An important note to understanding how Ryan's budget saves money: It's not through privatization, though everything does get privatized. It's through firm, federal cost controls. The privatization itself actually costs money. The CBO's analysis of Ryan's Medicare changes tells the story well:
Both the level of expected federal spending on Medicare and the uncertainty surrounding that spending would decline, but enrollees’ spending for health care and the uncertainty surrounding that spending would increase.
Under the Roadmap, the value of the voucher would be less than expected Medicare spending per enrollee in 2021, when the voucher program would begin. In addition, Medicare’s current payment rates for providers are lower than those paid by commercial insurers, and the program’s administrative costs are lower than those for individually purchased insurance. Beneficiaries would therefore face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.
Moreover, the value of the voucher would grow significantly more slowly than CBO expects that Medicare spending per enrollee would grow under current law. Beneficiaries would therefore be likely to purchase less comprehensive health plans or plans more heavily managed than traditional Medicare, resulting in some combination of less use of health care services and less use of technologically advanced treatments than under current law. Beneficiaries would also bear the financial risk for the cost of buying insurance policies or the cost of obtaining health care services beyond what would be covered by their insurance.
That's a bit of a slog, so here's the translation:
The proposal would shift risk from the federal government to seniors themselves. The money seniors would get to buy their own policies would grow more slowly than their health-care costs, and more slowly than their expected Medicare benefits, which means that they'd need to either cut back on how comprehensive their insurance is or how much health-care they purchase. Exacerbating the situation -- and this is important -- Medicare currently pays providers less and works more efficiently than private insurers, so
seniors trying to purchase a plan equivalent to Medicare would pay more for it on the private market. http://www.roadmap.republicans.budget.house.gov/http://voices.washingtonpost.com/ezra-klein/2010/02/rep_paul_ryans_daring_budget_p.htmlhttp://news.firedoglake.com/2010/02/02/administration-elevating-horrendous-republican-budget-proposals-looking-better-by-comparison/