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Deficit commission debates Medicare overhaul

President Barack Obama's deficit commission on Wednesday debated turning Medicare into a program in which seniors buy health insurance with government-issued vouchers.
/ Source: The Associated Press

President Barack Obama's deficit commission on Wednesday debated a dramatic plan to gradually turn Medicare from a system in which the government pays most beneficiaries' medical bills into a program in which seniors would purchase health insurance with government-issued vouchers.

Current Medicare beneficiaries wouldn't be affected, nor would future enrollees age 55 or over.

Image: Director Of Congressional Budget Office Testifies On Financial Crisis
WASHINGTON - SEPTEMBER 24: Rep. Paul Ryan (R-WI) questions Peter Orszag, director of the Congressional Budget Office, during a hearing on Capitol Hill about the impact of recent market turmoil on the federal budget on September 24, 2008 in Washington, DC. Orszag reported that while the impact is currently unknown, it is likely to be substantially less than $700 billion. (Photo by Brendan Hoffman/Getty Images)Brendan Hoffman / Getty Images North America

The plan by Rep. Paul Ryan, R-Wis., and Democratic economist Alice Rivlin of the panel would seem to face steep odds with most other panel Democrats.

Ryan came under assault by Democrats and President Obama during this year's campaign over a similar plan, which would gradually turn the traditional "fee for service" Medicare program into a less generous voucher system that would lose purchasing power as time goes on.

That would mean seniors would have to pay higher premiums or receive less extensive health coverage.

Image: Rivlin addresses the 2010 meeting of the Wall Street Journal CEO Council in Washington
Former Federal Reserve Vice Chairman Alice Rivlin addresses the 2010 meeting of the Wall Street Journal CEO Council in Washington, November 16, 2010. REUTERS/Jonathan Ernst (UNITED STATES - Tags: POLITICS BUSINESS)Jonathan Ernst / X01676

Panel Democrat Alice Rivlin — a deficit hawk — endorsed the plan, which would not change the Medicare programs for current enrollees or for those 55 and older. The new system would start in 2021. The eligibility age for Medicare would gradually increase from 65 to 67.

Ryan's plan is tough medicine but the future chairman of the House Budget Committee says it is needed to prevent Medicare from bankrupting the country.

"Medicare's open-ended, fee-for-service model distorts the health-care market, inflates costs and invites fraud and abuse," Ryan wrote in a post on The New York Times website. "With tens of trillions of dollars in unfunded promises, Medicare is on an unsustainable trajectory, and yet 'do-nothing' politicians irresponsibly insist the program remain on autopilot."

Democrats say the approach indiscriminately slashes Medicare.

"The plan simply mechanically cuts Medicare by increasing its vouchers more slowly than health care costs," former White House Budget Director Peter Orszag said in July.

The Ryan-Rivlin blueprint would also, in 2013, overhaul the Medicaid program for the poor and disabled by providing block grants to states instead of the current federal-state partnership.

For both Medicare and Medicaid, the yearly increases in the cost of the new programs would be capped at the rate of growth of the economy plus one percentage point.

Deficit panel member Sen. Kent Conrad, D-N.D., withheld judgement on the plan but pointed reporters to a Congressional Budget Office analysis that says the plan would mean seniors would have to pay higher premiums in the private market or choose insurance plans with less extensive coverage.

On Medicaid, the nonpartisan CBO also says states would probably provide less generous health care coverage to the poor.