Larry's Corner

On March 20, 2012, House Budget Chair Paul Ryan (R, WI) unveiled the Congressional Republican alternative FY13 budget. The Ryan plan, “Path to Prosperity,” explores an aggressive shift in Federal priorities and proposes to reduce Federal outlays, reduce tax revenues, and transform Medicare and Medicaid. While the plan may never be adopted, it is a very powerful political document. In this election year, the Ryan Plan sets forth an alternative vision for the Federal government.

The following tables summarize the 10-year impact of the President’s budget plan, the CBO analysis of the President’s budget plan and the Ryan proposal. While these aggregate numbers are estimates, they underscore the proposed shift in priorities:

*CBO analysis of the President’s FY13 Budget

• Provisions Affecting Medicare: The Ryan Budget incorporates the concept unveiled last year to privatize Medicare from a government defined benefit plan to a premium support approach for individuals 55-years of age or younger. The 2013 approach embraces the tweaks negotiated last year between Chairman Ryan and Senator Ron Wyden (D, OR). Wyden’s support for the concept of a premium support approach has provided Ryan the opportunity to promote this as a bi-partisan proposal. The Ryan proposal proposes only minor reductions in Medicare outlays; these savings come from his proposed expansion of competitive bidding and fraud prevention.
   
• Provisions Affecting Medicaid: The Ryan Budget proposes major savings from block granting Medicaid. While there are few details, the text indicates states would be given a lump sum adjusted for inflation and population growth; states would be given “more flexibility” to determine spending priorities.
   
• Provisions Affecting PPACA: The Ryan Budget calls for a complete repeal of the Patient Protection and Accountable Care Act (the health reform enactment).
   
• Tax Reforms: The Ryan Budget proposes to collapse the existing individual tax rates to two brackets of 10% and 25%. The plan proposes a reduction in the corporate tax rate to 25%. Additionally, the plan calls for a simplification of the tax code, eliminating a number of unspecified exemptions and loopholes.
   
• 2% Sequestration: The Ryan Budget proposes to eliminate the mandate of the current law that would require equal cuts for domestic and defense spending. Buried in Appendix II of the Ryan Plan are instructions to replace the Budget Control Act mandated 2% sequestration with reconciliation instructions to produce legislation by a date certain to design alternative actions to achieve the $98 b in program reductions ( 1 yr) before the end of 2012.

Within days of its release, the House Budget Committee marked up and passed the Ryan plan as the First Congressional Budget Resolution. On March 29, 2012, the House of Representatives on a vote of 228-191 adopted the resolution, setting spending and revenue targets for the Federal government. Even if the Senate does not consider this version of the budget resolution, leadership in the House is expected to use the budget targets and reconciliation instructions as policy guidance.

The on-going debate regarding Federal spending priorities that has dominated Congressional actions, and inactions, during the past year has been reignited by this Budget Resolution. This sets the stage for potential show-downs on appropriations for Federal agencies at the beginning of FY13 (October 1, 2012) and it casts a real shadow over prospects for positive bi-partisan actions extending the recently enacted Medicare provisions that expire on December 31, 2012. In short, our heavy lift to secure adequate resources to assure quality, responsive care for beneficiaries confronts a new set of challenges.