The 2012 Budget Debate

This year’s federal budget debate has grown larger than any in many years. What Republicans, Democrats and the Administration are debating and determining is what kind of society we want our country to support in the future. House Budget Committee Chairman Paul Ryan, R-Wis., the architect of the House Republicans’ FY 2012 budget proposal said, “The stakes in this [budget] debate are high … at stake is America.” President Obama responded with similar largesse: “The GOP vision is less about reducing the deficit than it is about changing the basic social compact with America.”

The “Paul Ryan” budget proposal was passed by the House of Representatives on April 15, largely along party lines. No Democrats voted in favor of the bill and only four Republicans voted against it, creating a 235-193 vote total. The same Republican proposal failed in the Democratic-controlled Senate by a vote of 40-57. This vote forced Republican senators to go on the record in support of the dramatic proposed Medicare and Medicaid changes.

As the Democrats seek to maintain the public obligation to provide for welfare programs (Medicare and Medicaid), the Republicans are promoting a vision where individuals will bear a larger financial responsibility to maintain access to these programs. Over the last few decades, Republicans have tried several times to overhaul the Medicare system, without success. But earlier proposals were less radical than the Ryan proposal — earlier plans always gave people an option to stay with traditional Medicare.

Now, however, Republicans are using a different rationale for restyling Medicare and Medicaid: The government simply cannot afford to continue to support entitlement programs as it has in the past — we’re running out of money. There is much truth in this argument. Today, Medicare, Medicaid and Social Security account for 45 percent of the federal budget. Left as is, that number will climb to 67 percent by 2035. The primary reason for this escalation is health care costs, exacerbated by an increasing senior population.

The crux of the Republican proposal for Medicare and Medicaid is a shift from defined government benefits to a defined and limited government contribution. The Ryan budget would completely change the Medicare system to a voucher system. Beneficiaries would have a list of private health care plans to choose from each year, and the federal government would contribute a set dollar amount toward a plan based on the rate of inflation, which is far less than the current rate of growth in health care costs.

Starting in 2022, the age of eligibility for Medicare would increase by two months per year until it reached 67 in 2033. After 2022, people eligible for Medicare would not enroll in the current program but instead would be entitled to a premium support payment to help them purchase private health insurance.

Interestingly, the Congressional Budget Office has scored the House Republicans’ proposed budget and has predicted that it would increase health care costs for seniors by shifting more of the spending from the federal government to the individual. In today’s Medicare program, seniors pay about 35 percent of their Medicare costs; under the Republican plan, they may pay as much as 68 percent of the cost of the plan in 2030.

The House Republican budget proposal would transform the Medicaid program to a block grant program. Under the plan, states would have far more flexibility but would also severely limit the federal government’s financial support of the state programs. States or Medicaid recipients would have to pick up the resulting financial deficit.

Look at last year’s Patient Protection and Affordable Care Act, which was designed to ease the increase in federal health care costs. Many members of Congress are trying to eliminate one of the health reform law’s most potent cost containment provisions: an independent board with the power to limit payment rates if spending increases above certain thresholds. This illustrates the question of whether the political will — whether it comes from the Right or the Left — will be able to sustain such significant change over the long term. History will tell you that the most enduring reforms to our health and social welfare systems have been bipartisan.

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A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is vice president, government relations, for Invacare Corp., Elyria, Ohio. Bachenheimer previously worked at the law firm of Epstein, Becker & Green in Washington, D.C., and at the American Association for Homecare and the Health Industry Distributors Association. You can reach her at 440/329-6226 or [email protected].