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CBO Analyzes Medicare Proposal

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Congressional Budget Office (CBO) analysts say the Rivlin-Ryan Medicare proposal could lead to a reduction in federal outlays.

Rep. Paul Ryan, R-Wis., the highest-ranking Republican on the House Budget Committee, and Alice Rivlin, have developed a proposal that calls for major changes in Medicare, Medicaid and other federal health care programs.

Ryan-Rivlin proposal supporters want to:

- Eliminate the Community Living Assistance Services and Supports Act (CLASS Act) worksite long term care benefits program that would be created by the Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).

- Replace Medicare with a voucher for buying private health insurance for people who turn 65 in 2021 or later. “The amount of the voucher would be calculated by taking the average federal cost per Medicare enrollee in 2012 (net of enrollee premiums) and growing that amount at the annual rate of growth in [gross domestic product (GDP)] per capita plus 1 percentage point,” CBO analysts say in a proposal analysis.

- Replace Medicaid assistance with paying Medicare premiums for low-income people with cash contributions into medical savings accounts. “The amount of the contribution would be calculated by starting with $6,600 in 2012 and growing that amount at the rate of GDP growth per capita plus 1 percentage point.”

- Increase the age of eligibility for Medicare by 2 months per year starting in 2021 until the eligibility age reached 67 in 2032.

- Change Medicare deductibles, coverage limits and other plan design features.

- Convert the federal share of Medicaid payments into a block grant to be allocated among the states. The total block grant would increase annually along with currently projected growth in the Medicaid population and with growth in GDP per capita plus 1 percentage point.

Over the period from 2011 to 2020, the proposal could reduce the projected federal budget deficit by a total of $280 billion, and it could reduce the deficit by $90 billion in 2020, CBO analysts say.

Over the long term, the program could reduce the percentage of the total U.S. GDP going to health care to about 8.25% in 2030, from the currently projected level of about 8.75%, and to 10% in 2050, from 12.25%, officials estimate.


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