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Should the Ryan Budget Worry Seniors?

Retirement home

SOURCE: AP/Darron Cummings

Caregiver Warren Manchess, left, laughs with Paul and Mary Gregoline as they work on a puzzle, in Noblesville Indiana.

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A central element of the Congressional Budget process, established in 1974, is that policy proposals affecting the balance between spending and revenues must be scored by a philosophically neutral organization, one created for the purpose of making sure Congress clearly understands the budgetary effect of the legislation brought before it. That duty was given to the Congressional Budget Office, or CBO. It is deeply ironic, then, that the House Budget Committee—the committee primarily charged with making sure Congress sticks to the principles of the Congressional Budget and Impoundment Control Act of 1974—is once again presenting a budget plan that essentially blocks the CBO from doing its job.

Learning to avoid bad news

When Rep. Paul Ryan (R-WI) assumed the chairmanship of the House Budget Committee three years ago, he followed the rules and sought CBO scoring for the various proposals he wanted the House of Representatives to endorse. That request, however, did not produce the results he had hoped for. In particular, Ryan was not pleased with CBO’s analysis of his proposal to revise the Medicare program: It would have required people who turn 65 after 2022 to obtain health care coverage through private and often for-profit insurance carriers. Medicare would no longer pay these beneficiaries’ medical bills, but would instead provide them with “premium subsidies” based on a formula devised by Rep. Ryan and his staff.

In a letter dated April 5, 2011, CBO rendered its expert judgment:

Under the proposal, the gradually increasing number of Medicare beneficiaries participating in the new premium support program would bear a much larger share of their health care costs than they would under the traditional program … That greater burden would require them to reduce their use of health care services, spend less on other goods and services, or save more in advance of retirement…

CBO determined that under the 2011 Ryan plan, the total cost of providing health care to eligible individuals born after 1957 would be about 11 percent higher than under the traditional Medicare program. Most explosively, CBO found that beneficiaries’ share of those rising costs would jump from 35 percent to 61 percent. In other words, out-of-pocket health care expenses would explode, leaving a typical retiree with far less of his or her monthly Social Security check to meet other living expenses. For a senior living on the average monthly benefit, the amount left for nonmedical needs would be slashed from about $900 a month to less than $600.

After a storm of criticism erupted, Rep. Ryan needed to revise the plan so that it would not appear so onerous to seniors, but he also had to save the money necessary to hit his budget targets. How did he expect to do that? By following the “specified path.”

In 2012, Ryan made a different request to CBO. The office was not to examine the various components of his budget plan to determine whether it saved the funds he claimed; CBO was instead supposed to ignore the pages upon pages of policy proposals that accompanied the budget proposal and simply incorporate the numbers that Rep. Ryan directed it to his specified path. The specified path was to be followed regardless of whether the policy changes would, in the office’s judgment, produce numbers anywhere close to the ones he had was directing them to incorporate.

In March 2012, CBO submitted their “calculations”—note that they avoided using the word “analysis”—on the 2013 budget proposal, expressing this caveat:

The calculations presented here represent CBO’s assessment of how the specified paths would alter the trajectories of federal debt, revenues, spending, and economic output relative to the trajectories under two scenarios that CBO has analyzed previously. Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.

A new round of unscored proposals with even deeper projected spending reductions have been incorporated into the Ryan Budget proposal. This year, we have again been offered nearly 100 pages of policy discussion about how one program could be eliminated or another program might be altered or the formula for determining such and such could be revised. But at the end of the day, none of it relates to the numbers contained in the budget resolution. As CBO pointed out on the day the resolution was released:

The projections do not represent a cost estimate for legislation or an analysis of the effects of any specific policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget numbers that Chairman Ryan released on April 1, 2014, as part of his proposed budget resolution.

There is neither a scoring of the proposed policy initiatives nor an analysis of what those changes might mean for beneficiaries and for segments of the economy and country as a whole. The fluff and the substance of this resolution are in no way connected, but the substance is profound.

Let’s start with Medicare. Ryan’s specified path directs CBO to score Medicare outlays at $129 billion below current law between now and 2024 and at far greater savings in the years after that. We are lead to believe the savings in the program would be achieved through the latest version of premium support and four other Medicare proposals, including sharply reduced subsidies for beneficiaries who elect to participate in the Medicare Advantage program.

But when they are all totaled together, we have no idea whether they will produce the savings promised. The stupendous reduction in outlays that Rep. Ryan has directed CBO to score for the Medicare program might be achieved by these cuts, or they might require far more draconian measures. His specified path of deep cuts is in the policy recommendations of the resolution, and all of the proposals contained in his discussion appear merely to be illustrative of the kinds of policy changes that might be implemented. Additional draconian benefit reductions might well be necessary to reach the specified path.

We do not know what the organization charged with making those judgments thinks about this. Nor do we know what the impact of these numbers might be on the lives of the tens of millions of seniors whose ability to maintain their homes and buy groceries is directly dependent on how much of their annual health care costs are transferred to them under the guise of Medicare reform.

Savaging America’s long-term care insurance

But as important as many seniors and their families think Medicare is to their well-being and family financial solvency, the greater threat to their well-being might well be Rep. Ryan’s Medicaid proposal. Medicaid is sometimes thought of as medical assistance for the poor, but about two-thirds of the money in the program goes to elderly and disabled Americans. It is likely that 90 percent of elderly households would be forced to turn to Medicaid if either member of an elderly couple needed to spend substantial time in a nursing home.

In addition to slashing more than about $200 billion per year in Medicaid funds necessary to implement the Affordable Care Act, Ryan makes a huge additional cut in the underlying Medicaid program. In 2024, the final year of his budget, he would lop $124 billion out of the federal contribution to state Medicaid programs—a more than 25 percent cut. Clearly, that huge cut would force states to shred the long-term care insurance coverage that Americans have depended on for decades.

Conclusion

Many people in Washington and across the country have been dismissive of both President Barack Obama’s and Rep. Ryan’s budgets. “They will both go in the circular file before they are a week old,” a colleague told me the morning the Ryan budget was released. True, neither will be written into law this year as the standoff in Washington continues into yet another budget cycle. But at some point, the standoff will end. At some point, the American people will choose between two starkly different visions of our future—visions represented by these two budget proposals. For that reason, both budgets deserve far more careful attention than they are likely to receive. We should not only know whether the proposals will save the money that their proponents claim; we also need to know what effect those savings will have on the lives of our nation’s seniors.

Scott Lilly is a Senior Fellow at the Center for American Progress.

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