries.  Their higher health costs would lead to higher premiums that people would be unable or unwilling to pay, resulting in a death spiral for traditional Medicare.  This would adversely impact people age 55 and older, including people currently enrolled in traditional Medicare, despite Chairman Ryan’s assertion that nothing will change for them.


The Ryan proposal establishes accounts for low-income Medicare beneficiaries, such as those people dually eligible for Medicare and Medicaid, to use to pay premiums, co-pays and other out-of-pocket costs.  However, it is unclear what the amount of assistance would be or if it would adequately cover out-of-pocket expenses.


Raising Medicare’s Eligibility Age/Increasing Out-of-Pocket Costs


In addition to privatizing Medicare, the Ryan budget would increase the age of eligibility for Medicare from 65 to 67 by increasing it two months per year from 2024 to 2035.  Raising the Medicare eligibility age is a benefit cut.  Although this proposal would save money for the federal government, it would increase system-wide health spending by increasing costs for everyone else – 65 and 66 years olds who would have to buy private insurance, which can be age rated; younger people buying health insurance coverage in an older risk pool; Medicare beneficiaries left in an older and less-healthy risk pool; employers providing health insurance to workers and retirees and State Medicaid programs.


The Ryan budget plan would also redesign the Medicare benefit beginning in 2024 by combining the Part A and Part B deductibles and making changes to supplemental insurance (Medigap) policies, changes that would likely increase costs for people with Medigap policies.  Medicare could be improved for beneficiaries by simplifying its cost-sharing and adding a catastrophic cap.  However, the National Committee is opposed to proposals to restructure Medicare’s benefits that would reduce federal spending by requiring beneficiaries to pay more.


We also oppose a proposal in the Ryan budget plan to expand income-related premiums under Medicare Parts B and D until 25 percent of beneficiaries are subject to these premiums.  A Kaiser Family Foundation study found that this proposal would affect individuals with incomes equivalent to $45,600 for an individual and $91,300 for a couple today.


Repealing the Affordable Care Act


The Ryan budget also calls for repealing provisions in the Affordable Care Act (ACA), which would make insurance available and more affordable for 65 and 66 year olds if they lost Medicare coverage.  Without the guarantees in the ACA, such as requiring insurance companies to cover people with pre-existing medical conditions and to limit age rating, it would be very difficult and expensive for older people to purchase private insurance.


Repealing the ACA would also take away improvements already in place for Medicare beneficiaries – closing the Medicare Part D coverage gap, known as the “donut hole;” providing preventive screenings and services without out-of-pocket costs; and providing annual wellness exams.  The Centers for Medicare and Medicaid Services recently reported that since the passage of the ACA, over 7.9 million Medicare beneficiaries in the Medicare Part D donut hole have saved $9.9 billion on their prescription drugs, an average of $1,265 per person.  Also, 37.2 million people with Medicare took advantage of at least one preventive service with no cost sharing, including an estimated 26.5 million people with traditional Medicare, and more than 4 million who took advantage of the Annual Wellness Visit.




The National Committee opposes the Ryan Budget Resolution, H. Con. Res. 96, and, in particular, the following:


  • Ending traditional Medicare by converting it from a defined benefit to a defined contribution program; 
  • Raising the Medicare eligibility age; 
  • Increasing costs for Medicare beneficiaries by further increasing income-related premiums and by restructuring the program and Medigap in ways intended to reduce federal spending; 
  • Repealing the Affordable Care Act, which is helping Medicare beneficiaries with their prescription drug costs and providing preventive screening and wellness visits with no out-of-pocket costs.


Government Relations and Policy, April 2014