The Medicare Debate
Is the program the solution, or the problem?

Democratic senator Ron Wyden and Republican House Budget Committee chairman Paul Ryan


James C. Capretta

There are many reasons to be grateful for the introduction of the Medicare “premium support” plan by Democratic senator Ron Wyden and Republican House Budget Committee chairman Paul Ryan.

In some respects, it represents an improvement over the design of previous versions of premium support. Whereas the original Ryan plan offered seniors a subsidy based on a predetermined formula, the Wyden-Ryan plan relies on competitive bidding for setting the government’s contribution rate. Competitive bidding has the potential to cut costs even more than a predetermined index, because an index tends to lock in today’s wasteful spending. Of course, Wyden-Ryan also very usefully shook up the political debate over premium support, making it much more difficult for Democrats to demonize the concept.

But perhaps the most useful byproduct of the Wyden-Ryan plan has been the clarifying effect it has had on the debate over how to slow the rise of health-care costs.

For some time, it has been easy to get confused over where Obamacare’s apologists actually stand on that question. When it has been useful for them, Obamacare’s apologists have sometimes left the impression that they aren’t averse to competition and choice in health care, and they have pointed to the state-based “exchanges” in Obamacare as evidence of their open-mindedness to a form of competition for the under-65 population. But at other times, their distrust of competition has been on display: They have signaled on numerous occasions that they plan to use the exchanges for regulatory control, not competition. For instance, they have threatened to bar some insurers from participating in the exchanges based on any number of subjective judgments from federal and state regulators.

The reason they sent mixed signals in this regard is that they wanted to get the legislation through Congress, and they concluded, perhaps accurately, that feigned support for competition might help them get the needed votes. Also, for some time, their real plan for cost cutting has been based on extending Medicare’s regulatory reach even further into the health system.

The consistent opposition of most Democrats to premium support is yet more evidence that they aren’t really for competition at all, and never have been. Ever since the news began to spread that Senator Wyden was joining forces with Representative Ryan, liberal commentators of all stripes have denounced the plan in the same apocalyptic terms that the president used to attack the Ryan version of premium support last April. The reaction has been fast and furious for a reason: Wyden-Ryan is the antithesis of their vision for American health care. Indeed, as the debate over the past several weeks has demonstrated, the liberal vision for American health care is embodied in traditional Medicare. They don’t want to move Medicare away from today’s uber-regulatory model. Quite the contrary. They want to drag the rest of American health care toward the way Medicare is micromanaged today.

But are they right? Can we fix American health care by applying Medicare-style regulation to the rest of the health-care sector? Or is Medicare actually the source of today’s dysfunction, and most especially rapidly rising costs?

Dr. Donald Berwick, who recently left his position as administrator of the Centers for Medicare and Medicaid Services (CMS), answered that question this way in a recent interview:

I don’t think Medicare is broken. I don’t think Medicaid is broken. They’re very important social programs of good intent that are accomplishing largely what they intend to accomplish. Health care is broken. The delivery system isn’t working. That’s the problem.

We set up a delivery system which is fragmented, unsafe, not sufficiently patient-centered, full of waste, unreliable, despite . . . great efforts of the work force. We built it wrong. It isn’t built for modern times.

Medicare doesn’t need fixing. Health care needs fixing.