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Ryan defends plan for fundamental Medicare redesign

House Budget Committee chairman Paul Ryan defended his plan to redesign the government’s biggest health insurance plans on NBC’s Meet the Press Sunday, saying it was necessary to avert a sovereign debt crisis.

House Budget Committee chairman Paul Ryan, R- Wis., defended his plan to redesign the federal government’s health insurance plans, Medicare and Medicaid, on NBC’s Meet the Press Sunday, saying it was necessary to avert a sovereign debt crisis.

“We need a clean break from the politics of the past,” he said. “We have a debt crisis staring us in the face.”

He rejected any tax increases as part of his plan, arguing that they would only slow down economic growth. “The problem we have is spending, not taxes,” he argued. “We’ve got to get our spending under control because that’s the root cause of our problem.”

Under President Barack Obama’s budget blueprint, federal outlays would be nearly 23 percent of gross domestic product over the next 10 years; Ryan says his plan would keep federal outlays under 20 percent of GDP.

Obama won't agree to Ryan plan
Also on Meet the Press, Obama’s senior advisor David Plouffe said Obama is “obviously not going to sign on” with Ryan’s approach to cutting future debt and that the Ryan plan is “not going to become law.”

He added that Obama “will be laying out his approach to long-term deficit reduction later this week,” which seemed to imply that Obama will offer new ideas beyond those he proposed in his fiscal year 2012 budget blueprint.

The health care overhaul signed into law by Obama last year would reduce Medicare spending by about $500 billion over 10 years. But Plouffe said "We have to do more. So you're going to have to look at Medicare and Medicaid and see what kind of savings you can get.”

Obama will make his proposals in a speech Wednesday.

Sen. Jeff Sessions, R-Ala., the ranking member of the Senate Budget Committee, said Sunday that Plouffe's announcement that the president will offer deficit reduction ideas this week "is an apparent recognition that the budget plan he submitted to Congress... fails to address our dire fiscal challenges. However, it will not be sufficient for the President to simply make a speech."

Instead, Sessions said, Obama ought to submit an entirely new budget plan to Congress specifying the changes he seeks to make to his previous proposals in both mandatory spending, such as Medicare, and discretionary spending, the annual appropriations for federal departments and agencies.

Plouffe said Congress must vote to increase the federal debt limit in the next few months and should not “be playing brinkmanship with the full faith and credit of the United States of America.” Some congressional Republicans have called for deeper spending cuts before they will agree to raise the federal government’s borrowing limit.

Plouffe said congressional leaders in both parties “have said we have to raise the debt limit, so we’re going to. But in that process, we should be able to reduce the deficit.”

Upcoming vote to raise the debt limit
Ryan, who appeared after Plouffe on the program, said he was encouraged that Plouffe had seemed to draw a connection between deficit-reducing steps and the upcoming congressional vote on the debt limit.  “We believe accompanying any debt ceiling (increase), you need real fiscal reforms, real spending cuts and real spending controls going forward,” Ryan said.

He acknowledged that negotiations between congressional Republicans and Obama over the preconditions to raising the debt limit would be just as contentious as last week’s bargaining over a spending bill for the remainder of the current fiscal year.

Plouffe said the spending accord which Obama reached with House Speaker John Boehner late Friday night was “a good moment” and a harbinger of good working relationships in the months ahead, saying “trust and understanding was built up between the speaker and the president and the Senate majority leader.”

“Our leaders in both parties… showed they could come together, compromise. Compromise, by the way, cannot be a dirty word. It’s the way we’re going to go forward as a country,” with government divided between Republicans having the majority in the House and Democrats controlling the Senate and the presidency.

Plouffe said, “We cut spending — the biggest annual spending cut in the history of the country — while still protecting investments in education, in infrastructure, and research and development….”

A plan to reduce future growth of Medicare
With the spending plan for the current fiscal year apparently settled, attention on Capitol Hill will turn to Ryan’s plan to fundamentally redesign the two entitlement programs that now account for more than one-fifth of federal spending, a share will grow rapidly in the years ahead due to the demographic shift in which a larger share of the population is eligible for those benefits.

The Congressional Budget Office, in an assessment last week, said Ryan’s plan “would significantly reduce mandatory outlays for health care” and result in “much lower deficits and debt in the long run.”

But the CBO also found that under Ryan’s redesigned Medicare, “most elderly people would pay more for their health care than they would pay under the current Medicare system.” CBO said by 2030 those on Medicare would pay more than twice as high a share of the cost of their medical care than beneficiaries in the current system do.

But CBO also said that without some steps to change Medicare and cut the growth rate of federal health care spending, the nation inevitably faces "rapidly growing budget deficits and mounting federal debt." 

The CBO also warned that a growing federal debt “would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.”

Under Ryan’s proposal which he unveiled last week:

  • Eligibility for the existing Medicare program would not change for people who are age 55 or older by the end of 2011.
  • People who turn 65 in 2022 or later years would get payments from the government to help them purchase private insurance.
  • The payments would be higher for low-income people and lower for high-income people: people in the top 2 percent of the income distribution of the Medicare-eligible population would receive less than one-third of the subsidy which middle- and lower-income people would get.
  • The payments for insurance would grow over time in pace with overall consumer prices, but not necessarily in pace with the increase in the cost of medical care.
  • Starting in 2022, the age of eligibility for Medicare would gradually increase until it reached 67 in 2033.
  • The federal government would change the Medicaid program for poor people into block grants to each state. Those grants would grow over time in pace with overall consumer prices and population growth.
  • There would be no tax increases.

Ryan’s plan would be the most far-reaching change in Medicare since the program was created in 1965.

As the CBO explained, “current law prescribes the (Medicare and Medicaid) health care benefits to which people are entitled, and the federal government pays whatever is needed to honor those entitlements. The (Ryan) proposal changes that entitlement to a fixed federal contribution….”

Ryan and his fellow Republicans seem to be convinced that today’s voters — especially those under age 55 — are more alarmed about the national debt than they are about cuts in future benefits.

Gross federal debt is now about 100 percent of gross domestic product, the highest level since immediately after World War II, and will grow as more Baby Boomers retire and start collecting Medicare and Social Security benefits.