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The battle over Medicare and Medicaid

What would the Republicans' newly proposed changes mean to Americans?

Nearly half a century ago, President Lyndon Johnson created the Medicare and Medicaid programs as part of his Great Society reforms. Now Medicare and Medicaid together account for almost a quarter of the entire federal budget – a total of almost $800 billion in the last year alone. In the recent recession, the federal government provided an additional $87 billion to fund Medicaid.

How would Rep. Paul Ryan’s plan change this? Instead of pumping in money as needed, the federal government would hand out a one-time block grant to each state, each year. You would not be entitled to a certain set of benefits if you qualified for Medicaid. It would depend on what a state governor wanted to do with that federal funding.

The New Republic’s Jonathan Cohn says it’s a risky prospect — and one that could have a serious human toll. “We know from the literature, we know from experience, we know anecdotally that when people can’t pay for their medical care they face very difficult, very painful choices.”

But Ryan (R.-Wis.) is betting that the rest of his plan will kick start the economy and fewer people will need Medicaid. “Of course, we want less people on Medicaid because that means people are making more money and they’re having better lives and they’re having more income,” he said.

Unlike Medicaid, Medicare is completely funded and run at the federal level. Most beneficiaries are covered by fee-for-service, which means that the government pays directly for things like doctor and hospital visits. Ryan’s plan would take away the fee-for-service option for future Medicare recipients and instead give a government subsidy to buy a private insurance policy. He also proposes to slowly raise the age of eligibility for Medicare from 65 to 67.

One last overarching problem with Ryan’s plan is the math. While the proposed changes to Medicare and Medicaid both take inflation into account, it’s not nearly enough to keep pace with rising health care costs. That could mean individuals would end up picking up more of the health care bill, an expense many can’t afford.

While Ryan’s plan is unlikely to pass, our experts said, it has big implications for the future. What should our entitlement programs be? What can we afford? And so again, while it won’t become law now, it’s not going to go away.