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Coburn-Lieberman: A reasonable compromise or Ryancare 2.0?

Senators Tom Coburn (R-Okla.) and Joe Lieberman (I-Conn.) have released an alternative to Rep. Paul Ryan’s plan to turn Medicare into a voucher system. They propose:

  • Raise the Medicare eligibility age from 65 to 67, which the senators acknowledge is only feasible because the Affordable Care Act makes it easier for 65 and 66-year-olds to buy private insurance.
  • Institute a single Medicare deductible of $550, ask seniors to pay coinsurance for services from 5% to 20%, and set a new annual “out-of-pocket” maximum of $7,500, which will protect seniors from medical bankruptcy. (Higher income seniors will face higher “out-of-pocket” maximums, up to $22,500 for individuals earning $160-$213,000 per year.)
  • Limit supplemental insurance coverage so that seniors can’t purchase Medigap policies to cover all of their out of pocket expenses.
  • Stop paying hospitals for debts incurred, but not paid, by Medicare beneficiaries.
  • Increase Medicare Part B premiums for all enrollees, but especially high-income earners. Increase Part D premiums for high-income earners.
  • Fix the SGR for three years. This would prevent Congress from having to constantly vote to prevent Medicare reimbursements from falling dramatically.
  • Combat Medicaid Medicare fraud. See here for more on this provision.

The cuts aren’t as drastic as Ryan’s plan, but it still shifts much of the cost of health care away from the federal government and onto seniors. The biggest change is the means testing for Medicare benefits– the fear is that by asking wealthier Americans to pay more for the same benefits, many will be tempted to leave the program altogether. Right now every senior has a stake in the program– if the wealthy leave, turning Medicare into a program targeted at the poor (similar to Medicaid), well, the poor don’t have much political power, which would make Medicare an awfully tempting target for more spending cuts.

And speaking of Paul Ryan’s Medicare plan, a study by Bloomberg Government finds that it doesn’t save much money:

Ryan would make the wealthiest 8 percent of 65-year-olds pay a larger share of their health-care bills in 2022, the first year the plan would take effect. Smaller U.S. subsidies would be 4.4 percent, or $1.2 billion, cheaper than if all beneficiaries got the same assistance, according to the study.

The plan “actually generates very modest dollars” in savings while giving higher-income seniors an incentive to pull out of the entitlement program, said Judith Feder, a professor at the Georgetown Public Policy Institute at Georgetown University in Washington. Costs for remaining beneficiaries may be higher if that happens, she said.

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