By JANET ADAMY
The House Republican plan for overhauling Medicare would fundamentally change how the federal government pays for health care, starting a decade from now, likely resulting in higher out-of-pocket costs and greater limits to coverage for many Americans.
The current spending level on seniors in Medicare is widely viewed as unsustainable, given rising medical costs and the aging population. Medicare calculates that it spent an average of $11,743 on beneficiaries in 2009, according to the Centers for Medicare and Medicaid Services.
House Budget Committee Chairman Paul Ryan's solution is to end the current Medicare program for people born in 1957 and after. Starting in 2022, when those Americans begin turning 65, they would no longer get their medical bills paid directly by the government, which the Wisconsin Republican in his blueprint released Tuesday calls an unsustainable "blank check commitment."
Instead, those age 65 would be entitled to $8,000 a year on average in 2022, according to an estimate by the nonpartisan Congressional Budget Office. The amount would increase as the enrollee aged and with the rise in the Consumer Price Index.
The government payment, made to an insurance company, would help seniors purchase policies offered by private carriers through an exchange. Lower-income and sicker beneficiaries would get larger subsidies than wealthier, healthier people.
The $520 billion-a-year Medicare program insures about 48 million elderly and disabled people, and exerts a huge gravitational force across the U.S. health-care system, affecting how much doctors and hospitals charge for services to both beneficiaries and non-beneficiaries. Medicare, which is expected to cover 73 million people in 2025, also provides big subsidies to hospitals for treating consumers who don't pay.
For seniors and the disabled, a shift to a private Medicare insurance program could present more options to buy plans tailored to their needs. But in a report released Tuesday, the CBO concluded that under Mr. Ryan's proposal, "most elderly people would pay more for their health care than they would pay under the current Medicare system."
Mr. Ryan says revamping Medicare is essential for avoiding big tax increases or a runaway national debt that stifles economic growth. He says his plan would make health care more affordable by letting market competition work as a check on costs.
The Republican plan would let people who turn 65 and enroll in Medicare before 2022 a group that includes a large portion of the postwar baby boom remain in the old, government-run Medicare program. But those grandfathered into classic Medicare would have the option of switching to the new private system, and health-policy experts say the healthiest individuals might opt for private plans.
The plan also gradually raises the age that seniors become eligible for federally subsidized health insurance. It would rise to age 67 by 2033; current law calls for a similar increase in the federal retirement age.
Mr. Ryan's 2012 budget plan also calls for nullifying major parts of President Barack Obama's 2010 health-overhaul law, including the requirement that most Americans carry insurance or pay a fee.
The Republican proposal says it would ensure seniors get access to care by setting up a new system of insurance exchanges, where seniors would shop for private plans. The CBO says the plans would have to issue insurance to all people eligible for Medicare who applied, and would have to charge the same premiums for all enrollees of the same age.