Paul Ryan  official portrait  111th Congress

Today, Paul Ryan, Chair of the House Budget Committee, will release his plans on how to cut the deficit by $6 trillion over the next decade. His budget would accomplish this primarily by changing Medicare for people under the age of 55, as well as changing the framework for Medicaid. Ryan, on Fox News Sunday with Chris Wallace, explains and defends his plan in detail, as seen in the video below.

The reason that Ryan’s proposal concentrates on these two health care areas is that 25% of what the government currently spends is in these two policies. This percentage will increase as the baby boomers move into retirement, which begins in the next year or two and then continues for the next few decades.

Currently, Medicare is a pay-for-service system, as we all know. That means that for every service that a person uses, the federal government provides a payment to augment what the individual user pays. Under Ryan’s proposal, the government will provide the elderly with subsidies that they may use to purchase health care insurance.

The political danger has to do with two separate but related factors. The first hurdle that must be overcome is that the elderly know that Medicare is a pretty sweet deal for themselves, and generally regard any proposed change as a danger to the benefits which they currently receive. As these benefits, even for future recipients, are reduced, we can only expect this position to harden. The other political problem is that the elderly vote in much greater numbers than does any other population group. One reason for this is because they have much more at stake in elections than does any other cohort, primarily because of the benefits which they receive.

Because of this, we can expect the Democrats en masse to argue against Ryan’s Medicare proposal. It will be easy for observers to determine the likelihood of this, or some other wide-sweeping plan to affect Medicare, to succeed by seeing which Republican elected leaders come to the defense of Ryan’s plan. If they are willing to fight back, then there is some possibility that the plan will have a chance. Otherwise, it will be just one man against the Washington establishment, which is almost always a losing fight.

The Medicaid cuts that are proposed are different. The main problem with Medicaid is the way that the system has been set up. The federal government mandates a set of services for states, and then subsidizes the services which each state provides. If these subsidies are reduced, there is one potential outcome which hasn’t been considered by most analysts. That outcome is that some states will opt out of the current system and provide their own solution. For example, a state could say we will provide the cost of private insurance that pays for Medicaid services for a poor person, if the cost of doing this for a state is less than the cost that it pays under the new system. I would expect that this is likely to be proposed in a state like Mississippi or Louisiana, where the poverty rate is extremely high and both governors are running for President.

Here is Ryan’s explanation of his plan.

Other links:
ABC News

Fox News