The Paul Ryan Budget Plan: What Does it Really Mean for Healthcare and Safety Net Programs?

by Rebecca Farley on August 16, 2012

With Mitt Romney’s announcement over the weekend that Wisconsin Congressman Paul Ryan would be his vice presidential running mate, media attention has surged around Ryan’s controversial budget proposals, particularly their impact on Medicaid and Medicare spending. Both political parties have leveled charges against the other of trying to destroy Medicare – and countered that their own proposals will save it.

Amid all the shouting, what’s really in Ryan’s budget plan, and how will it affect services for vulnerable Americans? As Chairman of the House Budget Committee, Ryan has for two years proposed a vast spending overhaul that would dramatically change federal investment in healthcare and social services. Ryan states that his budget is designed to “repair the safety net by returning power over public assistance programs to the states” and “realigning incentives to ensure these programs can best meet their critical missions.”

In a nutshell, the changes that he proposes would result in substantial cuts to both Medicare and Medicaid, along with what is known as “non-defense discretionary spending” – the category of federal funding that supports the Substance Abuse and Mental Health Services Administration, food stamps, education, community services, and much more. His proposals would also remove many federal regulations governing enrollment, income standards, and other requirements for participation in public assistance programs, allowing states wide latitude in how and to whom they make these benefits available.

Ryan has dubbed his budget the “Path to Prosperity” and says it will help slash the federal deficit to a more sustainable level. However, much of his budget’s $5.3 trillion in savings would be used not for deficit reduction, but to offset $4.6 trillion in corporate and individual tax cuts and a $200 billion increase in defense spending. This is reflective of the approach that many fiscal hawks have taken to deficit reduction in recent years: an approach that puts a disproportionate burden of spending cuts on health and social service programs while refusing to cut other areas of the budget or raise revenues that could mitigate the impact of these cuts.

Among the major changes in Ryan’s budget are:

Converting Medicaid to a block grant, indexed for inflation and population growth. Under this proposal, states would receive a fixed amount of funding from the federal government each year to operate their Medicaid programs. This amount would not change based on fluctuations in enrollment or healthcare needs. Ryan would remove certain enrollment requirements and other program standards. He would also repeal the health reform law’s Medicaid expansion and its subsidies to assist low-income people with purchasing insurance on state health insurance exchanges.

  • The net result: an $810 billion reduction in state and federal Medicaid spending over 10 years from converting the program to a block grant, plus a $1.6 trillion reduction from repealing the Medicaid expansion and insurance subsidies.
  • The effect on people with mental illness/addiction: Individuals could lose Medicaid coverage if states cut back on enrollment or don’t have enough money to serve everyone under the block grant formula. Mental health and substance use treatment are optional benefits in Medicaid and could be at risk if states need to find ways to cut down on costs.
  • For more information: see our fact sheet with more details on how this proposal would affect Medicaid enrollees with mental illness and substance use disorders and this Center on Budget and Policy Priorities state-by-state analysis of the Medicaid cuts.

Converting Medicare into a system of vouchers that could be used to purchase private insurance in a competitive market. The subsidy amount would vary by enrollees’ age, income, and health status, and would increase over time as the enrollee gets older. Yet, it would increase at a slower rate than the projected growth in healthcare spending costs, potentially leaving seniors on the hook for a rising share of their medical care over time. Ryan’s budget would also gradually raise the Medicare age from 65 to 67. These changes would be phased in over coming years so that current beneficiaries and Americans now over age 55 would not be affected. Ryan’s budget also maintains $716 billion in cuts to Medicare that were included in the health reform law. The ACA reduced overpayments to Medicare Advantage plans (which are currently paid more than their actual costs of providing services), phased down the federal payments that help hospitals provide uncompensated care to the uninsured, and established a variety of adjustments to improve payment accuracy.

  • The net result: preserves the $716 billion in cuts to Medicare included in the health reform law, plus achieves an unspecified level of reductions from converting Medicare to a voucher system. A 2011 Congressional Budget Office report found that the Medicare voucher proposal would reduce spending by $30 billion.
  • The effect on people with mental illness/addiction: To the extent that the Medicare subsidy is insufficient for the cost of coverage, individuals would have to make up the difference out of their own pockets. Although seniors could use their vouchers to purchase traditional Medicare coverage, this coverage could become steadily more unaffordable over time as less-comprehensive private plans entice the healthiest seniors into private coverage, leaving traditional Medicare to support those with the most complex (and costly) healthcare needs.
  • For more information: see this excellent article from Politico explaining the truths and misrepresentations in each party’s talking points against the other’s Medicare proposals.

Converting the Supplemental Nutrition Assistance Program (SNAP) into a block grant and devolving other federal low-income assistance programs to the states. Receipt of food stamps (SNAP) would be contingent upon work or job training, and time limits and work requirements would be established for other low-income assistance programs. States would get new “flexibility” in tailoring these programs to their own populations as federal program requirements would be removed.

  • The net result: $134 billion in spending reductions for the food stamp program, plus an estimated $463 billion in cuts to other low-income assistance programs.
  • The effect on people with mental illness/addiction: Individuals with mental health or substance use conditions who are receiving food stamps or other social services could see their benefits cut or eliminated, particularly if they exceeded the time limits or did not meet the new work requirements.
  • For more information: see this state-by-state analysis on the food stamp cuts, from the Center on Budget and Policy Priorities

The Bipartisan Policy Center has compiled a detailed summary of the Ryan budget plan, available here. You can read the full 100-page “Path to Prosperity” here.


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{ 2 comments… read them below or add one }

Diana Harris August 21, 2012 at 1:39 pm

I don’t believe this information is correct. Sound like propaganda for health care reform.


Rebecca Farley August 21, 2012 at 1:42 pm

Thank you for your comment. I would encourage readers to visit the sources linked in the story for additional information about the Ryan budget plan. The Bipartisan Policy Center in particular has an excellent summary which we drew on for this report.


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