Understanding Paul Ryan’s Medicare reform plan in three minutes

National Constitution Center

Mitt Romney’s newly announced running mate, Paul Ryan, wants historic changes to Medicare. Here are the key points and arguments.

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Ryan is leading the GOP effort to overhaul government spending in his role as a representative in the House from Wisconsin.

Medicare’s trustees currently say funding for the plan will start to run short in 2014.

The latest version of his plan, “Path To Prosperity,” was released in March 2012. The plan is a blueprint for government spending controls, with Medicare as a key component.

Link: Read the full Ryan plan

The Ryan plan doesn’t end Medicare, but it is a huge reform effort.

The proposed plan seeks to lower costs to taxpayers by using a system of payments given indirectly to seniors, who would in turn use the money to buy health insurance.

The Ryan plan calls them premium-support payments. Opponents call them vouchers.

The free market would then force insurance prices lower, according to the theory, through competition among insurers, while cutting costs to the federal government.

Factcheck.org and the Kaiser Family Foundation have breakdowns of the Ryan’s “Path To Prosperity” plan from March 2012.

Under Ryan’s plan, seniors currently in Medicare stay in the existing system. But in 2023, people over 65 would pick an insurance plan in a new Medicare exchange system, with Medicare competing with other insurers for their business.

The government would send money, called a premium-support payment, directly to the insurer picked by the consumer.

If the consumer picks a plan more expensive than the government premium payment they receive, the consumer must pay the difference out of pocket. If the consumer picks a cheaper plan, they pocket the difference in the form of a rebate check.

The Ryan plan set the premium payment to consumers at the cost of the second-least expensive government-approved plan.

The federal government will determine the minimum level of benefits that all plans must offer. The premium-support payment is capped at the growth of GDP, plus 0.5 percent. The subsidy will be adjusted based on the income level of the consumer.

After 2022, seniors are guaranteed they can enroll in any plan offered by the new exchanges and Medicare despite their health status or age.

In Ryan’s March 2012 plan, there is no limit of out-of-pocket costs incurred by seniors, and the plan doesn’t address prescription drug costs.

A key part of the plan is killing off the Obama administration’s Affordable Care Act.

The plan picks up out-of-pocket costs for seniors who qualify for both Medicare and Medicaid. Other seniors who don’t qualify for Medicaid also will have their out-of-pocket costs covered, based on their income level.

The Ryan plan also would gradually raise the eligibility age to 67 by 2034 and return the Medicaid program to the control of states, through the administration of block grants.

A sticking point with the health care industry will be the scenario where annual costs exceed the cap on premium payments based on GDP.

Some health care providers fear that doctors, insurance companies, and hospitals will pay the difference if Congress doesn’t authorize additional subsidies.

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