The House Budget Committee-passed Budget Resolution for Fiscal Year 2017, introduced by Budget Committee Chairman Tom Price (R-GA), would achieve savings for the federal government by privatizing Medicare. Beginning in 2024, when people became eligible for Medicare they would not enroll in the current program; rather, they would receive a capped payment to be used to purchase private health insurance or traditional Medicare. This could increase their out-of-pocket health care costs and limit their choice of doctors.
Representative Price claims that nothing would change for people who are already age 55 and older, but this is not true. Chairman Price’s budget resolution calls for private plans to provide benefits that are at least actuarially equivalent to the benefit package provided by fee-for-service Medicare, which gives private insurance companies incentives to manipulate their plans to attract the youngest and healthiest seniors. This would leave traditional Medicare with older and sicker beneficiaries whose higher health costs could lead to higher premiums that they and others would be unable or unwilling to pay, resulting in a death spiral for traditional Medicare. This could adversely impact people age 55 and older, including people currently enrolled in traditional Medicare, despite the assertion that nothing will change for them.
In addition to ending traditional Medicare, the Price Medicare plan would repeal parts of the Affordable Care Act (ACA). This includes the elimination of improvements already in place for current Medicare beneficiaries – closing the Medicare Part D prescription drug coverage gap, known as the “donut hole;” preventive benefits and annual wellness exams with no deductibles or copayments, and improvements in the quality of care they receive. The Medicare savings in the ACA – cutting waste, fraud and abuse, eliminating taxpayer handouts to insurance companies who offer private Medicare plans and slowing the rate of increase in payments to some providers – are maintained but the savings are used for deficit reduction and tax breaks for the wealthy, not to strengthen Medicare and expand benefits.
The Price Medicare plan would raise the age of eligibility for Medicare from 65 to 67. This provision, coupled with repealing the Affordable Care Act, would increase costs for millions of older Americans. 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 people 65 and 66 to purchase private insurance. Raising the eligibility age would also increase costs for Medicare as younger, healthier people are eliminated from the risk pool and costs are spread across an older, less-healthy population.
Government Relations and Policy, March 2016