The Problems with the Ryan-Wyden Medicare Proposal

March 19, 2012 at 2:51 pm

The budget that House Budget Committee Chairman Paul Ryan (R-WI) will unveil tomorrow is expected to include a Medicare “premium support” proposal that he and Senator Ron Wyden (D-OR) announced last year.  Our new paper explains the serious problems with the Ryan-Wyden plan.

Premium support would replace Medicare’s guarantee of health coverage with a flat payment, or voucher, that beneficiaries would use to buy private health insurance or traditional Medicare.  Although billed as a kinder, gentler form of premium support, the Ryan-Wyden plan has the same basic features as earlier proposals.  It is similar to a 1995 proposal from then-House Speaker Newt Gingrich that Gingrich said would have caused traditional Medicare to “wither on the vine.”

The Ryan-Wyden proposal would:

  • Shift substantial costs to Medicare beneficiaries rather than protect them from cost increases — in part because the value of the voucher would likely fail to keep pace with health care costs.
  • 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.
  • Produce few budgetary savings beyond those that the health reform law already calls for, since both plans have the same target growth rate for Medicare costs.

Some advocates of premium support falsely claim that it is necessary to keep Medicare from going bankrupt.  In reality, health reform has significantly improved Medicare’s long-term financial outlook, and the program is not on the verge of  shutting down.  Medicare’s trustees estimate that, even without any changes to the program, Medicare’s Hospital Insurance trust fund can pay 100 percent of the program’s hospital insurance costs through 2024; at that point, the payroll taxes and other revenue deposited in the trust fund will be sufficient to pay 90 percent of those costs.

The American people — a large majority of whom oppose premium support, according to a recent Kaiser Family Foundation poll — shouldn’t let scare tactics frighten them into supporting radical and harmful Medicare changes.

In Case You Missed It…

March 16, 2012 at 4:36 pm

This week on Off the Charts, we focused on the federal budget and taxes, the economy, health policy, safety net programs, and housing policy.

  • On the federal budget and taxes, we debunked the claim that roughly half of Americans pay no taxes.  Kelsey Merrick noted that Pell Grants are doing less to help low- and moderate-income people afford college.
  • On the economy, Chad Stone explained that while the jobs market is doing better, it needs to improve further to address the nation’s large jobs deficit.
  • On health policy, Paul Van de Water countered arguments for eliminating the health reform law’s cost-cutting Independent Payment Advisory Board.  Sarah Lueck noted that the Administration’s new rules for the health insurance exchanges that health reform calls for include important improvements.  Jesse Cross-Call explained why Rhode Island’s experience under a Medicaid waiver is not a good indicator of how a Medicaid block grant would affect states.
  • On safety net programs, LaDonna Pavetti showed that Temporary Assistance for Needy Families (TANF) has become much less effective as a safety net over time, and we updated our map showing how many weeks of unemployment insurance benefits are available across the country.
  • On housing policy, Douglas Rice cautioned that the President’s 2013 budget doesn’t fully renew housing assistance for low-income households.

In other news, we released reports on why repealing the Independent Payment Advisory Board (IPAB) would be a mistake, TANF’s decreasing role as a safety net, the President’s 2013 budget for the Department of Housing and Urban Development, factors that states should consider regarding health reform’s Basic Health option, and claims that Rhode Island’s cap on federal Medicaid funding has generated large state savings.

Why Rhode Island’s No Model for a Medicaid Block Grant

March 16, 2012 at 1:12 pm

The budget that House Budget Committee Chairman Paul Ryan (R-WI) will unveil next week is expected to propose converting Medicaid into a block grant.  Some block-grant proponents cite Rhode Island’s Medicaid program, which operates under a federal waiver with capped federal funding, as evidence that all states would do well under a block grant, claiming the waiver has saved the state over $100 million.

But a recent independent report that Rhode Island Governor Lincoln Chafee commissioned shows that the state’s savings under the waiver were unrelated to the federal funding cap and mostly reflected a large influx of new federal dollars.  Our new paper highlights some of the report’s findings:

  • The waiver did not save the state $100 million over 18 months, as block-grant proponents claim, but $23 million over three years.  These savings resulted from policy changes that required a waiver, but not one with a federal funding cap.
  • A much larger chunk of the state’s savings under the waiver — $42 million — result from a waiver provision that allowed Rhode Island to claim federal matching funds for certain health services that the state had previously paid for.
  • Since the waiver took effect, Rhode Island has also saved $32 million by making Medicaid changes that have nothing to do with the waiver; any state can make them under current federal rules.

As our 2011 report (which likewise argued that block-grant supporters were exaggerating the waiver’s savings) explained, the waiver was a “sweetheart deal” between the outgoing George W. Bush administration and Rhode Island’s Republican governor, allowing the state to get millions of additional federal dollars in return for accepting a cap on its Medicaid spending at an inflated level that it never expected to reach anyway.  The waiver is nothing like the block-grant proposals that Chairman Ryan and others have promoted, which are designed to produce federal savings by giving states substantially less money than they would otherwise receive.

By shifting financial risk and costs to states, a block grant would force them to dramatically reduce eligibility, benefits, and payments to providers, which could harm millions of seniors, people with disabilities, and children.

President’s Budget Falls Short on Renewing Housing Assistance

March 16, 2012 at 10:19 am

Announcing the President’s 2013 budget for the Department of Housing and Urban Development, HUD Secretary Shaun Donovan said that a key goal is to protect rental assistance for the low-income families that use it.  Unfortunately, the budget falls short for the three largest rental assistance programs, our new analysis shows.  As a result, as many as 55,000 low-income families would risk losing their housing vouchers, and public housing for 1.1 million low-income families would deteriorate due to delayed maintenance and repairs.

These three programs — Housing Choice vouchers, public housing, and Section 8 project-based rental assistance (PBRA) — help 4.5 million low-income households, nearly all of which include seniors, people with disabilities, or families with children.

The budget proposes cost-saving policy changes to shrink the funding gap between what the budget provides and what we think it needs to fulfill its key goal.  We’re all for reforms that improve program effectiveness and cut costs.  And some of the proposals, like enabling the voucher program to help more working-poor families, are sound.   But others are simply bad ideas — particularly raising rents sharply on 500,000 of the poorest HUD-assisted households.   Moreover, HUD’s budget overstates the likely savings from many of these proposals.

Analysis of HUD Requests to Renew Rental Assistance
Program HUD request for 2013 Renewal and operating shortfalls, net of realistic policy-related savings
Housing Choice Voucher renewals $17.2 billion $250 – 440 million
Section 8 PBRA $8.7 billion ~$1.1 billion
Public Housing Operating Fund $4.5 billion $350 million
Total $1.7 – 1.9 billion
Source: Center on Budget and Policy Priorities and HUD.

Using more realistic cost projections and assuming that Congress will not agree to hike rents on the poorest HUD tenants, we estimate that the President’s request is at least $1.7 billion short of the amount needed to sustain rental assistance for current families (see table).

Fortunately, HUD expects revenues for the Federal Housing Administration — which help cover the cost of HUD programs — to rise next year.  That means Congress could boost HUD funding above the President’s level and enable HUD to keep serving as many families as it does now, while still keeping HUD funding well below recent years’ levels.

Why Good Jobs Reports Aren’t Good Enough

March 15, 2012 at 2:56 pm

Like the Roman god Janus, who looks at both the past and the future, my latest post for US News & World Report looks at where the jobs market is coming from and where it needs to go:

Looking in the rearview mirror, the latest jobs report looks OK — at least we’re heading in the right direction.  But looking at the road ahead, we still face a long uphill climb, and it will take a whole string of jobs reports significantly better than February’s to get us back to full employment in any reasonable period of time.

Our chartbook, The Legacy of the Great Recession, tells the story.  The Great Recession (from December 2007 to June 2009) produced an unprecedented jobs deficit and inflicted other serious damage on the jobs market.  The economy has been growing since then, but a large jobs deficit and other symptoms of serious labor market distress remain.

This chart shows why we can’t be complacent about the jobs recovery.  The share of the population with a job plunged to levels last seen in the mid-1980s and has remained there.  This measure captures not only the high unemployment rate but also the fact that people left the labor force in droves during the recession and have largely remained on the sidelines.  Labor force participation rose in February, but only slightly.

Share of Population Without a Job Remains Depressed