A road map to saving Medicare

By Paul Ryan
Friday, August 13, 2010

The annual analysis of Medicare's financial health released by the program's trustees on Aug. 5 led some Democrats to claim that Medicare's imminent bankruptcy has been delayed, thanks to the creation of their health entitlement program. Only in Washington could the government raid one entitlement program to finance a brand-new one and still claim that deficits have been reduced and entitlements have been reformed.

The trustees' report compares the revenue that supports Medicare's trust funds with the program's planned expenditures. Last year's report revealed a $38 trillion shortfall over the next 75 years. This year the shortfall appears to have decreased, but only after the Democrats' health bill cut $529 billion from Medicare. This apparent improvement was the basis for Democratic celebration -- even though the program remains tens of trillions of dollars in the hole.

With the same legislation that cut more than half a trillion dollars in Medicare spending, the Democrats created a nearly $1 trillion health-care entitlement. The Obama administration's own chief actuary has explained that in addition to the dubious assumptions on provider cuts and other claims of savings, the health-care law's Medicare cuts cannot be used to both reduce Medicare's unfunded obligations and pay for a new entitlement. And the Congressional Budget Office said in March that the health-care overhaul's Medicare savings "would be used to pay for other spending and therefore would not enhance the ability of the government to pay for future Medicare benefits."

Put simply, Medicare is on course to collapse. Medicare and interest on the national debt alone will soon overwhelm the federal budget, crowding out all other national priorities. The CBO estimates that Medicare will consume 12 percent of gross domestic product by 2080 (up from 3.6 percent of GDP today), bringing total health entitlement spending to 17 percent of GDP. Exacerbating our unsustainable trajectory, health spending explodes under the Democrats' health plan -- raiding Medicare, expanding Medicaid and creating two entitlements without any clue of how to finance the ones we have now. The economy simply cannot handle such crushing levels of taxation and the borrowing required to finance this spending; the CBO warned last month of a devastating debt crisis within two decades.

We do not have a choice as to whether Medicare will change from its current structure. It is being driven to insolvency. An honest debate requires a serious discussion of how Medicare will avert its collapse and be made sustainable. Unfortunately, but not surprisingly, the Democrats' political machine has attacked my contribution to this debate, making the false claim that the only solution put forward to save Medicare would "end Medicare as we know it."

The CBO has said that my reform plan, "A Roadmap for America's Future," would put Medicare on a sustainable path. The plan protects and preserves Medicare for those enrolled now and for those who will become eligible in the next 10 years, while reforming the program to ensure it will be there for younger generations. Future seniors would have access to the same coverage I enjoy as a congressman.

Far from the claims of "radicalism," this proposal is based on a key reform from the National Bipartisan Commission on the Future of Medicare, chaired by then-Sen. John Breaux (D-La.). That commission in 1999 recommended "modeling a system on the one Members of Congress use to obtain health care coverage for themselves and their families."

Future Medicare beneficiaries would receive a payment to apply to a list of Medicare-certified coverage options. The Medicare payment would grow every year, with additional support for those who have low incomes and higher health costs, and less government support for high-income beneficiaries. The most vulnerable seniors would also receive supplemental Medicaid coverage and continue to be eligible for Medicaid's long-term care benefit.

If we act now, we can avoid disruptions for current seniors while advancing patient-centered reforms so Medicare will be strengthened for future beneficiaries. The alternative is the European-style death spiral of the welfare state: kick the can down the road as our debt explodes. Under an ever-expansive, all-consuming central government, costs will be contained with Washington's heavy hand imposing price controls, slashing benefits and arbitrarily rationing seniors' care.

The Democratic leadership will seek to brand every Republican running for office with my road map. Ironically, if Democrats succeed in demagoguing to death efforts to save Medicare, that political victory will hasten the program's end. While I am proud to have 13 House Republicans co-sponsor the legislation, and have been overwhelmed by the support outside the Beltway, my plan is not the Republican Party's platform and was never intended to be. This proposal is my sincere attempt to break the political paralysis on entitlement reform, to show that this challenge can be met -- mathematically and politically -- and to challenge those who disagree with my proposal to offer their own.

The writer, a Republican from Wisconsin, is the ranking minority member of the House Budget Committee.

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