Once again, Paul Ryan has put forth a budget that not only gets 69% of the spending cuts from the poorest and most vulnerable sectors of the population but that seriously goes after senior citizens by privatizing Medicare by replacing their health care benefits with a premium support voucher to purchase private insurance which would not cover total premium costs in most cases; the growth of such premium vouchers will be tied to the per capita annual GDPl growth rate plus half a percentage point which guarantees that the value of the new vouchers will increasingly fall short of rising medical costs. The high income beneficiaries will join high priced private plans skewing the risk pool of the poor beneficiaries toward the sickest and thus highest cost. The plan has no feature to control rising medical costs and will contain insurance costs by reducing benefits. Vouchers would purchase less and less coverage every year under the Ryan plan. Traditional Medicare would become too expensive and "unravel" quickly as the program lost money as healthy, higher income members abandoned it for private plans. One CBPP report explains the process;
Inadequate risk adjustment would mean that traditional Medicare would be only partially compensated for its higher-cost enrollees, which would force it to raise premiums to make up the difference. The higher premiums would lead more of Medicare’s healthier enrollees to abandon it for private plans, very possibly setting off a spiral of rising premium costs and falling enrollment for traditional Medicare. Over time, traditional Medicare would become less financially viable and could unravel — not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a consequence. The Ryan plan also would allow private plans to tailor their benefit packages to attract healthier beneficiaries and deter sicker ones, which only makes this outcome more likely.It is odd that the vouchers are indexed to GDP growth rates but not the rate of growth of health care costs which promise to boost the costs of Ryan's privatization reform to the beneficiaries. The League of Women Voters website's cites a CBO analysis of the Ryan plan claiming that the current share of out of pocket costs to many beneficiaries could increase by nearly 200% over time.
The CBO analyzed the impact of the Medicare proposal in “The Path to Prosperity” on spending for health care by Medicare beneficiaries. They found that currently, on average, Medicare Parts A, B and D paid for approximately 76 percent of the cost of services covered by Medicare, with the individual paying the balance in out-of-pocket expenditures such as premiums for Parts B and D and in co-pays and deductibles. Thus, the beneficiary would be paying approximately 24 percent of the cost of services. The CBO estimated that if the law were not changed, the beneficiary would be paying about 25 percent of the cost of services in 2030. However, under the plan proposed in “The Path to Prosperity”, the beneficiary would pay 68 percent of the cost of currently covered services and the premium support payment would pay 32 percent of the currently covered services. (CBO at 21) In part, this would be because both administrative costs and profits would be higher in a private plan, and payment rates to providers are higher for private plans than for Medicare. They estimated that utilization would be less because private health insurers would probably impose greater utilization management than occurs in Medicare and increased cost sharing with beneficiaries would encourage lower utilization. In addition, premium support payments would increase with increases in the consumer price index for all urban consumers (CPI-U). Historically, increases in health insurance have outpaced increases in the CPI-U.The Ryan Plan, as of 2024 when it would be fully phased in, provides no guarantee that current Medicare costs would be covered by the private insurance plan purchased with the voucher nor does it guarantee that the private plan would cover all the health care costs currently covered by the Medicare system today. In all likelihood benefits covered would be significantly less since private health insurance companies would be deciding what is covered and not the Medicare program as it now exists. The current system is very cost efficient while shifting to a private plan will increase costs while lowering benefit levels. When the plan is fully effective in ten years, the federal government will save significant amounts of money through the voucher system mostly by doubling the real costs to beneficiaries.
The Kaiser Foundation found that about three quarters of the 50 million Medicaid beneficiaries have traditional Medicare while the rest have one of the higher cost private Medicare Advantage plans. Federal contributions now keep monthly premiums lower than the privatization option would. A Kaiser study from two years ago found that not only would great regional disparities emerge due to the differences in Medicare spending levels and costs, disparities now suppressed by uniform benefits offered by the current Medicare program nationwide, but costs will increase for nearly three fifths of all seniors across the country based on the loss of current government contributions to cover benefits that will in the future be taken up by private insurers willing to pay less. Premiums will increase along with health care costs as well.
As to the rest of the budget, about 69% of the roughly $4.8 trillion in cuts over the next ten years come from programs that currently service the poor, elderly, students and the middle class in general. The program has been described as "Robin Hood in reverse!" This would leave millions in misery as poverty rates would increase. Defense spending would increase, however! Medicaid, which Obama's ACA was supposed to expand to cover about two thirds of the existing uninsured, would be decimated by smaller block grants to states. Well over $1.5 trillion will be lost to the program through both the elimination of funding for Medicaid expansion and through the smaller block grants.
It should come as no surprise that the party that erroneously believes in austerity as a path to recovery and cutting one's way to prosperity also has included steep corporate tax cuts and other tax code adjustments for the corporate rich. Not only would it reduce the current top corporate rate from 35% to 25% but it would also eliminate taxes on all revenue earned overseas thus actual compelling corporations to locate abroad with this particular incentive. In addition, US corporations already pay among the lowest effective federal income tax rates, despite the higher statutory rate, given the myriad deductions and loopholes they currently enjoy. A well publicized GAO report that came out in 2013 concluded that the average large US corporation had an effective federal income tax obligation of roughly 13% which is far lower than corporate income tax paid by many US competitors. According to the 2013 GAO report, those US corporations filing a schedule M-3 (usually corporations reporting total assets in excess of $10 million) paid an average of 13% effective federal income tax rate. The reason for the report was that an earlier GAO study from 2008 reported that more than half of all such corporations reported no federal income tax liability in at least one year between 1998 and 2005! It is amazing that in a country where the largest corporations pay little or no taxes, there are those who call for even greater tax breaks. Such breaks are to be paid for with federal budget cuts to the poor and the sick. This is especially egregious when one considers that these cuts are accompanied by corporate tax code adjustments that encourage even more shifting of American jobs overseas!
The same logic that applies to taxes on high net worth individuals. Ryan similarly wants to slash the top rate on wealthy individuals from 39.6% to 25% as per his current federal budget recommendations. Such policies have never created jobs. They do however, increase deficits! A Tax Policy Center analysis projects that Ryan's currently proposed tax cuts for the rich would cost the federal government over $5.7 trillion over the coming decade. Such long discredited trickle down policies are known to fail, especially when combined with spending cuts to programs that chiefly benefit the working poor and middle class which have been proven to have a spending multiplier that is far higher than that of tax cuts which eventually cost tax revenue-that is, they have a spending multiplier of less than one compared to social spending that has a multiplier of between 1 and 2.
We cannot expect a budget that gives us tax fairness, a robust public spending program for full employment, protection of the social safety net or even respect for a long standing contract with the American People like Social Security and Medicare. The Republicans care only for the very rich and nothing for the poor and the middle class. It should be obvious that the GOP is truly the Greedy Old Plutocrat Party. Let's vote them out of Congress this November!!