Now that Representative Paul Ryan (R-WI) has been selected by former Governor Mitt Romney (R-MA) as his vice presidential running mate, the debate is focusing on the Wisconsin representative’s plan to reform Medicare. Known as Medicare Premium Support, it “refers to a system under which Medicare enrollees would pick from a menu of competing plans with a fixed government payment to help defray premium costs. Enrollees would be on the hook for any charges above the government contribution. But they could save money by selecting a plan with a premium below the federal subsidy.”
Ryan says that under his plan, the government’s contribution toward premiums will equal the cost of the second least expensive plan in any market — or traditional Medicare — whichever costs less. Ryan believes that his plan is politically feasible because it doesn’t begin until 2022 with the result that it retains traditional Medicare for Americans who were 55 and older in 2011 — meaning that baby boomers are exempt from the changes. Democrats who oppose the plan contend that Ryan’s Medicare overhaul would subject seniors to the vagaries of the private market, leaving them with little protection against rising premiums and negligible benefits.
So what is the difference between the Democratic and Republican cuts to Medicare? The ACA stresses government control and central planning. The law creates a panel of 15 unelected government officials, called the Independent Payment Advisory Board (IPAB) to direct changes that will shrink spending by cutting physician and hospital reimbursement. The Wyden-Ryan plan preserves the ACA’s targets for future Medicare spending, but uses competitive bidding. Seniors would have the same benefits that they do now, and would have the option of choosing from several government-approved private insurance plans.
The Republican budget targets Medicare growth of GDP plus 0.5 percent, just as the 2013 Obama budget does. The difference lies in the fact that the GOP budget repeals the ACA, while maintaining that law’s Medicare cuts. The Democratic budget leaves the ACA in place.
Writing in the Washington Post, Ezra Klein puts the difference in a nutshell: “The difference between the two campaigns is not in how much they cut Medicare, but in how they cut Medicare.”
In an exclusive interview with Modern Healthcare magazine, Ryan says that “This is an idea whose time has come. And it’s a bipartisan idea. What Representative Ron Wyden (D-OR) and I tried to do was to plant the seeds of a bipartisan consensus. We knew we weren’t going to pass it because of the politics. We did this together to get the consensus-building started.” Ryan believes that the plan’s chances for approval will greatly improve in 2013 — especially if the Romney/Ryan team wins the November 6 presidential election. “I’m actually pretty optimistic,” he said, noting that the United States should reform healthcare on its own terms and “fix this on our terms” instead of borrowing European ideas. “We believe there are far superior ways to get back to a patient-centered healthcare system, the nucleus of which is the patient and doctor — and not the government,” Ryan said. “We believe consumer-driven, market-based reforms do more to alter the cost curve of healthcare inflation.”
If Ryan’s plan is enacted into law, people 55 and younger would see a change from one in which everyone gets the same set of government-paid benefits to one in which the government gives all senior citizens a fixed amount of money. They could use this to purchase private insurance or pay a portion of the cost of enrolling in traditional Medicare. Ryan has not said how much the premium support payment would be. But he would limit the annual growth rate to no more than one-half percent more than the economy’s overall growth rate, even though healthcare costs are rising at a significantly faster pace. Ryan’s plan would also raise the Medicare eligibility age to 67 from 65 by 2034.
“Not so fast,” Democrats warn as partisans from both parties accuse the other side of throwing senior citizens under the bus. “Make no mistake about it — these Republicans don’t believe in Medicare,” Obama campaign senior adviser David Axelrod said. “They want to turn it into a voucher program. And slowly, all the burden is going to shift to seniors themselves. And that is not an answer to entitlement reform.”
Republicans counter that $716 billion in cuts to Medicare are already a part of the Patient Protection and Affordable Care Act (ACA). An online video created by the Republican National Committee features Ryan saying that Democrats “have refused to make difficult decision because they are more worried about their next election than they are about the next generation.” According to Ryan, “We won’t duck the tough issues; we will lead.”
Uwe Reinhardt, a healthcare economist at Princeton University disagrees, saying that rather than motivating insurers to control their costs, the Ryan plan will not benefit seniors. “You’re essentially shoving these guys out on a boat, saying, ‘We’ll give you a push, but if the waves are rough, you’re on your own,” he said. “It would really worry me if I were a middle-class American.”