April 26, 2011

The plan will lead to seven dollars of waste for every dollar saved by the government.

For immediate release: April 26, 2011
Contact: Alan Barber 202-293-5380 x115

Washington DC- The budget plan put forth by Representative Paul Ryan has been described by some as a serious, smart plan that will help reinvigorate the economy and reduce the deficit. Ryan’s plan to revamp Medicare has been described as shifting costs from the government to beneficiaries. A new report from the Center for Economic and Policy Research (CEPR), however, shows that the Ryan proposal will increase health care costs for seniors by more than seven dollars for every dollar it saves the government, a point missing from much of the debate over the plan.

“The Ryan plan does nothing to control private-sector waste in health care costs,” said David Rosnick, an author of the report.  “As a result of the waste in the private system, beneficiaries will end up paying substantially more for Medicare, in effect paying a hefty new tax on their health care.”

The report, “Representative Ryan’s $30 Trillion Medicare Waste Tax,” documents the potential effects of replacing Medicare with a system of vouchers or premium supports and raising the age of eligibility from 65 to 67 as suggested in the Ryan plan, which was passed by the House of Representatives with almost unanimous support from Republicans and no votes from Democrats. The authors note that each voucher under the plan will initially be worth $6,600, but would be frozen at this amount over the program’s 75-year planning window, paying less and less of a beneficiary’s health care costs over time.

In addition to comparing the costs of Medicare to the government under the current system and under the Ryan plan, the authors also show the effects of raising the age of Medicare eligibility. The paper also demonstrates that while Ryan shifts $4.9 trillion in health care costs from the government to Medicare beneficiaries, this number is dwarfed by a $34 trillion increase in overall costs to beneficiaries that is projected based on the Congressional Budget Office’s analysis.


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