Summary

Those familiar with House Budget Committee Chairman Paul Ryan’s (R-WI) last budget proposal won’t be shocked at this year’s updated “Path to Prosperity,” a fiscal plan for 2013 and beyond that pledges policy prescriptions for “safeguarding America from the perils of debt, doubt and decline.” Like the old version of the “Path,” Ryan’s second attempt at engineering fiscal policy – including recommendations for overhauling the tax code, cutting spending, and reforming Medicare and Medicaid – takes an axe to federal spending that benefits those without political or economic power but showers tax breaks on the wealthy. With its absence of reasonable solutions for lowering debt and its far-fetched proposals to shift the country’s fiscal burdens onto the poor and middle class, the latest Ryan plan is at heart the same as the old one: A blueprint not for stabilizing the country’s fiscal situation but for forcing an ultra-conservative vision on the federal government.

Ryan Plan’s Cuts Are Enormous, Unrealistic, And Wouldn’t Balance The Budget Until 2040

The New Ryan Plan Proposes Even Larger Deficit Cuts Than Last Year’s GOP Budget. From the Associated Press: “This year’s GOP measure would produce deficit estimates that are significantly lower than a comparable measure passed by the House a year ago, claiming deficit cuts totaling $3.3 trillion – spending cuts of $5.3 trillion tempered by $2 trillion in lower taxes – below Obama over the coming decade. The deficit in 2015, for example, would drop to about $300 billion from $1.2 trillion for the current budget year. Last year’s GOP draft called for a 2015 deficit more than $100 billion higher.” [Associated Press via HuffingtonPost.com, 3/20/12]

The New Ryan Budget Cuts Spending By $100 Billion From This Year To Next. From the Associated Press: “The measure would cut spending from $3.6 trillion this year to the $3.5 trillion range in 2013 and freeze it at that level for two more years.” [Associated Press via HuffingtonPost.com, 3/20/12]

The New Ryan Budget Cuts Spending By $5 Trillion Over The Next Ten Years. From Bloomberg: “House Budget Committee Chairman Paul Ryan today proposed reducing spending by $5 trillion over the next decade from the U.S. budget with Medicaid, food stamps, Pell college tuition grants and other programs facing reductions.” [Bloomberg, 3/20/12]

Ryan Requested CBO Use The Unrealistic Assumption That Non-Entitlement Spending Will Go Below Four Percent Of GDP. From Ezra Klein’s Washington Post blog:

Translated out of CBO-ese, what that means is that CBO hasn’t looked at whether Ryan’s budget will achieve the results Ryan says it will. Rather, it looked at what will happen assuming Ryan’s budget achieves the results that Ryan says it will.

On the third page, CBO writes, “Chairman Ryan and his staff specified rules by which revenues and spending would evolve.” They then detail what those rules were:

Ryan tells CBO to assume his tax plan will raise revenues to 19 percent of GDP and then hold them there. He tells them to assume his Medicare plan will hold cost growth in Medicare to GDP+0.5 percentage points. He tells them to assume that spending on Medicaid and the Children’s Health Insurance Program won’t grow any faster than inflation. He tells them to assume that all federal spending aside from Medicare, Medicaid and Social Security will fall from 12.5 percent of GDP in 2011 to 3.75 percent of GDP in 2050.

It’s that last assumption, perhaps, that shows most clearly how unlikely Ryan’s specified budget path is. He’s saying that in 2050, spending on defense, on food stamps, on infrastructure, on education, on research and development, on the federal workforce, and everything [sic] other non-entitlement program combined will be less than four percentage points of GDP.

Consider that defense spending has never fallen below three percentage points of GDP, and Mitt Romney has promised to keep it above four percentage points of GDP. Ryan has not outlined a realistic goal. [WashingtonPost.com, 3/20/12]

CBO: Ryan Plan Decreases Federal Spending On Programs Other Than Health Care And Social Security To Historical Lows. From the Congressional Budget Office’s analysis of the Ryan plan: “The specified path for spending on all federal programs other than Social Security and the major health care programs would cause such spending to grow much more slowly than in CBO’s two scenarios―and to decline sharply as a share of GDP, from 12½ percent in 2011 to 5¾ percent in 2030 and 3¾ percent in 2050. By comparison, spending in this category has exceeded 8 percent of GDP in every year since World War II. Spending for defense alone has not been lower than 3 percent of GDP in any year during that period.” [CBO.gov, March 2012]

CBPP: Ryan Plan Also Decreases Total Federal Spending To A Level Not Sustained Since Before Medicare And Medicaid Existed. From the Center on Budget and Policy Priorities: “In addition, CBO shows that total federal spending — including Social Security, interest, and health care — would fall to 16 percent of GDP by 2050 under Ryan’s budget path, a target specifically included in the Ryan budget resolution.  This would be the lowest level since 1950, when Medicare, Medicaid, most federal funding for education, highways, and environmental protection, and various other significant federal activities did not exist.” [CBPP.org, 3/20/12]

CBPP: Ryan Budget’s Drastic Cuts Would Destroy Core Government Functions Outside Social Security, Health Care, And Defense. From the Center on Budget and Policy Priorities: “The CBO report, prepared at Chairman Ryan’s request, shows that Ryan’s budget path would shrink federal expenditures for everything other than Social Security, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and interest payments to just 3¾ percent of the gross domestic product (GDP) by 2050.  Since, as CBO notes, “spending for defense alone has not been lower than 3 percent of GDP in any year [since World War II]” and Ryan seeks a high level of defense spending — he increases defense funding by $228 billion over the next ten years above the pre-sequestration baseline — the rest of government would largely have to disappear.  That includes everything from veterans’ programs to medical and scientific research, highways, education, nearly all programs for low-income families and individuals other than Medicaid, national parks, border patrols, protection of food safety and the water supply, law enforcement, and the like.” [CBPP.org, 3/20/12]

The New Ryan Plan Reneges On Last Year’s Budget Deal By Setting Discretionary Spending Limits That Are Lower Than Agreed Upon. From the Wall Street Journal: “Democrats quickly attacked the Ryan budget not just for cutting what they called necessary government programs, but also for ostensibly reneging on a bipartisan deal reached after tough negotiations in August. That deal set a 2013 spending level of $1.047 trillion for discretionary programs, but the Ryan budget establishes a figure of $1.028 trillion. Republicans say the initial figure was an upper limit, not an ironclad level, but Democrats disagree.”  [Wall Street Journal, 3/20/12]

CBPP President: Ryan Budget Would Slash Non-Defense Discretionary Spending To “$800 Billion Below The Level To Which That Funding Would Fall If Sequestration Occurred Every Year Through 2021.” According to a statement by Robert Greenstein, the president of the Center on Budget and Policy Priorities: “The Budget Control Act of last August substantially cut funding for non-defense discretionary programs by imposing tough annual budget caps, but the Ryan budget would cut these programs nearly $1.2 trillion below the caps.  In fact, it would slash funds for non-defense discretionary programs over the coming decade by $800 billion below the level to which that funding would fall if sequestration occurred every year through 2021.” [CBPP.org, 3/21/12, italics original]

Under The New Ryan Budget, The Deficit Would Begin To Grow Again After 2018 And The Budget Wouldn’t Be Balanced Until 2040. From Bloomberg: “The proposal would produce $3.1 trillion in deficits over the next decade, a little less than half as much as President Barack Obama’s budget plan. The deficit would shrink to $166 billion in 2018 under the proposal, though it would begin growing again in subsequent years. The plan would not balance the government’s books until 2040.” [Bloomberg, 3/20/12]

The New Ryan Plan’s Cuts Rely On The Decimation Of The Safety Net

The New Ryan Budget Cuts Crucial Safety Net Programs. From the Associated Press: “The GOP plan released by House Budget Committee Chairman Paul Ryan would, if enacted into law, wrestle the deficit to a manageable size in short order, but only by cutting Medicaid, food stamps, Pell Grants and a host of other programs that Obama has promised to protect.” [Associated Press via HuffingtonPost.com, 3/20/12]

The New Ryan Budget Cuts Spending On “Income Security,” Veterans Programs. According to the Washington Post’s “Wonkblog”: “Over the next decade, Ryan would spend 30 percent less than the White House on ‘income security’ programs for the poor — that’s everything from food stamps to housing assistance to the earned-income tax credit. (Ryan’s budget would spend $4.8 trillion over this timeframe; the White House’s would spend $6.8 trillion.) Compared with Obama, Ryan would spend 38 percent less on transportation and 24 percent less on veterans. He’d spend 20 percent less on ‘General science, space, and basic technology.’ And, compared with the White House, he’d cut ‘Education, training, employment, and social services’ by a full 44 percent.” [WashingtonPost.com, 3/20/12]

CBPP President: Ryan Budget Would “Likely Increase Poverty And Inequality More Than Any Other Budget In Recent Times.” According to a statement by Robert Greenstein, the president of the Center on Budget and Policy Priorities: “In essence, this budget is Robin Hood in reverse — on steroids.  It would likely produce the largest redistribution of income from the bottom to the top in modern U.S. history and likely increase poverty and inequality more than any other budget in recent times (and possibly in the nation’s history).” [CBPP.org, 3/21/12]

Medicaid And CHIP

The New Ryan Plan’s Biggest Cuts Are To Health Care Programs. From Ezra Klein’s Washington Post blog: “On the spending side, Ryan’s biggest cuts come from health-care programs. He eliminates the $1.5 trillion that the Affordable Care Act uses to purchase health insurance for 30 million Americans. Then he cuts Medicaid and related health programs by $770 billion — which is to say, by about a third. Medicare takes $200 billion in cuts on top of that.” [WashingtonPost.com, 3/20/12]

The New Ryan Budget Block-Grants Medicaid. From the Associated Press: “Medicaid would be sharply cut and awarded to states as a flexible block grant.” [Associated Press via HuffingtonPost.com, 3/20/12]

Medicaid Block Grants Would Not Grow At A Rate That Allows Them To Keep Pace With Projected Costs. From the Center on Budget and Policy Priorities: “The Ryan plan would replace Medicaid with a block grant that would grow each year with inflation and U.S. population growth, or more than 3.5 percentage points less than current projected annual growth in Medicaid (which is influenced by the growing number of elderly beneficiaries as the population ages) and significantly below the cost growth that the Ryan budget would allow in Medicare.” [CBPP.org, 3/20/12]

CBPP President: Medicaid Is Already More Cost-Effective Than Private Insurance, And Its Costs Are Rising More Slowly Than The Private Sector. From a statement of Robert Greenstein, the president of the Center on Budget and Policy Priorities: “Medicaid already costs substantially less per beneficiary than private insurance because it pays health providers rock-bottom rates and has low administrative costs.  In addition, its per-beneficiary costs have been rising more slowly than private-sector health care costs.  Assertions that Medicaid costs are highly inflated and that states can provide comparable health care for much less money may serve as convenient rationales for severe cuts in health care for some of the nation’s most vulnerable people, but they do not reflect reality.” [CBPP.org, 3/21/12]

• Block Granting Medicaid Shifts Financial Risks To States, Threatening Access To Care. From the Center on Budget and Policy Priorities:

Converting Medicaid to a block grant is attractive to some federal policymakers because it could produce large federal budgetary savings (and, in doing so, potentially ease pressure on certain other parts of the federal budget — such as the tax code, where, for example, policymakers will face a decision on whether to extend the Bush tax cuts for high-income households beyond 2012).  But a block grant would almost certainly shift substantial costs to the states.  Instead of the federal government picking up half to three-quarters of unanticipated Medicaid cost increases that result from a recession, the onset of a new disease, or the development of new pharmaceutical or other treatments, states would have to bear all of those costs themselves (once they exhausted their block grant allocation).  A block grant would make Medicaid much more financially unpredictable and risky for states.

A block grant may also appeal to some federal policymakers because it would force the states to “be the bad guys” — making the decisions about which people to drop from coverage or which medical services to curtail when federal funding proved inadequate.  States would essentially be left “holding the bag” — they would either have to contribute more state funding (by raising taxes or cutting other programs) or, more likely, exercise their increased flexibility to institute wide-ranging cuts in eligibility, benefits, and/or provider reimbursement rates.  Those cuts could add millions to the ranks of uninsured.  They also could impede access to care for tens of millions of people who continued being covered, as a consequence of substantial increases in co-payment and premium charges or cuts in reimbursements that cause substantial numbers of providers to leave the program.

A block grant would also significantly deepen state budget holes in recessions, forcing still larger state budget cuts or tax increases in those periods and thereby further slowing state economies and making the loss of jobs even greater. [CBPP.org, 2/23/11]

CBPP President: Ryan Plan For Medicaid Could Kick Up To 27 Million Low-Income People Off Insurance. According to Robert Greenstein, the president of the Center on Budget and Policy Priorities: “Last year, the Urban Institute estimated that a very similar Ryan Medicaid block-grant proposal would likely cause 14 to 27 million low-income Americans to lose coverage by 2021 (in addition to the 17 million people who no longer would gain coverage due to the repeal of health reform and its Medicaid expansion).” [CBPP.org, 3/21/12]

CBO: Ryan Plan Would Likely Impact Access To Health Care For Medicaid Beneficiaries. From the Congressional Budget Office’s analysis of the Ryan plan: “If states were given additional flexibility to allocate federal funds for Medicaid and CHIP according to their own priorities, they might be able to improve the efficiency of those programs in delivering health care to low-income populations. Nevertheless, even with significant efficiency gains, the magnitude of the reduction in spending relative to such spending in the other scenarios means that states would need to increase their spending on these programs, make considerable cutbacks in them, or both. Cutbacks might involve reduced eligibility for Medicaid and CHIP, coverage of fewer services, lower payments to providers, or increased costsharing by beneficiaries—all of which would reduce access to care. Because the specified paths for health spending do not include spending for exchange subsidies, the number of people without health insurance would be much higher than under CBO’s other scenarios.” [CBO.gov, March 2012, emphasis added]

Additional Safety Net Cuts

Second-Biggest Cuts In New Ryan Plan Are ‘Substantial’ Cuts To Food Stamps And Tax Credits For The Poor. From Ezra Klein’s Washington Post blog: “Ryan’s next significant source of cuts is so-called ‘other mandatory.’ Compared to the president’s budget, Ryan cuts $1.8 trillion from this category. Some of that might simply be an accounting difference: The president’s budget proposes to move infrastructure spending from the ‘discretionary’ side of the budget to the ‘mandatory’ side. Ryan might be moving that back, which isn’t, in and of itself, a spending cut. But beyond that, the main programs in ‘other mandatory’are low-income supports like refundable tax credits for the poor and food stamps. Ryan is cutting these quite substantially.” [WashingtonPost.com, 3/20/12]

The New Ryan Plan Block-Grants The Food Stamp Program. From the Wall Street Journal: “The budget, which sets spending for the 2013 fiscal year, which starts Oct. 1, also takes aim at a variety of high-profile programs. It recommends repealing President Barack Obama’s health plan, eventually eliminating Fannie Mae and Freddie Mac, and turning Medicaid and the Supplemental Nutritional Assistance Program, formerly known as food stamps, into block-grant programs.” [Wall Street Journal, 3/20/12]

The New Ryan Plan Could Cut Millions Of Low-Income Families Off Food Assistance. According to the Center on Budget and Policy Priorities: “House Budget Committee Chairman Paul Ryan’s budget plan includes cuts in SNAP (formerly known as the Food Stamp Program) of $133.5 billion — more than 17 percent — over the next ten years (2013-2022), which would necessitate ending assistance for millions of low-income families, cutting benefits for millions of such households, or some combination of the two.  Chairman Ryan proposed a similarly deep SNAP cut last year. […] Since more than 90 percent of SNAP expenditures are for food assistance benefits for low- income households, and most of the remaining funds go for necessary state administrative costs to determine program eligibility and operate the program properly, policymakers couldn’t possibly achieve cuts of this magnitude without substantially scaling back SNAP eligibility or reducing benefits deeply, with serious effects on low-income families and individuals. […] If the cuts were to come solely from eliminating eligibility for categories of currently eligible households or individuals, more than 8 million people would need to be cut from the program, if the cuts began taking effect in 2013. […] If the cuts were to come solely from across-the-board benefit cuts, SNAP benefits would have to be cut by about $22 to $27 per person per month in 2016 dollars.  This would require setting the maximum benefit at about 86 percent of the Thrifty Food Plan (TFP), USDA’s estimate of the minimum amount that a family needs to afford a bare-bones, nutritionally adequate diet.” [CBPP.org, 3/22/12, internal citations removed]

Under The New Ryan Plan, 1 Million Students Would Lose Pell Grants. From the Huffington Post: “More than 1 million students would lose Pell grants entirely over the next 10 years under Rep. Paul Ryan’s budget, according to an analysis that the national reform organization Education Trust provided to The Huffington Post. And by the looks of it, the Ryan budget, which is slated to hit the House floor this week, would hit the poorest kids hardest. […] The plan proposed by Ryan (R-Wis.), who chairs the House Budget Committee, would chop away at Pell grant eligibility, thereby reducing total Pell grants by about $170 billion over the next decade; allow the interest rate for federally subsidized Stafford loans to double; end student loan interest subsidies for those still in school; and make Pell spending discretionary — instead of mandatory — allowing further cuts down the line. Pell grants, the largest source of federal financial aid, currently help more than 9 million students to afford college. Following last year’s budget standoffs, next year’s maximum Pell grant of $5,645 will cover just one-third of the average cost of college — the smallest share ever.” [Huffington Post, 3/27/12]

The Ryan Plan Institutes A Regressive Tax System That Wouldn’t Raise Enough Revenue

CBPP: The Ryan Plan’s Tax Proposals “Disproportionately Benefit Wealthy Americans.” According to a statement by Robert Greenstein, the president of the Center on Budget and Policy Priorities: “In fact, TPC reported yesterday that the four major new tax cuts in the Ryan plan — cutting the top income rate to 25 percent and creating a lower tax bracket of 10 percent, cutting the corporate income tax rate to 25 percent and exempting from taxation the profits that U.S. corporations earn overseas, repealing the Alternative Minimum Tax, and repealing the tax increases in health reform — would cost $4.6 trillion in lost federal revenue over the next ten years (not counting the overseas corporate profits exemption).  All four revenue-losing measures would disproportionately benefit wealthy Americans.” [CBPP.org, 3/21/12]

The New Ryan Budget Preserves $40 Billion In Tax Giveaways To Oil And Gas Companies. From the Center for American Progress: “American families have been plagued by higher oil and gasoline prices over the past several years despite a significant increase in domestic oil production and rigs, and decline in consumption. But while high prices threaten the economy and family budgets, they enrich American oil companies with huge profits. Yet it appears that House Budget Committee Chairman Paul Ryan’s (R-WI) proposed FY 2013 budget resolution would retain a decade’s worth of oil tax breaks worth $40 billion. And his budget would cut billions of dollars from investments to develop alternative fuels and clean energy technologies that would serve as substitutes for oil and help protect middle-class families from volatile energy prices as well as create jobs. In short, the Ryan budget compounds the cost of high oil and gasoline prices on the middle class.” [AmericanProgress.org, 3/20/12]

The New Ryan Plan Cuts The Top Individual Tax Rate To 25 Percent, And Flattens The Tax Code By Enacting Just Two Brackets. From the Associated Press: “On taxes, the measure calls for eliminating a host of tax deductions and credits in order to produce a far simpler income tax code with just two rates for individuals: 10 percent and 25 percent. But Ryan doesn’t say the income levels at which the new rates would apply, nor does he specify which popular tax breaks – like the child tax credit or the mortgage interest deduction – might be spared.” [Associated Press via HuffingtonPost.com, 3/20/12]

• Shifting To Ryan’s Proposed Two-Rate Tax Code Would Cost Over $2.5 Trillion In Lost Revenue By 2022. According to the Tax Policy Center, enacting “ordinary income tax rates of 10 and 25 percent” would reduce the federal government’s tax revenue by $2,549,000,000 between 2012 and 2022. [TaxPolicyCenter.org, 3/20/12]
• The Top Marginal Rate Hasn’t Been As Low As 25 Percent Since 1931. According to the Tax Policy Center, the top marginal income tax rate has been above 25 percent every year since 1931. [TaxPolicyCenter.org, 1/31/11]

The New Ryan Plan Would Make The Bush Tax Cuts And An Estate Tax Reduction Permanent, Costing Upwards Of $5 Trillion Over Ten Years. According to a statement by Robert Greenstein, the president of the Center on Budget and Policy Priorities: “Moreover, this $4.6 trillion revenue loss would come on top of about another $5 trillion revenue loss over the coming decade, TPC reported, from Chairman Ryan’s proposal to make permanent all of the Bush tax cuts along with other tax cuts that are scheduled to expire, such as an estate-tax giveaway from late 2010 that benefits the estates of only the wealthiest one-quarter of one percent of people who die.” [CBPP.org, 3/21/12]

The New Ryan Plan’s Territorial Tax System That Would Cut Or Eliminate The Taxes Corporations Owe On Foreign Earnings. From National Journal: “Ryan’s plan would also create a territorial tax system that would offer a low tax rate, if any taxes, on the profit that U.S. companies earn overseas–a page from the playbook of the Ways and Means Committee Chairman Dave Camp, who introduced a similar international tax plan last fall.” [National Journal, 3/20/12]

The New Ryan Budget Also Cuts Top Corporate Tax Rate To 25 Percent. From Bloomberg: “The Pentagon would be spared while the top individual and corporate tax rates would fall to 25 percent under the plan.” [Bloomberg, 3/20/12]

• The Ryan Budget’s Corporate Tax Changes Would Cost Over A Trillion Dollars By 2022. According to the Tax Policy Center, instituting the corporate tax provisions specified in Ryan’s plan would decrease federal tax revenues by $1,101,000,000 between 2012 and 2022. [TaxPolicyCenter.org, 3/20/12]

The New Ryan Budget Gets Rid Of The Alternative Minimum Tax. From Bloomberg: “It would cut the corporate tax rate to 25 percent while eliminating the alternative minimum tax.” [Bloomberg, 3/20/12]

• Getting Rid Of The Alternative Minimum Tax Would Cost $670 Billion In Lost Revenue Over The Next Decade. According to the Tax Policy Center, repealing the alternative minimum tax would reduce revenues collected by the federal government by $670 billion between 2012 and 2022. [TaxPolicyCenter.org, 3/20/12]

Ryan Plan Doesn’t Account For $700 Billion In Revenues It Promises To Raise. From the Tax Policy Center’s Tax Vox blog: “To put it another way, TPC figures such a tax package would generate revenues of about 15.8 percent of Gross Domestic Product in 2022. His budget aims to collect about 18.7 percent. That means he’d have to find about $700 billion in new revenues by cutting tax preferences. Keep in mind that TPC did not model the actual Ryan plan, since it is not specific enough to estimate. Instead, we looked at a plan with the elements of his proposal.” [TAxVox.TaxPolicyCenter.org, 3/20/12]

Ryan Budget’s Failure To Raise As Much Revenue As President’s Plan Is Due To Lower Taxes On The Wealthy. From Ezra Klein’s Washington Post blog: “At the end of his initial release, Ryan posts a table comparing his budget to the president’s budget. The single largest difference is in the tax section: Ryan raises $2 trillion less in revenue than the White House does. In the president’s budget, those revenues come mostly from increasing taxes on the wealthy. So that’s the first big gap between the two proposals: Under Ryan’s budget, revenue would be lower, and the distribution of taxes more regressive, than under Obama’s budget.” [WashingtonPost.com, 3/20/12]

The New Ryan Medicare Plan Is Bad News For Seniors

The New Ryan Budget “Reiterates Republicans’ Call Last Year For Overhauling Medicare.” From Bloomberg: “The proposal reiterates Republicans’ call last year for overhauling Medicare, though with some changes reflecting a compromise plan Ryan of Wisconsin has since written with Senator Ron Wyden, an Oregon Democrat. It would offer seniors, starting in 2023, subsidies they could use to buy private health insurance or use in Medicare. Either way, benefits would be capped, which would be a major change in how the open-ended program now operates.” [Bloomberg, 3/20/12]

The Ryan Plan Relies On Competitive Bidding To Slow Medicare Costs. From Ezra Klein’s Washington Post blog: “The Republicans’ budget, released today, would rely on competitive bidding. And although the structure of such programs can get complex, the thing to know is this: Under the Ryan budget, private plans would send the government an estimate of the premiums they would charge for insurance coverage that is at least as generous as the standard Medicare benefit package. The second-lowest of those ‘bids’ would set the benchmark for how much premium support seniors receive. Seniors could spend that support on traditional Medicare, a less-expensive private plan (and receive a rebate), or a more-costly coverage package (and pay the difference).” [WashingtonPost.com, 3/20/12]

CBPP President: Vouchers Would Lose Value Over Time. From a statement of Robert Greenstein, the president of the Center on Budget and Policy Priorities: “Once seniors reached the age of eligibility for Medicare, they would receive a premium-support voucher to help them buy coverage, with the voucher apparently rising in value from year to year by the rate of growth in the Gross Domestic Product (GDP) per capita plus one-half percentage point — which is below the rate of growth in health care costs in recent decades.  Seniors who couldn’t afford to spend more than the voucher amount likely would have to purchase insurance that covered fewer health services as time went by, since the voucher likely would not keep pace with increases in health care costs.” [CBPP.org, 3/21/12]

Ryan Plan Would Shift Costs To Seniors, “Likely Lead To The Gradual Demise Of Traditional Medicare.” According to the Center on Budget and Policy Priorities: “The Ryan-Wyden plan would shift substantial costs to Medicare beneficiaries rather than protect them from cost increases, in part because the payment that beneficiaries would receive to help them buy coverage would likely fail to keep pace with health care costs. The plan also would likely lead to the gradual demise of traditional Medicare by making the pool of Medicare beneficiaries smaller, older, and sicker — and increasingly costly to cover.” [CBPP.org, 3/19/12]

Ryan Plan Would Eventually Make Medicare Unsustainable. From the Center on Budget and Policy Priorities:

Under premium support, traditional Medicare would tend to attract a less healthy pool of enrollees, while private plans would attract healthier enrollees (as occurs today with Medicare and private Medicare Advantage plans).  Although the proposal calls for “risk adjusting” payments to health plans — that is, adjusting them to reflect the average health status of their enrollees — the risk adjustment process is highly imperfect and captures only part of the differences in costs across plans that stem from differences in the health of enrollees.

Inadequate risk adjustment would mean that traditional Medicare would be only partially compensated for its higher-cost enrollees, which would force Medicare to raise beneficiary premiums to make up the difference.  The higher premiums would lead more of Medicare’s healthier enrollees to abandon it for private plans, very possibly setting off a spiral of rising premium costs and falling enrollment for traditional Medicare.  Over time, traditional Medicare would become less financially viable and could unravel — not because it was less efficient than the private plans, but because it was competing on an unlevel playing field in which private plans captured the healthier beneficiaries and incurred lower costs as a consequence.  Ryan-Wyden also would allow private plans to tailor their benefit packages to attract healthier beneficiaries and deter sicker ones, which only makes this outcome more likely. [CBPP.org, 3/19/12]

The New Ryan Budget Raises The Medicare Eligibility Age. From the Congressional Budget Office’s analysis of the Ryan plan: “In addition, the eligibility age for Medicare would increase by two months per year beginning in 2023 until reaching age 67 in 2034.” [CBO.gov, March 2012]

CBO: Effects Of Ryan Plan’s Reduced Medicare Spending “Unclear,” Could Include “Diminished Quality Of Care” And “Higher Costs.” From the Congressional Budget Office’s analysis of the Ryan plan:

Under the specified path, average real (inflation-adjusted) spending for new enrollees in Medicare would rise in coming decades but at a much slower rate than would occur under the other policy scenarios that CBO has analyzed. Average net Medicare spending for 65-year-olds in 2011 was $5,500. Under the baseline scenario, average spending per 66-year-old in 2030 would be $8,600 in 2011 dollars (56 percent more); under the alternative fiscal scenario, that ending would rise to $9,600 in 2011 dollars (75 percent more); and under the specified path, it would be $7,400 in 2011 dollars (35 percent more). In 2050, the corresponding spending for a 67-year-old would be, in 2011 dollars, $17,000 under the baseline scenario, $19,100 under the alternative fiscal scenario, and $11,100 under the specified path. By 2050, spending for new enrollees under the specified path would be 35 percent below that for the baseline scenario and 42 percent below that for the alternative fiscal scenario.

The implications of that substantial cut in spending relative to the other policy scenarios are unclear, because they would depend on both the specific policies that were implemented to generate that spending amount and the ways in which the nation’s health care and health insurance systems reacted to those policies. Possible consequences include the same kinds of effects noted for the baseline and alternative fiscal scenarios—reduced access to health care; diminished quality of care; increased efficiency of health care delivery; less investment in new, high-cost technologies; or some combination of those outcomes. In addition, beneficiaries might face higher costs, which could in turn reinforce some of the other effects. At least some of those effects would of necessity be a great deal stronger than under the baseline scenario or alternative fiscal scenario because spending would be so much lower. However, as with the other scenarios, CBO does not have the capability at this time to estimate such effects for the specified path of Medicare spending. [CBO.gov, March 2012, emphasis added, internal citations removed]

The Ryan Plan Contains A Host Of Destructive Policy Prescriptions

The Ryan Plan Repeals Health Care Reform And Eliminates Fannie And Freddie. From the Wall Street Journal: “The budget, which sets spending for the 2013 fiscal year, which starts Oct. 1, also takes aim at a variety of high-profile programs. It recommends repealing President Barack Obama’s health plan, eventually eliminating Fannie Mae and Freddie Mac, and turning Medicaid and the Supplemental Nutritional Assistance Program, formerly known as food stamps, into block-grant programs.” [Wall Street Journal, 3/20/12]

The Ryan Plan Weakens Wall Street Reforms. From Ezra Klein’s Washington Post blog: “On financial regulation, Paul Ryan’s 2013 budget basically cuts-and-pastes its recommendations from last year: it wants to repeal parts of Dodd-Frank that give new power to federal regulators to break up big banks, arguing that the regulations actually make bailouts more likely, not less so. Ryan isn’t proposing an alternative, however, so his plan to repeal the government’s new ‘resolution authority:’ would bring us back to the pre-Dodd Frank era — which was also, of course, the era in which bank bailouts proved necessary.” [WashingtonPost.com,  3/20/12]

The Ryan Plan Kills 10 Percent Of The Jobs In The Federal Government. From the Wall Street Journal: “Mr. Ryan (R., Wis.), chairman of the House Budget committee, proposes reducing the federal work force by 10% over three years through attrition.” [Wall Street Journal, 3/20/12]

The New Ryan Budget Reverses Defense Sequestration By Pushing For Safety Net Cuts. From the Associated Press: “Also at issue, though, are across-the-board spending cuts set to take effect in January, punishment for the failure of last year’s supercommittee to come up with a new package of $1.2 trillion in deficit cuts over the next decade as part of last summer’s deal to let the government keep borrowing. Those cuts, including $55 billion from defense accounts and $43 billion from non-defense accounts approved by lawmakers each year, are universally opposed by defense hawks and liberals alike. The GOP plan would reverse the cuts by requiring various committees and try come up with at least $261 billion in other savings over the coming decade, including curbs to food stamps, federal employee pensions, and further cuts to federal health care programs. Republicans are likely to reprise a bid to tighten oversight of the child tax credit to make sure illegal immigrants don’t claim it.” [Associated Press via HuffingtonPost.com, 3/20/12]

The New Ryan Budget “Punts” On Politically Difficult Choices. From Ezra Klein’s Washington Post blog: “Ryan prides himself on making tough choices. But where such choices need to be made for politically powerful constituencies — say, the tax breaks offered to the wealthy and the middle class, or the benefits offered to current seniors — Ryan punts. Changes for seniors don’t begin for a decade, the tax breaks Ryan will close to pay for his tax cuts go unnamed, and, of course, there are no tax increases at all. When such choices need to be made for programs that the poor depend on, however, Ryan is considerably more specific, and considerably more willing to inflict real budgetary pain on current beneficiaries.” [Washington Post’s Wonkblog, 3/20/12]