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Smart Benefits: Will Paul Ryan’s Plan for Medicare + Medicaid Fly?

Monday, August 20, 2012


What does Republican VP nominee Paul Ryan propose the nation do about Medicare and Medicaid? Photo: Gage Skidmore.

Minutes after Paul Ryan was named Mitt Romney’s Vice Presidential running mate, critics called his plans for reforming Medicare and Medicaid too radical while supporters claimed them necessary to contain spiraling out-of-control costs. If you missed the media coverage, below is a summary of his approach.

Ryan on Medicare

Ryan’s plan for Medicare doesn’t affect retirees who are currently receiving Medicare benefits. Rather, it would only impact those under age 55 today.  How?

  • Rather than the federal government funding all future medical expenses, Ryan’s plan would include a co-sharing arrangement.
  • Private insurance companies would bid for the Medicare business, competition Ryan hopes would bring down premiums. 
  • The federal government would accept the second least expensive plan and allow retirees to enroll for zero premium. 
  • Retirees would have the option to purchase the least expensive plan and receive a rebate, or buy up to higher levels of coverage available through private insurers.


If Ryan’s proposal is implemented, to offset the out-of-pocket expenses, those enrolled in Health Savings Accounts (HSAs) could use their savings to pay for their Medicare expenses or a spouse’s. With an HSA, funds can be saved now – and earn tax-free interest – to cover future qualified medical expenses, including Medicare.

What about Medicaid?

Ryan wants to shift control of Medicaid away from the federal government to the states through block grants. States could use the federal money to run the programs at their discretion, which Ryan hopes would promote greater efficiencies.

Rhode Island has a similar program already in place called the Global Consumer Choice Compact Waiver. Under it, the state can draw down funds up to a total of $12.1 billion over five years to maintain state-funded programs targeting those at risk of poor health and institutional placements, including services that are not traditionally eligible for Medicare matches. 

Rhode Island is currently in year three of the program. According to the Lewin Group, an independent consultant hired to assess the success of the program, between 2009 and 2011, the state saved almost $23 million under the program as a result of:

  • Fewer low-needs people using nursing homes and instead receiving care at home or in alternatives care settings like an assisted living facility.
  • Stable nursing homes costs in Rhode Island. 
  • Improved care because all Medicaid beneficiaries have a patient-centered medical home, which encourages and rewards better quality and health outcomes, promote homes and alternative care settings and improves access. 


Fanciful or Flexible: Voters Decide

Everyone agrees Medicare and Medicaid must be reformed to reduce costs, expand choice and improve access. The question is how. Ryan’s plan puts the states at the center of decision-making, giving them greater flexibility to spend federal funds to deliver care. Is Ryan’s plan the solution? We’ll find out when voters decide on November 6th.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

For more health and business coverage, watch GoLocalTV, live every day at 4pm, and on demand 24/7, here.


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