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A Project of The Annenberg Public Policy Center

Obama Misrepresents Ryan Plan

President Barack Obama has been hammering away at Rep. Paul Ryan’s Medicare proposal, misrepresenting what it would mean for seniors.

Since his deficit speech April 13, Obama has continued to claim that the Republican plan would throw Medicare beneficiaries to the open insurance market. But, as we said last week, the plan would create a new Medicare exchange, with rules for participating insurance companies.

Obama, April 20, Facebook town hall: And if the health insurance companies don’t sell [retirees] a policy that covers your illnesses, you’re out of luck. … [Y]ou, a Medicare recipient, will go out and you’ll shop for the best insurance that you’ve got — that you can find. …

Obama, April 21, Democratic National Committee event: Or do we end up balancing our budget and reducing our deficit by fundamentally reworking our social compact … so that we say to our seniors Medicare is no longer a guarantee that you will have health care when you are older — here’s a voucher; we’re going to shift the costs on to you, and if you can’t get the health care that you need on the open market, then tough luck?

Ryan’s plan would shift future beneficiaries to private insurance plans, but it doesn’t call for seniors to find their own plans “on the open market.” Instead, it sets up a Medicare exchange. Obama ignores certain provisions of the proposal.

Here are the main bullet points on the House Republican plan:

  • Medicare won’t change until 2022. New enrollees that year (65-year-olds) would get a subsidy to help them buy a private insurance plan through a new Medicare exchange.
  • The exchange would offer plans only to seniors, and those plans would be required to provide a certain level of standard benefits. Insurance companies would also be required to cover anyone who wanted a plan and to charge the same premium for those of the same age.
  • The average subsidy, or “premium-support payment,” as Ryan calls it, would be $8,000 in 2022. Those with higher incomes would pay more out of their own pocket, and the payments also would be different, depending on health status.
  • Low-income seniors would get government-financed medical savings accounts, with $7,800 deposited into the account in 2022.

So Medicare beneficiaries would buy coverage through a special marketplace. And plans would have to offer standard benefits — we don’t know what those would be yet — and accept everyone who applied. Sound familiar? It’s awfully similar to the state insurance exchanges that are part of the federal health care law.

The president implies that seniors could be rejected by insurance companies when he says that “if you can’t get the health care that you need on the open market, then tough luck.” But the Medicare plans would have to accept them.

The president attempted to explain the Ryan plan at an April 19 town hall in Virginia. But he didn’t quite get it right.

Obama, April 19: What would happen under this proposal is you’d get a set amount of money; you could then go out under the private marketplace and buy insurance, but if the voucher you were getting for $6,000 or $7,000 and the insurance company said it’s going to cost you $12,000, well, you’re going to have to make up that difference.

And so it’s estimated by the Congressional Budget Office, which is an independent, bipartisan sort of referee in Congress that determines these things — they figure that seniors would end up paying twice as much for their health care as they are currently. At least twice as much. And more importantly, it would get worse over time, because health care inflation goes up a lot faster than regular inflation. So your health care costs keep on going up and up and up; the voucher doesn’t. Each year, more and more costs coming out of pocket.

As we said, seniors would buy through a Medicare exchange. They’d get $8,000 on average in 2022, not “$6,000 or $7,000.” Obama is correct, however, in saying seniors would pay more under this proposal than they would under the current Medicare system, and the CBO estimated seniors’ costs in 2022 would be twice as much as they would be under traditional Medicare.

Obama calls these payments “vouchers,” while Ryan calls them “premium-support payments.” We’ll stick with neutral terms like “subsidies.” It’s not accurate to say that these government payments, which would go to the insurance companies, wouldn’t increase each year. The Republican plan says they’ll go up based on the consumer price index for urban consumers and the beneficiary’s age. But Obama is correct in saying that the increase isn’t expected to keep pace with health care inflation. The CBO said in its April 5 analysis: “[T]he government’s contribution would grow more slowly than health care costs, leaving more for beneficiaries to pay.”