NCPA - National Center for Policy Analysis

Reforming Medicare: The Affordable Care Act versus the Rivlin/Ryan Proposal

January 5, 2011

Former Congressional Budget Office (CBO) Director Alice Rivlin and Rep. Paul Ryan (R-WI) have offered a proposal to reduce projected Medicare and Medicaid spending, independent of last year's health reform bill, the Patient Protection and Affordable Care Act (ACA).  The ACA also cuts Medicare spending significantly in order to fund health insurance for the uninsured, but does so by imposing price ceilings, according to Andrew J. Rettenmaier and Thomas R. Saving, executive associate director and director, respectively, of the Private Enterprise Research Center at Texas A&M University and senior fellows with the National Center for Policy Analysis.

  • The Rivlin/Ryan proposal would eventually replace the current Medicare system with a system under which individuals born in 1956 and later would receive a voucher to buy private health insurance.
  • Those born in 1955 and earlier would remain in traditional Medicare.
  • The cost containment measures in the health reform bill passed last year continues the sustainable growth rate (SGR) system that attempts to control payments to physicians under Medicare Part B and makes even more stringent reductions in payments to hospitals and other providers under Part A.

The ACA essentially imposes price ceilings on Medicare payments to providers.  These price controls will lead to fewer health care options and lower quality of care for the Medicare population.  In contrast, the Rivlin/Ryan approach would affect both the demand and supply side of the health care market -- patients would shop and providers would respond.  The more realistic cost savings resulting from the Rivlin/Ryan proposal could be accomplished without the unintended consequences of price ceilings.

Source: Andrew J. Rettenmaier and Thomas R. Saving, "Reforming Medicare: The Affordable Care Act versus the Rivlin/Ryan Proposal," National Center for Policy Analysis, January 5, 2011.

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