The Republicans' Incredible Bait-and-Switch -- Truly Trying to Screw You When You Get Older

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Back when I analyzed health plans and other benefits for a living, I asked a famous CEO what his goals were for the corporation's employee benefit plan. "I want to give them less and make them think it's more," he said. 

The new Republican budget proposes to radically restructure the country's relationship with its citizens. They're using bogus economics to confuse people into thinking these extreme cuts will somehow leave them more money. But they're really offering less - much less.

We'll deal with the politics later. The policy is astounding enough. But we'll throw in a little context: The top 25 hedge fund managers made a collective $22 billion last year. If they had been taxed under the same rules as cops, firefighters, nurses, and teachers, and if the President's proposed tax changes for the wealthiest earners had passed, these 25 people alone might reduced the Federal deficit by more than five billion dollars in a single year! But Rep. Ryan and his party prevented that from happening.

"Party of deficit reduction"? Gosh, I don't think so.

A Radical Attack

Since all the specifics aren't in, we ran some rough preliminary numbers. Here's what we found: Within ten years of this plan taking effect, most Americans would be spending all of their Social Security income just to pay for their health care or going without coverage.

The Republicans claim their budget will cut $4 trillion from the Federal budget. But it will take much more than that out of everyone's pockets. The Republican proposal wouldn't just end Medicare as we know it - although it would certainly do that. It would also end Social Security as we know it.

In the end America's seniors would pay more and get less as their social safety net was gradually eliminated. Their Social Security income would essentially evaporate as they were forced to spend it on previously-available health care coverage. That also means it would be redirected into the large corporations that dominate our health care system.

Slow Bleed

The new budget was presented by Rep. Paul Ryan, based on a proposal he co-wrote with economist (and long-time "entitlement" opponent) Alice Rivlin. It would dismantle Medicare and Medicaid starting in 2021, when Medicare's system of guaranteed, comprehensive health coverage would be replaced with "vouchers" under what's known as a "defined contribution plan" - exactly what that CEO foisted upon his hapless employees.

The "voucher" would be based on Medicare's 2012 cost per enrollee, increased by the general rate of inflation plus 1% every year. How would this change affect Medicare-eligible people?

Medical inflation's growing much faster than general inflation, so people who retire in 2021 would get a voucher that's worth considerably less than Medicare's current coverage.[1] The Rivlin/Ryan plan uses 2011 costs as a base for calculating the voucher's value, increasing the voucher after 2021 by the rate of general inflation plus one percent. Using the medical and general inflation rates from the past decade, here's what we would see:
If the 2012 base for the voucher isn't adjusted for medical cost inflation between 2012 and 2021, the GOP plan would wind up costing seniors more than six thousand dollars in 2021 - over four thousand dollars more than they would've paid in Medicare premiums. Even if it is adjusted for those years it would still fall short by nearly $2,500 after subtracting current premiums, using Ryan and Rivlin's formula:

Seniors would either have to pony up the difference or get less medical coverage. [2]

Ten Years After

If we keep projecting forward using the rates of overall inflation, medical inflation, and Social Security benefit increases from the last decade, it's easy to see that things will really go to hell in a few short years: