Paul Ryan’s 2011 Medicare Plan: A Primer

Scott Olson/Getty Images(WASHINGTON) — Welcome to the next phase of the U.S. presidential campaign: a debate over Medicare.

With Mitt Romney’s selection of Rep. Paul Ryan, R-Wis., as his vice presidential running mate, conversation will swiftly turn to the proposal that has come to define Ryan’s political career — a plan to reinvent Medicare as a way to limit the growth in taxpayer spending on health care.

Ryan has pushed some version of his plan since 2008, but it exploded as a topic of national discussion in the spring of 2011 when Ryan introduced it as part of his 2012 budget outline.

President Obama blasted it. Newt Gingrich called it “right-wing social engineering.” House Speaker John Boehner didn’t exactly embrace it. Romney himself has not endorsed it in full, and since its roll-out, Ryan has worked with Democratic Sen. Ron Wyden, Ore., to modify it.

Here’s what you need to know about Ryan’s Medicare plan:

HOW IT WORKS

If implemented, the government would no longer pay doctors to treat Medicare beneficiaries. Instead, beneficiaries would buy their own private insurance plans, and the government would give people money to pay to buy health plans from an approved list.

Critics have called this the “end of Medicare as we know it,” and that’s true. Until now, Medicare has operated as a “fee-for-service” system; under Ryan’s plan, it would operate more like a voucher system, although Ryan and his aides have resisted this term.  Medicare would cease to pay for health services directly, instead operating as a board that approves a menu of health plans for public sale and doles out predetermined lumps of money to people enrolled in Medicare, to help them buy those plans.

Ryan’s staff has defended this plan as “progressive,” and it is: If you’re poorer or sicker, you get more money from Medicare to cover your premiums. Think of it like “Obamacare” for seniors: Beneficiaries buy plans listed on a government-approved “exchange” of sorts, with more subsidy payments going to poorer people and those more expensive to cover.

Everyone over 55 would be grandfathered into the current Medicare system. So if you’re of Medicare age right now, nothing would change if Ryan’s 2011 plan became law tomorrow.

IT SHRINKS THE DEFICIT

During the health overhaul debate, much was made of the deficit-neutrality of President Obama’s law, which Democrats achieved, in part, by taking $500 billion out of projected Medicare spending over the next 10 years, even as Medicare spending continues to grow.

Ryan’s plan gets more aggressive.

Under Ryan’s 2011 budget plan, the CBO projected in 2011 that deficits would be 2 percent of GDP by 2022, compared to 2.75 percent under current law, and compared to 9 percent in 2010.

PEOPLE WILL HAVE TO PAY MORE

A big part of Ryan’s method for slowing the rapid growth of health-care costs is by shifting incentives. Under his plan, it’s in the best interest of Medicare beneficiaries and health insurers to pay less for health care, avoiding superfluous services and procedures. Under the current system, that incentive doesn’t exist, as the government foots some of the bills.

That said, the Congressional Budget Office projected in 2011 that individuals would have to pay more under his plan, with their share of (albeit lower) costs skyrocketing to 61 percent by 2022. The CBO’s preliminary long-term analysis included this chart of findings that drove much of the discussion of Ryan’s plan in 2011:

WHAT PRESIDENT OBAMA HAS SAID ABOUT THE PLAN

Democrats have roundly bashed Ryan’s Medicare plan, even picking up a House seat in a spring 2011 special election largely thanks to their loud campaigning against its recent release. Democrat Kathy Hochul ran ads attacking her opponent’s support for the plan, gaining a GOP-held seat in May of last year.

After its release, the president called Ryan’s plan “fairly radical” and posited that it would “change our social compact in a pretty fundamental way,” ABC’s David Kerley reported.

“I guess you could call that bold. I would call it short-sighted,” Obama told 500 Facebook employees and 200 other attendees at a town-hall meeting held at Facebook headquarters in Palo Alto, Calif., in April 2011. “Nothing is easier than solving a problem on the backs of people who are poor or people who are powerless or don’t have lobbyists or don’t have clout.”

WHAT RYAN HAS SAID ABOUT IT

Ryan himself has argued repeatedly that major changes are the only way to save Medicare, that if the cost curve isn’t bent dramatically, Medicare will drive the United States to insolvency, endangering the entitlement altogether.

Faced with an onslaught of criticism, Ryan released a pitch for his plan in May 2011:

Copyright 2012 ABC News Radio