Editor’s note: This analysis piece was submitted while Tom Price was in Congressional hearings for HHS Secretary confirmation.
All eyes on Capitol Hill are focused on the fight over the “repeal and replacement” of the Affordable Care Act (ACA), also known as Obamacare, by the new Republican-controlled Congress and the Trump administration. But don’t get confused. That’s only the warmup card. The championship round could be the battles over the future of Medicare and Medicaid.
While Donald J. Trump and his administration settle in to their new jobs, House Speaker Paul Ryan, R-Wis., and Health and Human Services Secretary nominess Tom Price, are pushing to change the future of Medicare and Medicaid. This, despite Trump having signaled his opposition to sweeping Medicare changes during the campaign. Ryan has proposed replacing Medicare’s open-ended entitlement with the option of “premium support” — a fixed contribution for each beneficiary to purchase private insurance.
While the battle to repeal and replace the ACA directly affects more than 20 million beneficiaries, there are 53.8 million seniors on Medicare and nearly 70 million people, including the frail elderly, disabled seniors and millions of children and working families on Medicaid.
Drastic changes to Medicare and Medicaid could come separately or as part of an effort to repeal and replace Obamacare. That’s also still to be decided. Where Trump stands on Ryan’s push to turn Medicare into a voucher program and turn Medicaid control back to the states is also very much in question.
During the presidential campaign, Trump repeatedly vowed to “save” Medicare, Medicaid and Social Security “without cuts” while getting rid of any fraud, waste and abuse. Trump also promised not to touch Social Security. “Every Republican wants to do a big number on Social Security,” Trump said in 2015. “They want to do it on Medicare. They want to do it on Medicaid. And we can’t do that. And it’s not fair to the people who’ve been paying in for years.”
During the campaign, Trump called Ryan’s plans to change Medicare a political “death wish” for the Republican Party. On Medicaid, Trump’s initial campaign stance was not to change things but later he said he supported block grants to states.
Since winning the presidency, Trump has sent signals that he may no longer see Medicare as untouchable — raising the possibility that at some point in his administration the Republicans may pursue a Medicare overhaul. After the election, Trump laid out a health care platform that called for “modernizing” the program — a phrase Ryan and his supporters also like to use. Nominating Price to run HHS reinforces that position.
Ryan has been pushing for sweeping changes to Medicare, Social Security and Medicaid since 2011, which Democrats denounce as “voucherizing” Medicare. Price, who is an orthopedic surgeon, has championed Ryan’s Medicare plan, which has been a central part of Republican budgets since that time.
Price has said he plans to push privatizing Medicare in the next Congress. Price has also supported raising the age of eligibility for Medicare to age 66 or 67 (currently at age 65) and has also favored increasing Medicare premiums.
What Ryan and Price have in mind is this: Medicare beneficiaries would buy health insurance from one of a number of competing plans. The traditional fee-for-service Medicare program would compete directly with plans offered by private insurers like Blue Cross Blue Shield, Humana and UnitedHealth Group.
The federal government, under their plan, would contribute the same basic amount
toward coverage of each beneficiary in a region. Those who choose more costly options would generally have to pay higher premiums, and those who choose plans that cost less than the federal contribution could receive extra benefits or rebates. Ryan and Price argue this would save money by prompting greater price competition among insurers, who would offer plans with lower premiums to attract customers.
Ryan stressed that his proposal would apply to future beneficiaries, not to those in or near retirement. As he always does, Ryan predicted fiscal doom for the program if his reforms are not implemented: “Medicare goes bankrupt in the next decade,” Ryan argues. But the House Speaker is not exactly accurate in that statement. As a result of changes made by the ACA, Medicare trustees in 2014 pushed back their projections by 11 years to 2033 for when the Medicare fund would be exhausted.
That doesn’t mean retirees will get nothing by 2034. It means that at that point the program will only have enough revenue coming in to pay 79 percent of promised benefits. Medicare Part B, meanwhile, which helps seniors pay for doctor’s bills and outpatient expenses, is funded by a combination of premium payments and money from general federal revenue. The same is true of Part D, which offers prescription drug coverage. Both will be financed in full indefinitely, but only because the law requires automatic financing of it.
Ryan may have other problems pushing through changes to Medicare. While he can get a measure through his House of Representatives, Senate Republicans have been lukewarm at best on the idea of privatizing Medicare. A few have said they would only be willing to do so with
full buy-in from both Trump and the Democrats.
Even those Republicans that support Ryan’s idea suggest privately that a major move on Medicare should not happen in the first year of the Trump administration. Another potential area of resistance to revamping Medicare could come from conservative Republicans in the House of Representatives. Most of them support the concept.
But the Tea Party wing – the most extreme of the fiscal hawks including members of the conservative House Freedom Caucus — are worried that Trump might not push ahead on major entitlement reforms and that would explode the deficit.
The other side
Democratic opposition to sweeping Medicare changes is a certainty. They remember the politics of elderly issues. It was just a few years ago that Democrats ran ads accusing Ryan of trying to push a wheelchair-bound grandmother over a cliff. In addition, many lawmakers vividly remember the strong opposition to George W. Bush’s plan to privatize Social Security in 2005, which caused a firestorm but never gained political traction.
Democrats see a Republican-led push to privatize Medicare as a way to motivate liberals and progressives because politically they can frame themselves as defending seniors and as saviors of Medicare and Medicaid.
Democrats worry privatized Medicare would replace a government service that most people think works well, with skimpy vouchers or “coupon care for seniors,” as some label it. They also fear that the healthiest seniors would choose private insurance, lured by offers of health club memberships, and other wellness programs. They expect that the vouchers will fuel a big increase in enrollment in private Medicare Advantage plans, leaving Medicare with the sicker, more expensive patients and higher premiums. Enrollment in private plans is already on the rise, having increased more than 55 percent since adoption of the Affordable Care Act in 2010.
Democrats also fear that if they focus too much on the Obamacare fight, they may not be able to stop efforts to change Medicare and Medicaid – which could result in denying health benefits to millions of seniors, children, working families and people with disabilities.
Medicaid/Obamacare fights
Trump sometimes included Medicaid as well as Social Security and Medicare in the list of entitlements he did not want to touch during his presidential campaign, while steadfastly advocating repealing the ACA. But since you cannot repeal it without tampering with the Medicaid expansion that has been the source of much of the ACA’s coverage expansion, Medicaid reform and Obamacare will go hand in hand moving forward.
But with all the focus on Obamacare, the substantial changes to Medicaid being proposed may get lost in the crossfire. Late in the campaign, after repeatedly promising not to change Medicaid, Trump’s vague health care platform included a proposal to turn Medicaid into a block
grant wherein states would call the shots in exchange for a fixed federal grant.
That coincides with what Ryan and Price have proposed in the House of Representatives. Their idea is to cap the federal contribution to the federal-state health insurance program for low-
income people in some fashion in order to limit the future growth of Medicaid. States would have more leeway to design their own approaches to caring for vulnerable people.
But the impact could be major for the 70 million people now covered by Medicaid, including some 10 million added through the ACA’s expansion of the program. Because state programs can vary dramatically, federal limits risk locking in disparities among states. In a
budget crunch, states might cut off hundreds of thousands of people from the Medicaid rolls, meaning hospitals would get stuck with the bill for emergency care.
Ryan and other congressional Republicans argue that Medicaid is a bloated wasteful program and that financing caps are a way to give states more flexibility while slowing growth.
But according to the well-respected Center on Budget and Policy Priorities, Medicaid’s actual spending per beneficiary has grown by about 3 percentage points less each year than it has for those with private insurance. That trend is expected to continue. Democrats argue Ryan and Price’s spending caps would cut Medicaid to the bone, leaving states with only one option – imposing harsh cuts in benefits and coverage.
Also contributing to this column were the New York Times, Politico, the Associated Press and the Washington Post.
