U.S. Congressman Paul Ryan Serving Wisconsin's 1st District

U.S. Congressman Paul Ryan Serving Wisconsin's 1st District

U.S. House of Representatives


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Medicare is the cornerstone on which all other government health programs rest.  Unfortunately, the deteriorating financial conditions of this program are threatening beneficiary access to its benefits.  In their most recent report, the Medicare Trustees projected that the account that funds Medicare’s hospital benefit will go bankrupt in 2030.  Reports like this illustrate that we can no longer let politicians in Washington deny the danger to Medicare – it is all too real, and the health of our nation’s seniors is far too important. We have to save Medicare to avoid disruptions in benefits for current seniors and to strengthen the program for future generations.

The President’s Health Care Law

On March 25, 2010, a Democrat controlled Congress passed the President’s health care law which fundamentally realigns our nation’s health care system. This massive health care overhaul will exacerbate the very problems this reform effort sought to address. It will dramatically alter our deteriorating economic and fiscal conditions for the worse and may irrevocably impair the American identity.

Sky-rocketing health care costs are drowning families, businesses and governments in red ink — leaving millions unable to afford coverage. This law — with its maze of mandates, dictates, controls, tax hikes and subsidies — pushes costs further in the wrong direction. It initiates a government takeover of the health care sector, intrudes in the doctor-patient relationship, and it raids over $700 billion from Medicare to finance a new open ended entitlement.  All told, this law will dramatically add to an already unsustainable rate of government spending growth that will overwhelm the Federal budget and will dramatically change the way Americans get health care.

The health care law will have significant and serious consequences on the sustainability of Medicare and access to medical care. Before the bill’s enactment, the Medicare program was already on an unsustainable path. As mentioned earlier in this report, according to the most recent Medicare Trustee’s report, the Medicare program will be insolvent by 2030 — meaning Medicare will have exhausted the assets in its Hospital Insurance trust fund. Instead of reforming this important program so that current beneficiaries will not see a disruption in their services and future generations will be able to plan their retirement around Medicare’s assistance — as I have been advocating for several years — the health care law treats Medicare like a piggy bank.

Instead of promoting real competition – which would moderate costs naturally — the law nationalizes the regulation of health insurance premiums. This will lead to shortages and rationing.  Waiting times will result from limited supply and higher demand. Quality will decline as consumers begin facing restricted access to the full range of treatment options. Greater government regulation also will limit incentives for medical innovation.

Yet, despite all the new spending and all the increased taxes, supporters of this law argue that it will actually reduce our current deficit levels. However, the fiscal arguments just do not add up. The only way reduce the deficit, while at the same time having the government pick up the tab for more than 25 million uninsured Americans and subsidize millions more is through the use of smoke and mirrors.

Medicare Reimbursements for Physicians

Medicare reimburses health care providers for various procedures they perform.  These reimbursements are made according to a fee schedule, which is updated annually by a formula called the Sustainable Growth Rate (SGR).  If spending exceeds the established targets, payment rates to providers are cut; if spending is below the target, payment rates are increased.  The intent of the formula is to place a restraint on overall increases in Medicare spending for physicians’ services.

Since 2003, Congress has chosen to override current law in order to prevent reimbursements from being cut as a result of the formula.  On March 27, 2014, the House approved legislation, which subsequently passed the Senate on March 31st, which would provide, among several provisions, a year-long patch in the scheduled cuts in physicians’ Medicare reimbursements that would have taken place due to the flawed SGR formula.  However, since the law only provides a temporary patch to the over 20 percent cut physicians would face, Congress will need to again act on this issue in advance of the deadline. 

Rather than passing temporary fixes, I would prefer to address the more important matter of wholesale reform to the Medicare reimbursement system.  Physicians should not have to wait on Congress to act every year in order to prevent pay cuts that are arbitrarily determined by an outdated formula. Fundamental reforms to Medicare and our broken health care system are urgently needed, and I will continue to push my colleagues to take on this challenge.

The Fiscal Year 2015 Budget, The Path to Prosperity

Medicare’s structural imbalance threatens beneficiaries’ access to quality, affordable care.  Currently, Medicare reimburses health care providers for services, creating a perverse incentive to order more tests and perform more services than may be necessary as a way to maximize one’s share of the program.  By basing payment on volume, not quality, costs rise and efficiency is reduced.  Ultimately, this flaw in the structure of the program is driving up health care costs, which are, in turn, threatening to bankrupt the system – and ultimately the nation.

Unless Congress fixes what’s broken in Medicare, without breaking what’s working, the program will end up causing exactly what it was created to avoid – millions of American seniors without adequate health security and a younger working generation saddled with enormous debts to pay for spending levels that cannot be sustained.

It is morally unconscionable for elected leaders to cling to an unsustainable status quo with respect to America’s health and retirement security programs. Current seniors and future generations deserve better than empty promises and a diminished country. Current retirees deserve the benefits around which they organized their lives. Future generations deserve health and retirement security they can count on. By making gradual structural improvements, Congress can preserve America’s social contract with retired workers.

Recognizing the problems facing Medicare, the House Budget Proposal:

  • Strengthens health and retirement security by taking power away from government bureaucrats and empowering patients with control over their care.

  • Repeals the new health care law’s unaccountable board of bureaucrats empowered to cut Medicare in ways that would jeopardize seniors’ access to care.

  • Saves Medicare for current and future generations, with no disruptions for those in and near retirement.

  • For younger workers, when they become eligible, Medicare will provide a premium-support payment and a list of guaranteed coverage options – including a traditional fee-for-service option – from which recipients can choose a plan that best suits their needs.

  • Premium support, competitive bidding, and more assistance for those with lower incomes or greater health care needs will ensure guaranteed affordability for all seniors.

Letting government break its promises to current seniors and to future generations is unacceptable. The reforms outlined in the budget passed by the House protect and preserve Medicare for those in and near retirement, while saving and strengthening this critical program so that future generations can count on it to be there when they retire.

The Medicare reform envisioned in this budget resolution begins with a commitment to keep the promises made to those who now are in or near retirement. Consequently, for those who enter the program before 2024, the Medicare program and its benefits will remain as they are, without change.

For future retirees, the budget supports an approach known as “premium support.” Starting in 2024, seniors (those who first become eligible by turning 65 on or after January 1, 2024) would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange. Medicare would provide a premium-support payment either to pay for or offset the premium of the plan chosen by the senior, depending on the plan’s cost. For those who were 55 or older in 2013, they would remain in the traditional Medicare system.

The Medicare recipient of the future would choose, from a list of guaranteed-coverage options, a health plan that best suits his or her needs. This is not a voucher program. A Medicare premium-support payment would be paid, by Medicare, directly to the plan or the fee-for-service program to subsidize its cost. The program would operate in a manner similar to that of the Medicare prescription-drug benefit. The Medicare premium-support payment would be adjusted so that the sick would receive higher payments if their conditions worsened; lower-income seniors would receive additional assistance to help cover out-of-pocket costs; and wealthier seniors would assume responsibility for a greater share of their premiums.

This approach to strengthening the Medicare program — which is based on a long history of bipartisan reform plans — would ensure security and affordability for seniors now and into the future. In September 2013, the Congressional Budget Office analyzed illustrative options of a premium support system. They found that a program in which the premium-support payment was based on the average bid of participating plans would result in savings for affected beneficiaries as well as the federal government.

Moreover, it would set up a carefully monitored exchange for Medicare plans. Health plans that chose to participate in the Medicare Exchange would agree to offer insurance to all Medicare beneficiaries, to avoid cherry-picking, and to ensure that Medicare’s sickest and highest-cost beneficiaries receive coverage.

While there would be no disruptions in the current Medicare fee-for-service program for those currently enrolled or becoming eligible before 2024, all seniors would have the choice to opt in to the new Medicare program once it began in 2024. This budget envisions giving seniors the freedom to choose a plan best suited for them, guaranteeing health security throughout their retirement years.

These reforms also ensure affordability by fixing the currently broken subsidy system and letting market competition work as a real check on widespread waste and skyrocketing health-care costs. Putting patients in charge of how their health care dollars are spent will force providers to compete against each other on price and quality. That’s how markets work: The customer is the ultimate guarantor of value.

Reform aimed to empower individuals — with a strengthened safety net for the poor and the sick — will not only ensure the fiscal sustainability of this program, the federal budget, and the U.S. economy. It will also guarantee that Medicare can fulfill the promise of health security for America’s seniors.

Additional Information

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