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Paul Ryan's Budget Is About One Thing: Medicare

Paul Ryan isn't on the Republican presidential ticket anymore, yet he's still campaigning--for the smaller government that's become his signature issue. And the battle he's waging will affect the majority of Americans whether he gets his way or not.

Ryan, chairman of the House Budget Committee, has once again outlined the Republican proposal for federal spending during the next decade. In a Wall Street Journal op-ed, Ryan recites the usual litany of sad facts about Washington deficits and ticks off a few familiar ideas for reform, such as expanding energy development, simplifying the tax code, and revamping welfare.

But the nub of his plan comes in the 10th paragraph, where he says this about Medicare: "Starting in 2024, we'll offer eligible seniors a range of insurance plans from which they can choose--including traditional Medicare--and help them pay the premiums."

The key phrase there is "help them pay the premiums," because Ryan's budget would sharply reduce the average health care subsidy to seniors while requiring them to pay more out of pocket.

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Them's fightin' words, of course, but Ryan correctly identifies the single biggest strain on federal spending for the indefinite future. Medicare payouts are due to rise from $592 billion this year to nearly $1.1 trillion within a decade, according to the Congressional Budget Office.

That's an 82 percent increase and under current law, there's nothing Congress can do to control that, for two reasons:

1. Medicare is an entitlement programs that covers everybody who's eligible, and the aging of the baby boomers will swell the ranks of those covered by the program.

2. Health care costs typically rise by far more than inflation, hiking the cost of Medicare even more.

Other federal healthcare programs, such as Medicaid and the Children's Health Insurance Program, face the same problem with rising costs, but Medicare is the biggest by far. Plus, Medicare is fanatically protected by powerful lobbying groups such as AARP, and the seniors who benefit from it are one of the nation's most reliable voting blocs.

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That doesn't change the fact that Medicare will soak up more federal spending if nothing is done make it more affordable, requiring either sizable tax hikes on somebody or sharp cutbacks in funding for defense, education, roads, and mostly everything else the government spends money on.

Ryan wants to solve the problem by giving seniors a federal subsidy they can use to purchase health insurance of their own choice. The catch is that the subsidy would only cover part of the premiums, forcing seniors to pay the difference, which would be a sizable expense.

In addition to reducing federal spending, such a plan, in theory, would force seniors to be thriftier with the money they spend on both insurance and care, making the whole program more cost effective. The biggest changes wouldn't go into effect for a decade or so, allowing people close to retirement age to receive traditional Medicare benefits.

As radical as Ryan's plan may sound, there's widespread recognition that Medicare spending will devour an increasing amount of tax dollars at current rates of growth. The debt commission President Barack Obama set up in 2010 recommended a fixed annual budget for all federal health spending, capped at an annual growth rate of 1 percent more than GDP growth. That would require either much lower increases in the cost of care or less spending per recipient.

Ryan's budget isn't the final word, of course, but Obama and his fellow Democrats haven't proposed much of an alternative for fixing Medicare. Their first priority seems to be more tax increases on the wealthy, which Republicans oppose. Even if there were more tax increases, it's not clear that would generate enough revenue to keep Medicare solvent without cannibalizing other types of spending.

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So even though nobody really wants to hear it, Ryan the budget scold will keep reminding whoever's paying attention that voters get a lot more government than they pay for. It's a campaign unlikely to end anytime soon.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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