What Ryan's Medicare and Social Security Plans Mean for You
A quick look at how the budget proposals of Mitt Romney's running mate would affect citizens in their 50s and 60s
Bob Rosenblatt is a writer and editor specializing in aging issues. His blog, Helpwithaging.com, focuses on the finances of aging.
I am over 55. How would the Ryan plan’s Medicare proposals affect me?
They wouldn’t. You would be covered by the current package of Medicare benefits.
And if I'm younger than 55?
For one thing, you would have to wait longer to become eligible for Medicare. The age of eligibility is now age 65 (technically, you can sign up three months before your 65th birthday). Under Ryan’s plan, starting in 2022 the Medicare eligibility age would increase by two months a year, topping off at 67 in 2033 — the year today’s 46-year-olds would start receiving benefits.
I’ve heard Ryan wants to change Medicare to a voucher system for everyone currently under 55. What would that system look like?
This system would change Medicare in a profound way. Under the currrent system, there is what's known as "open-ended" spending, with the federal government paying for benefits. Under the Ryan plan, the government would make a specific financial contribution toward Medicare each year.
People enrolling in Medicare after January 1, 2023, would have a choice of health plans, including ones offered by insurance companies and the current Medicare fee-for-service system. Each plan would provide all the services currently covered under Medicare, and the federal government would contribute to the cost of the plans. You'd get a certain amount of money — a voucher — to buy insurance on your own. The Medicare plans would offer bids to the federal government based on the cost of providing the insurance, and the voucher price would be based on the bids. How much you’d pay for Medicare would depend on the plan you chose.
What would this mean to my health-care costs in retirement?
The Congressional Budget Office reported that many of the people who would otherwise have enrolled in the government's Medicare plan would face higher premiums for health insurance, higher out-of-pocket costs or both.
Your out-of-pocket medical costs under Medicare would depend on health-care inflation. The Ryan plan puts a limit on the government's Medicare spending at the rate of U.S. economic growth plus 0.5 percent. So if the economy grew at 3 percent, the maximum increase in the government’s contribution to the cost of a Medicare policy would be 3.5 percent. If medical inflation was higher, a larger share of the cost of a Medicare policy would be shifted to individuals.
What about the charge by Republicans that the Obama Administration is robbing $700 billion from the Medicare system to spend on its expansion of health coverage under the Affordable Care Act?
This figure refers to savings projected for Medicare under the Affordable Care Act. Much of the money would come from reductions in payments to insurance companies operating HMO-type plans under Medicare Part C, known as Medicare Advantage plans.
These plans offer benefits not covered under traditional Medicare, such as eyeglasses, hearing aids and prescription drugs. Those enrolled in these plans generally must use doctors and hospitals in a particular network.
The plans are reimbursed by Medicare and currently receive about 14 percent more than Medicare spends on beneficiaries in traditional fee-for-service Medicare. The Affordable Care Act will gradually reduce these excess payments to the plans, most likely beginning in 2014 or later. The last time Congress imposed this type of cut, Medicare Advantage plans withdrew from many markets.
These prospective cuts are also in the Ryan proposal, according to the Kaiser Family Foundation, a nonpartisan health-care policy analysis group.
How would Ryan change Social Security?
Ryan favors letting individuals take a portion of their Social Security payroll taxes and investing the money in stocks and bonds. Under this system, you’d have a base Social Security retirement check and a personal individual retirement account. This is similar to a plan proposed by President George W. Bush in 2005 but rejected by Congress.
As with Medicare, the proposal would apply only to people now under 55. Ryan included Social Security reform in his “Roadmap for America’s Future” blueprint in 2010, but didn’t include it in the formal legislative proposal approved by the House.
How do voters view Ryan’s ideas?
Polling done before Ryan became the VP nominee showed a widespread support for the current Medicare and Social Security programs and deep skepticism about changing them.
The Pew Research Center’s May 2011 survey, for example, found that those 65 and older had a negative reaction to Ryan’s plan to change Medicare. Some 51 percent opposed the plan, and 25 percent favored it. People under 50 were more inclined to support for Ryan’s Medicare plan than those over 50.
When Pew asked whether it was more important to reduce the deficit or keep the Social Security and Medicare programs as they are, 60 percent of all Americans (64 percent of those 50- to 64-years-old and 66 percent of those 65 and older) favored leaving Social Security and Medicare unchanged; 30 percent preferred trimming the deficit.
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