Articles

By James Pethokoukis

Rep. Paul Ryan and Sen. Ron Wyden have co-authored a new Medicare reform plan. It’s based around the idea of a “premium support” system where seniors, with federal financial help, could choose from a menu of private plans, each offering Medicare equivalent benefits, and with providers competing for their business. I chatted with Ryan this afternoon about the plan:

Would this plan fundamentally change America’s fiscal trajectory for the better?

Yes, because we are stopping the open-ended, defined-benefit system. We are adding the traditional fee-for-service system within the premium-support exchange to be a choice that seniors could choose from. The monetary commitment by Medicare is no different under this kind of system with this additional option than with the one we proposed in the Path to Prosperity. … Some want to keep Medicare with its open-ended commitment and then have a premium-support system grafted onto the side of it. That doesn’t work. That’s doesn’t reform at all.  … Saying that I’m going to have a voluntary premium-support system aside the current system doesn’t reform the current system, and there’s no way it could compete. With this, everything is inside the premium support system. … And the plans — Medicare fee-for-service, Blue Cross, Aetna, Humana — all compete against each other for the patient’s business. … Seniors get their premium support and they choose among plans on a list on an equal playing field to one another.

The plan has a nominal GDP+1 percent cap on spending just in case the injection of market competition doesn’t reduce healthcare inflation. But you think your reforms will work well enough to avoid that cap?  

Absolutely. I have no doubt in my mind about that whatsoever. Look at Medicare Part D. But just in case, because of [the Congressional Budget Office] and because of the credit markets, you have to put some kind of cap in there to show the credit markets and CBO that the liability of the federal government is being wiped out by “x’ amount.

Some have also said that addition of the Medicare option is a major concession by you.

We’ve always said we’re going to grandfather people into Medicare. Traditional Medicare is going to be around for a long, long time. So the idea of allowing a traditional fee-for-service option within the premium support structure is hardly a change or a stretch.

Why wait until 2022 to have the reforms kick in? Why not start them in, say, 2014 and include all seniors immediately?

That’s something Congress is going to have to grapple with. If the credit markets are turning on us, then we’re going to have conversations like that, I think. But the point is that we can afford this now … we still have time to reform these programs on our own terms and timeline and keep the commitments that were made to the current generation of seniors. But if we don’t tackle the situation soon, that won’t be the case. … If we kick the can down the road, then all bets are off, like they are in Europe.

The White House has already slammed the new plan.

That’s not surprising, and I would simply say that the biggest threat to Medicare is the status quo. And the status quo is doing bad. Obamacare is going to change Medicare as we know it.

How is your plan different than Obamacare, which also has competition between government subsidized plans?

People who are under 65 are in a private market now, and Obamacare moves them to a public system. People over 65 today, a different population of Americans with different demographic issues, are in a public system right now, and we are moving them to more of a private system. So the people we are talking about are different — healthy people versus not healthy people. And the flow of reforms is the opposite … in our case from a state-run monopoly system to more of a private-market system.

And what I would simply say is that for the healthcare system to function well, you need to have the most free-market, individual-based system for the younger healthy crowd — to drive reform and get at the root causes of health inflation — to make us be able to stretch our healthcare dollars farther in Medicare. … If you move the population under 65 away from a market-based system toward a government-run system, then you are doing much more damage to the healthcare system, and you are going away from what you need to do to get at the root causes of healthcare inflation and you are encouraging a rationing, price-control type system.

Do you think your approach has momentum?

We are basically showing that this kind of market-based, patient-centered, premium-support reform is becoming more mainstream and is becoming the consensus. We’re also getting a consensus on tax reform — lower the rates and broaden the base. Now we’re getting a consensus on Medicare reform — run the money through the person in a premium-support way rather than through the government in a government monopoly way. That’s good. And the fact that we’re getting a Democrat to agree to this — we’ve also had Alice Rivlin and Erskine Bowles — shows that our ideas are becoming more mainstream. And who is on the outside looking in? I would argue that it’s the president. He’s not for lowering rates and broadening the base. He’s for broadening the base and raising tax rates. He’s for IPAB for Medicare, and what we’re showing here is that he’s increasingly outside the mainstream on these issues.

http://blog.american.com/2011/12/my-qa-with-paul-ryan-on-his-new-medicare-reform-plan/