Paul Ryan on Medicare

By Congressman Paul Ryan

Medicare is the cornerstone on which all other government health programs rest. Unfortunately, the deteriorating financial conditions of this program are threatening beneficiary access to its benefits. In 2008, the nonpartisan Medicare Trustees Report reported that the trust fund that finances virtually all Medicare initiatives will be insolvent by the year 2019. Since Congress has refused to consider legislation reforming our broken health care system, the Trustees’ 2009 report is expected to predict Medicare’s insolvency much earlier than 2019.

At the same time, other government health programs are growing at unsustainable rates and threatening to overrun many state budgets. If left unreformed, these health care costs will impose a crushing financial burden on our economy and fail in their promise to provide core benefits to those in the most need. One of the most important issues for Congress to focus on is managing the skyrocketing costs of health care and setting the Medicare program back on the path of long-term fiscal sustainability.

FY2010 Presidential Budget

Recently, President Obama released his fiscal year 2010 budget. While I applaud the President’s commitment to health care reform, I have serious concerns about the direction he has chosen. Without providing any specifics, his budget proposes to spend $634 billion on health care, half of which is paid for by increasing taxes. The other half is paid for by cutting payments to benefits such as Medicare Advantage plans, Home Health programs, and Medicaid drug rebates. Further, the President’s budget implies a massive expansion of federal involvement over health care management. Leaving aside the problems that already exist within programs such as Medicare and Medicaid, it is irresponsible to propose massive expansions of deeply flawed government bureaucracies without requiring any reforms in return. I believe in the promise of health care security that Medicare and Medicaid offer and I believe it is Congress’ job to make sure these programs meet that mission. Unfortunately, the President’s proposed budget falls dramatically short of that goal.

That is why I have proposed an alternative approach to reforming our health care system. My bill, a Roadmap for America’s Future, would put patients and doctors in control of health care decisions. It fundamentally changes the mechanics of Medicare and Medicaid while strengthening the promise of health care and retirement security for all Americans. In short, we can have universal health care coverage without having government run health care. My plan achieves this goal.

H.R. 6110, A Roadmap for America’s Future

For more than a decade, legislation has been offered in Congress attempting to address Medicare’s financial shortcomings. Some proposals suggest comprehensive reform while others address only specific issues. While these initiatives have been met with mixed results, none have addressed the underlying problem responsible for our current situation. The third-party-payer, first-dollar-coverage health care model that drives Medicare spending no longer meets the needs of patients, doctors, hospitals, and governments. Last year, I offered comprehensive health care reform legislation that redesigns Medicare, protects beneficiaries’ access to health care services, and restores the fundamental relationship between doctors and patients.

My proposal preserves the current Medicare system for those individuals who are 55 years or older. While the program’s fiscal crisis demands change, I do not believe it is appropriate or necessary to force these reforms on seniors who are retired or nearing retirement. For those who are under age 55, my proposal restructures the way in which beneficiaries interact with Medicare to provide them with more direct control over health care decisions while fulfilling the program’s goal of health care security.

Under my proposal, beginning in the year 2019, Medicare would provide seniors who turn 65 that year with a voucher of at least $9,500 to purchase a health care plan of their choosing. For those seniors who are sicker, the amount of the voucher will be increased to account for the increased medical costs they will incur. Additionally, low-income seniors will also receive additional assistance to cover their out out-of-pocket costs. The plan would work similar to how members of Congress receive their health coverage. Seniors will receive a booklet of Medicare approved plans along with their voucher to assist them in deciding which coverage option to choose. This will be similar to the Medicare & You pamphlet that beneficiaries receive each year under the current program. Seniors would not be limited to the plans listed in this manual, but would have the freedom to choose any plan they find that fits their needs. Beneficiaries would receive a new voucher every year with its value increasing to keep pace with changing medical costs.

Medicare provides millions of seniors every year with access to essential health care services. But unless Congress reigns in the out of control spending and reforms the program’s outdated policies, Medicare will not be available to provide future generations the same health care security it offers today. I look forward to working with my colleagues in Congress to address these serious issues and restore the promise of Medicare.

Medicare Reimbursements for Physicians

Under current Medicare law, doctors providing health care services to Part B enrollees are compensated through a “fee-for-service” system, in which physician payments are distributed on a per-service basis, as determined by a fee schedule and an annual conversion factor (a formula dollar amount). The fee schedule assigns “relative values” to each type of provided service. Relative value reflects physicians’ work, time, skill, average medical practice expenses, and geographical adjustments.

Medicare law requires that the conversion factor be updated each year. The formula used to determine the annual update takes into consideration the following factors:

  • Medicare economic index (MEI)–cost of providing medical care;

  • Sustainable Growth Rate (SGR)–target for aggregate growth in Medicare physician payments; and

  • Performance Adjustment–an adjustment ranging from -13% to 3%, to bring the MEI change in line with what is allowed under SGR, in order to restrain overall spending.

Every November, the Centers for Medicare and Medicaid Services (CMS) announces the statutory annual update to the conversion factor for the subsequent year. The new conversion factor is calculated by increasing or decreasing the previous year’s factor by the annual update. Since 2003, Congress has chosen to override current law in order to prevent reimbursements from being cut as a result of the formula. In 2008, physicians were expected to receive a 10.1 percent decrease in Medicare reimbursements. While I disagreed with the process by which Congress chose to address this issue, I voted in July 2008 to override the President’s veto of legislation that would have staved off this cut. As a result, physicians will not face a cut in their reimbursements through 2009. On December 19, 2007 Congress acted to prevent this significant cut in physician reimbursements that severely threatened beneficiary access to doctors.

However, this temporary legislation does not address the cuts that physicians are expected to receive in 2010. In fact, without Congressional action, health care providers who treat Medicare beneficiaries are facing a 21 percent cut next. While it is unacceptable to let Medicare costs continue to spiral out of control, getting our fiscal house in order should not come at the expense of doctors and providers of health care. Rather than passing temporary fixes, I would prefer to address the more important matter of the wholesale reform to the Medicare reimbursement system. People should be paid for the work that they do and physicians should not have to wait on Congress to act every year in order to prevent pay cuts that are arbitrarily determined by an outdated formula. Fundamental reforms to Medicare and our broken health care system are urgently needed, and I will continue to push my colleagues to taking on this challenge.

Congressman Paul Ryan serves Wisconsin’s 1st Congressional District. To contact him by phone in Washington, D.C., call (202) 225-3031. Or visit Paul Ryan at

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