Fox News contributor Andrea Tantaros recently claimed that Rep. Paul Ryan's (R-WI) budget proposal would not "drive up the costs" of Medicare because "[Ryan is] bringing it to the private market." In fact, the nonpartisan Congressional Budget Office estimated that under Ryan's plan, seniors' out-of-pocket health care costs would more than double.
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Tantaros Falsely Claims Ryan's Plan "Doesn't Drive Up The Costs" Of Seniors' Health Care
Tantaros: Ryan's Plan "Doesn't Drive Up The Costs" Of Seniors' Health Care Because It "Bring[s] It To The Private Market." On the May 26 edition of Fox News' Fox & Friends, during an exchange with Fox News contributor Juan Williams, Fox News contributor Andrea Tantaros claimed that Ryan's budget plan "doesn't drive up the costs" of health care for seniors because "[h]e's actually bringing it to the private market. That incentivizes insurers." From the broadcast:
WILLIAMS: Now we have a proposition here from Paul Ryan, who I acknowledge has taken a necessary first step because we've got to deal with entitlements if we want to get the deficit under control, but it is a plan that's going to have an adverse effect in terms of the cost of health care for seniors, just as President Clinton described. Health care costs are not static. They keep rising.
TANTAROS: Well, you talk about costs going up under the Ryan plan. How? He's actually bringing it to the private market. That incentivizes insurers --
WILLIAMS: No, I said --
TANTAROS: Hold on a minute -- incentivizes insurers --
WILLIAMS: No, no, but I'm saying, it drives up the costs --
TANTAROS: No, it doesn't drive up the costs. And I'll tell you why.
WILLIAMS: No, no, hold on -- health care costs, independent of Paul Ryan's plan --
TANTAROS: I will tell you --
WILLIAMS: -- are going up -- higher than the rate of inflation.
TANTAROS: First of all, Juan, health care costs have spiked since Obamacare was passed. Premiums have gone through the roof.
WILLIAMS: They have not spiked, come on!
TANTAROS: What Ryan's plan does is he puts it in the hands of insurers, and he says compete against each other. [Fox News, Fox & Friends, 5/26/11]
But CBO Projects Ryan's Plan Would Increase Total Cost Of Seniors' Health Care...
CBO Report: "A Private Health Insurance Plan Covering The Standardized Benefit Would ... Be More Expensive Currently Than Traditional Medicare." On April 5, the Congressional Budget Office (CBO) released a report analyzing Ryan's budget proposal. The CBO noted that Ryan's plan would privatize Medicare, stating it "would convert the current Medicare program to a system under which beneficiaries received premium support payments--payments that would be used to help pay the premiums for a private health insurance policy and would grow over time with overall consumer prices." In its analysis, it determined that such private health care plans would "be more expensive currently than traditional Medicare" because "[b]oth administrative costs (including profits) and payment rates to providers are higher for private plans than for Medicare." From the report:
Chairman Ryan's proposal would affect not only federal spending for Medicare but also Medicare beneficiaries' spending for their health care. To quantify the impact of the proposal on beneficiaries' spending, CBO followed these steps: First, the agency estimated what total health care spending (including the costs paid by health insurers and out-of-pocket expenses for covered services) would be in 2011 for a typical 65-year-old who had a private health insurance plan with a benefit package comparable to the services covered by the Medicare program. That package is dubbed the "standardized benefit," and CBO used the total health care spending for a typical 65-year-old with a standardized benefit in a private plan as a benchmark for this analysis.
A private health insurance plan covering the standardized benefit would, CBO estimates, be more expensive currently than traditional Medicare. Both administrative costs (including profits) and payment rates to providers are higher for private plans than for Medicare. Those higher costs would be offset partly but not fully by savings from lower utilization stemming from two sources. First, private health insurers would probably impose greater utilization management than occurs in Medicare. Second, private plans might restrict enrollees' ability to purchase supplemental insurance plans; enrollees would thus face higher out-of-pocket costs than they do in Medicare, and that increased cost sharing would encourage lower utilization. On net, for a typical 65-year-old in 2011, CBO estimates that average spending in traditional Medicare will be 89 percent of (that is, 11 percent less than) the spending that would occur if that same package of benefits was purchased from a private insurer (see Figure 1).
Moreover, CBO projects that total health care spending for a typical beneficiary covered by the standardized benefit under the proposal would grow faster than such spending for the same beneficiary in traditional Medicare under either of CBO's longterm scenarios. For the period before 2030, the difference in projected growth rates occurs primarily because CBO expects that the payments to providers in Medicare will grow more slowly (especially under the extended-baseline scenario) than those in the private market.
As a result, total health care spending for a typical 65-year-old in Medicare under the extended-baseline scenario in 2022 would be 66 percent of total spending with a private plan with the standardized benefit; in 2030, the figure would be 60 percent of that benchmark. Total health care spending in Medicare under the alternative fiscal scenario would be a larger share of total spending with a private plan--72 percent in 2022 and 71 percent in 2030--because payments to providers in Medicare are assumed to grow at a faster rate than under the extended-baseline scenario. ["Long-Term Analysis of a Budget Proposal by Chairman Ryan," CBO, 4/5/11, emphasis added]
CBPP: "In 2022 ... CBO Estimates That Total Health Care Expenditures For A Typical 65-Year-Old Would Be Almost 40 Percent Higher With Private Coverage Under The Ryan Plan." From an April 7 report on Ryan's plan by the Center on Budget and Policy Priorities (CBPP):
Moreover, CBO estimates that the total health care costs attributable to Medicare beneficiaries would be considerably higher under the private insurance plans they would purchase under the Ryan plan than under a continuation of traditional Medicare, because private plans have higher administrative expenses and higher payment rates for providers.
In 2022, the first year the voucher would apply, CBO estimates that total health care expenditures for a typical 65-year-old would be almost 40 percent higher with private coverage under the Ryan plan than they would be with a continuation of traditional Medicare. [CBPP, 4/7/11, emphasis in the original]
...And Would Double Seniors' Out-Of-Pocket Health Care Costs
AP: "CBO: Big Health Cost Shift To Elderly In GOP Plan." From an April 6 Associated Press article:
Most future retirees would pay considerably more for health care under the new budget proposed by House Republicans, according to an analysis by nonpartisan experts for Congress that signals problems ahead for the plan.
The fiscal blueprint would put people now 54 and younger in a different kind of health care program when they retire, unlike the Medicare that their parents and grandparents have known. Instead of coverage for a set of benefits prescribed from Washington, they'd get a federal payment to buy private insurance from a choice of government-regulated plans.
"A typical beneficiary would spend more for health care under the proposal," the nonpartisan Congressional Budget Office estimated in an analysis released late Tuesday.
The CBO said over time future retirees would pay much more, partly because the Medicare benefits package would be more expensive to deliver through private insurers. By 2030, the government payment would cover only about one-third of the typical retiree's total health care costs, the budget office said.
The sweeping fiscal plan by House Budget Chairman Paul Ryan, R-Wis., would reduce total federal spending, deficits and debt, saving money for federal taxpayers. But it would be tempered by a cost shift to future retirees. [Associated Press, 4/6/11]
CBO: "A Typical 65-Year-Old Would Pay 61 Percent Of The Benchmark In 2022 Under the Proposal" As Compared To 27 Or 30 Percent Under Alternative Scenarios. From the April CBO report about Ryan's budget proposal:
Under the proposal, most beneficiaries who receive premium support payments would pay more for their health care than if they participated in traditional Medicare under either of CBO's long-term scenarios. CBO estimated that, in 2030, a typical 65-year-old would pay 68 percent of the benchmark under the proposal, compared with 25 percent under the extended-baseline scenario and 30 percent under the alternative fiscal scenario.
After assessing the total costs that would be incurred for a typical 65-year-old, CBO estimated the government's share and the beneficiary's share of those costs under the proposal and under CBO's long-term scenarios. The proposal would set the premium support payment for a typical 65-year-old at $8,000 in 2022, approximately equal to government spending on the average 65-year-old beneficiary in Medicare under the extended-baseline scenario in that year. In other words, the government contribution to that beneficiary's health care costs under the proposal would be approximately equal to the government's contribution to the beneficiary's costs through Medicare under current law. Hence, measured relative to the benchmark, the government's contribution in 2022 would be similar under the proposal (at 39 percent), the extended-baseline scenario (39 percent), and the alternative fiscal scenario (42 percent).
However, because the benchmark would be greater than that with traditional Medicare, a typical beneficiary's spending--the sum of premiums and out-of-pocket spending--would be greater under the proposal than under traditional Medicare. Specifically, CBO estimated that a typical 65-year-old would pay 61 percent of the benchmark in 2022 under the proposal. In comparison, under the extended-baseline scenario, the typical 65-year-old would pay 27 percent of the benchmark, while under the alternative fiscal scenario, that figure would be 30 percent. ["Long-Term Analysis of a Budget Proposal by Chairman Ryan," CBO, 4/5/11, emphasis added]
CBPP: CBO Found That Typical Medicare Beneficiary's "Annual Out-Of-Pocket Costs Would More Than Double." From the CBPP report:
Since the Ryan proposal would reduce the federal government's contribution for beneficiaries' health care costs even as it caused total costs to increase, beneficiaries' out-of-pocket spending would rise dramatically.
CBO also finds that this beneficiary's annual out-of-pocket costs would more than double -- from $6,150 to $12,500. In later years, as the value of the voucher eroded, the increase in out-of-pocket costs would be even greater.
The report included this graph showing the projected increase in seniors' health care costs under Ryan's plan:
[CBPP, 4/7/11, emphasis in the original]