The new budget from Rep. Paul Ryan (R-Wis.), out this week, contains a subtle change on Medicare that might make the budget easier for centrists to defend in the midterm elections.
{mosads}As in the past, the Ryan plan gives future seniors the option of traditional fee-for-service Medicare or buying private insurance using subsidies from the federal government.
Private competition, in theory, is supposed to drive down costs and lower federal spending. In the past three budgets, Ryan has structured the program, so cost cutting would be guaranteed by a spending cap.
“As a backup, the per-capita cost once the program has begun could not exceed nominal GDP [gross domestic product] growth plus 0.5 percent,” his 2014 budget released last year noted.
That backstop is missing this year, the committee confirmed. Talking Points Memo pointed out the change Thursday.
Instead, the budget references a 2013 Congressional Budget Office (CBO) paper that contains an option that cuts both federal spending and premiums for seniors.
The CBO paper analyzed a competitive bidding process where the second-lowest option and the average bid price are selected. In the latter, federal spending would be lower by $15 billion in 2020, and premiums would be lower by 6 percent, according to the CBO. The second-lowest option would save $45 billion but increase premiums.
Democrats are chomping at the bit to accuse the GOP of cutting Medicare, and the backstop cap led the CBO to forecast out-of-pocket increases for seniors under changes similar to previous Ryan plans.
With the cap gone, the new Ryan plan might be more politically insulated but out-year savings might end up being smaller. The plan’s primary goal of balancing by 2024 does not rely heavily on Medicare changes however, since most would occur after the next decade.