While the Republican presidential race continues to flirt with catastrophe, Rep. Paul Ryan continues to advance the ball in some remarkable ways on the key conservative policy reforms of our time. This evening, the
New York Times is
reporting that Ryan has managed to get Democratic senator Ron Wyden of Oregon to sign on to a premium-support reform of Medicare.
Apparently, Ryan and Wyden are jointly proposing a reform essentially identical to the one that the Republican members of the supercommittee proposed to their Democratic colleagues (to no avail), and very much along the lines of the one House Republicans proposed in their budget this spring. It would leave current seniors and people who are now over 55 untouched, but for all younger Americans would transform the Medicare system into a premium-support system, in which Medicare would offer a fixed amount per recipient each year and individuals could use that amount to choose from a menu of private insurance options as well as one public fee-for-service option.
The latter would be a fee-for-service plan as an option
within the capped premium-support system and so competing with the private insurers, not today’s open-ended fee-for-service Medicare as an
alternative to a premium-support system (an idea that Newt Gingrich
has proposed, and which alas would be very unlikely to help alleviate Medicare’s woeful inefficiency or the government’s fiscal problems). This far better Ryan-Wyden idea seems to be roughly the same as the one proposed by Mitt Romney last month, and advocated by champions of premium-support (including Ryan, but until today not Wyden) since at least the Breaux-Thomas commission of the late 1990s.
Moreover, under the Ryan-Wyden proposal, as I understand it, the value of the premium-support payment would be set by competitive bidding. The government would define the minimum insurance benefit it would seek to provide to all covered seniors, based on the level of coverage Medicare now provides, and then there would be a process each year in which the competing insurers would offer bids proposing to provide that (or a greater) benefit at the lowest cost they could. The level of the premium-support payment would be set at the level of the second-lowest of the bids. Seniors would then be able to apply that amount toward the purchase of any of the plans on offer. Thus, there would be at least one option that would cost less than the premium-support benefit, and seniors choosing that option would get the difference back; there would be at least one plan that cost the same as the benefit, so that seniors could obtain it with only the same out-of-pocket costs they have today; and there would be other plans that cost more (perhaps because they offered more, or because they failed to find ways to drive greater efficiency in their networks of doctors and hospitals) and for which seniors would pay an additional premium if they chose. Poorer and sicker seniors would get additional help, while the wealthiest seniors would get less. (I laid out how such an approach would work and why I think it’s a very appealing idea in the
Weekly Standard a few months ago,
here).
To help CBO score such a proposal, and to make sure the government’s maximum costs are reasonably predictable, the competitive bidding process would also be backed up by a maximum growth index (of nominal GDP plus 1 percent per year)—an idea suggested to the supercommittee this fall by Democratic budget guru Alice Rivlin and former Republican senator Pete Domenici as a revision of their original premium-support proposal from earlier this year, and
apparently proposed by the Republicans on the supercommittee to their Democratic counterparts, who rejected it.
That index is made necessary by the scoring conventions of this kind of debate, but the key to this reform is the competitive bidding process, which would allow the premium-support benefit to grow exactly as slowly as possible while providing a comprehensive insurance benefit, since the growth rate would be determined by a market process rather than a pre-set formula. Information about costs and prices would flow from those who had more direct on-the-ground knowledge (insurers, doctors, and hospitals) to those with less (Medicare administrators) rather than the other way around, as now happens. Insurers and providers would have a strong incentive to innovate, to improve efficiency, and to cut costs while offering high-quality services to consumers, and the broader health care system would be liberated from the stranglehold of the economically obtuse fee-for-service system.
In a sense, competitive bidding is an even more market-based reform than the original Ryan proposal; it’s a way for those of us who believe that markets can help control health-care costs to show confidence in our expectations of competition. If market forces do drive costs down, as conservative health-care experts expect, the reform would save an enormous amount of money, leaving both our budget and our health-care system in vastly better shape. If market forces do not drive costs down sufficiently, then we would have to find another way to address our entitlement costs. We would be back where we started, which is where most Democrats want to end up anyway. (The index alone wouldn’t do all that much in that case; as we’ve learned over and over, Congress won’t let costs for seniors actually go up much, the only way to cut costs for the system as a whole is to use market forces to drive efficiency without undermining quality and access.) Whether the reform succeeds or fails, seniors would have a guaranteed benefit and essentially no added financial risk—which of course also reduces the political risk for elected officials willing to back such an idea.
As the Times puts it, “the proposal is sure to come under fire from beneficiaries and Democrats.” I don’t know about beneficiaries, but it will surely come under fierce fire from many Democrats, as it badly disrupts their plans for 2012. Wyden’s support for this proposal is the largest crack yet in the Democratic wall of demagoguery on Medicare, and will certainly complicate the Democrats’ efforts to paint premium-support—which has basically become the consensus conservative position on Medicare reform since the Ryan budget was introduced this spring—as a crazy right-wing assault on the elderly. In fact, premium-support is more or less the only plausible way to save Medicare from fiscal collapse, to save the federal government from a debt crisis, and to free the health sector from the crushing burden of the Medicare fee-for-service system, allowing for far greater efficiency and innovation and restraining the growth of costs.
As the
Times reported a few weeks ago, some congressional Democrats have quietly come to the conclusion that such a reform could work and should be tried, even as their leaders have continued to rail against it. But Wyden is the first Democratic member of Congress to back it publicly, and he has done so by joining hands with the chief architect of the Republican embrace of premium-support, Paul Ryan. Amazing.
Some key details are left rather vague in what Ryan and Wyden have so far had to say about their proposal—perhaps especially the restraints on the fee-for-service option necessary to have it compete on a level plain with the private insurers. It would, for instance, need to be divided into regional insurers, and to be entirely self-funded through premium payments. Paul Ryan has often made clear that he understands what this would require, down to the weeds, but it will be interesting to see how specific he and Wyden will want to get.
In any case, this joint venture will be of much help in combating the Democrats’ scare tactics on Medicare. It is a great sign for the potential of real Medicare reform, and another extraordinary feat in a year of great achievements for Ryan. He has more or less singlehandedly moved conservatives to exactly the right place on entitlement reform, and now he seems to be starting to build a broader coalition for it too.
"It would leave current seniors and people who are now over 55 untouched, but for all younger Americans would transform the Medicare system into a premium-support system,"
Nope. Non-starter. The public does not want such a plan, this was made perfectly clear when Ryan's budget flopped earlier this year.
I don't think anyone is fooled into thinking this is any different than the 'private account' BS that Bush tried back in his day; just another way to destroy a program that the GOP hates.
"Some key details are left rather vague"
You don't say.
Reply to this commentLinkReport AbuseRyan's budget flopped exactly when?
Reply to this commentLinkReport AbuseWhen it was introduced. Where were you?
External Link
It went nowhere at the time and will continue to go nowhere, because the public simply doesn't believe that this isn't a plan to destroy medicare. And why would they believe any differently, given the rhetoric that has been applied to that program by Conservatives for the last 40 years?
Reply to this commentLinkReport AbuseLast I heard, the House passed it, and Reid has buried it. Since it's been close to 1,000 days since the Senate has produced a budget, that's hardly a surprise.
Am I mistaken?
Reply to this commentLinkReport AbuseWhy? Why even bother writing about subjects you know nothing about? I will NEVER understand the tendency that posters here have to comment on issues that they KNOW they don't understand.
Your assertion that Reid 'buried' Ryan's plan is false. On the contrary; it was voted on in the Senate"
External Link
It was rejected in the Senate 40-57, with 5 GOP senators voting against it.
Please, if you don't know what you are talking about, either look it up before posting, or just don't comment at all.
Reply to this commentLinkReport AbuseThanks. I stand corrected on the disposition in the Senate.
Reply to this commentLinkReport AbuseYou mad, bro?
Sheesh. "Polite disagreement." Try it some time.
Reply to this commentLinkReport AbuseTrying to wrap my head around how to disagree with somebody who doesn't know simple facts. Shouldn't a disagreement be based on a subjective analysis and assessment of facts that are known or available to all? How can a disagreement be based on whether or not the Senate voted on a bill? To politely disagree with a careless assumption of a known fact is a lot to ask for these days.
Reply to this commentLinkReport AbuseOf course, Fish decides to avoid the real elephant in the room. The President's budget received 0 votes. So, it would appear that the reform process is doing far better when actually moved for a vote.
Reply to this commentLinkReport AbuseFreedom to spout guesses and assumptions is the new norm on the net. I've actually heard it encouraged on right-wing talk radio. "Just do it...get out there and make mistakes...don't be afraid...that's how we learn." Scary stuff in the hands of those new to political thought and research.
Reply to this commentLinkReport AbuseI should point out that President Obama's was voted down 97-0 in the Senate.
Reply to this commentLinkReport AbuseThe fact that Reid refused to allow the bill to be voted on is proof that the public doesn't want it.
Man, you are easily convinced.
Reply to this commentLinkReport AbuseReid DIDN'T keep the bill from being voted on, he specifically BROUGHT the bill up for a vote in the Senate. It failed. Did you even read the link I posted?
Mark, you are a fool to spout stuff like this without checking on it first. 30 seconds of google would have prevented your error. But you can't be bothered, right?
Reply to this commentLinkReport AbuseIt's getting close to the end of the year, I needed make my first error so that you couldn't accuse me of trying to be perfect.
Reply to this commentLinkReport AbuseOkay, great response, it actually made me laugh, kudos.
Reply to this commentLinkReport AbuseWoah boy. Bipartisanship?
Reply to this commentLinkReport Abuse"restraints on the fee-for-service option necessary to have it compete on a level plain with the private insurers. It would, for instance, need to be divided into regional insurers, and to be entirely self-funded through premium payments. "'
"On a level plain"? Insurance is the only industry Congress has specifically exempted from federal antitrust laws. Because of the inevitable monopoly pricing, the big benefit of a public option plan is to clobber private insurers on their return on equity margins. As for the "entirely self-funded through premium payments", upwards of 75% of Medicare Parts B and D premiums comes out of general revenue and 100% of Part A premiums (if that's the right word) come out of payroll taxes. There's nothing self-funded about it.
Reply to this commentLinkReport AbuseI suspect what Wyden is doing (he's the sharpest Democrat on the Senate Finance Committee) is looking ahead to the individual mandate failing in the Supreme Court.
Wyden's goal (which I would entirely support), is to streamline and retool Medicare now so it can be quickly adapted to-- after the demise of Obamacare-- to provide universal coverage. To that end, I wish Ryan and Wyden the best of luck.
Sorry to see that Ryan is working with Wyden. Ron Wyden is truly evil - one of the most rabid pro-abortionists in congress.
Reply to this commentLinkReport AbuseFirst of all, I want to give Yuval Levin credit for one point.
Namely, for mentioning the possibility of failure. When new ideas are tried, there is the potential for failure. I think Mr. Levin deserved credit for being straightforward about this. The can be no progress unless you take risks that involve some risk of failure.
That said, I think this plan is an incoherent and self-contradictory experiment. The prices of the plan are going to be set by competitive bidding. Yet, there also has to be an index that caps the maximum price. Levin says adoption of this plan is a chance to demonstrate their blind faith in markets. Or in his words, "to show confidence in our expectations of competition."
If conservatives really want to show "confidence" in markets, then the competitive bidding process should be able to stand on its own.
The risk of failure that comes with the "cap" is that the available coverage just gets worse and worse overtime as the benefit amount fails to keep up with medical inflation. This would impact lower income seniors who do not have the resources to supplement premium support.
If conservatives really had "faith" in the market, they wouldn't be proposing a plan that relies on an arbitrary bureaucratic index and would just let competitive bidding and the free market determine prices. It appears that as much as they preach, conservatives actually are more suspicious of market processes than they appear.
What this plan does is shift risk that if conservative "faith" in markets ends up being misplaced, lower income seniors who find themselves priced out of the market will be the ones to pay the prices for conservatives faith. A pure competitive bidding process, on the other hand, means that the government rather than low income seniors are on the hook if this plan does not control medical inflation as promised.
I think what this plan reveals is a fundamental lack of confidence in market processes on the part of conservatives. Why do they need to shift the risk of failure to low income seniors rather than taxpayers if they are so confident that competitive bidding will control medical inflation?
Hey conservatives, how about putting your money where your mouth is and proposing a plan that does not shift the risk of failure using an index?
Reply to this commentLinkReport AbuseReplace "seniors" with "auto companies" and you'll appreciate the "moral hazard" aspect of the plan, without which NO market reform can work.
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