The Corner

“Support Builds for Premium Support Plan for Medicare”

Last spring, when the House Republicans took the risky and courageous step of lining up behind a serious structural reform of Medicare proposed by Paul Ryan—a reform that would replace the program’s fee-for-service monopoly with a premium-support system to enable some real competition among private insurers—many people thought they had committed political suicide. The Democrats pounced, announcing plans to put that proposed reform at the center of their own 2012 election campaign in an effort to scare seniors away from Republicans. Even many Republicans were wary, and it was far from clear if the party’s presidential candidates would back the idea.


As the Republican primary race has progressed, however, it has become clear that the House Republicans’ decision has had its desired effect: The dire need to reform Medicare and the case for doing so through a premium-support reform have become conservative orthodoxy, and all of the Republican candidates have adopted some version of the idea as their own.


Now, this article in Saturday’s New York Times suggests that far more than that may be afoot, and that even some Democrats are acknowledging that some version of a premium-support reform will be necessary and could well work. Referring to the hearings held by the Supercommittee before it concluded in failure last week, the Times’s Robert Pear notes:

Members of both parties told the panel that Medicare should offer a fixed amount of money to each beneficiary to buy coverage from competing private plans, whose costs and benefits would be tightly regulated by the government.


Republicans have long been enamored of that idea. In the last few weeks, two of the Republican candidates for president, Mitt Romney and Newt Gingrich, have endorsed variations of it.


The idea faces opposition from many Democrats, who say it would shift costs to beneficiaries and eliminate the guarantee of affordable health insurance for older Americans. But some Democrats say that — if carefully designed, with enough protections for beneficiaries — it might work.


The idea is sometimes known as premium support, because Medicare would subsidize premiums charged by private insurers that care for beneficiaries under contract with the government.

At the very least, this news should complicate the Democrats’ efforts to build their 2012 campaigns around a demagogic attack on the Ryan plan, since clearly “some Democrats” seem to have realized that it doesn’t involve pushing elderly people in wheelchairs off of cliffs and in fact might even save Medicare and the federal budget from doom. At most, this news might even mean that the idea could have a chance of getting somewhere if a president who supports it is elected next November.


The Times article goes out of its way to minimize the news it brings. For one thing, it places it in the context of the Supercommittee, treating it as a recent development that some Democratic fiscal hawks like Alice Rivlin like the idea of premium support and don’t think Paul Ryan is the antichrist. But of course, this much is not news. The Bipartisan Policy Center’s debt reduction task force, which Rivlin co-chaired and which included other Democrats, proposed a premium-support plan very similar to Ryan’s earlier this year. And for that matter, Rivlin and Ryan together proposed another version of the idea to the Bowles-Simpson commission (of which they were both members). That information has been available to the New York Times for some time. What’s news is that some Democratic politicians may be listening.


Second, rather than acknowledge that the fact that such reforms are needed is proof that no one seriously expects the supposed Medicare reforms in Obamacare (like the IPAB and its price controls) to work, the Times parrots the line tried out by various defenders of Obamacare in the past year, that Obamacare would actually move the under-65 market to something like a premium-support system, so its logic is the same as a premium-support reform of Medicare. This ignores the fact that Ryan’s Medicare reform would transform Medicare—which is currently a purely government-run single-payer fee-for-service insurer—into at least something of a competitive market among private insurers while Obamacare would transform our existing private market (in which competition is already severely constrained and distorted by a variety of federally imposed flaws and inefficiencies) into an even more heavily regulated and less competitive market, while leaving in place Medicare’s fee-for-service system, which is responsible for so much of the inefficiency in our entire health sector. In other words, Ryan would move the entire sector in the direction of more private competition than exists today while Obamacare would move the entire sector in the direction of less private competition than exists today. The fact that both might use something called premium-support, but in very different parts of the system and for very different purposes, can hardly mask this utterly fundamental difference. 


Third, in an effort to justify the hysterical attacks on the Ryan proposal earlier this year, the article tries to make the versions of premium support that some Democrats now find acceptable seem vastly different from Ryan’s. It points out that Alice Rivlin is now backing a form of premium support that would include an insurance plan that resembles today’s Medicare as one of the options available for seniors to choose in the new system and that (unlike even the plan that Rivlin herself championed as part of the original Bipartisan Policy Center proposal) would set the growth rate of the benefit using competitive bidding among insurers. This idea (which I described a few months ago here) is neither new nor all that different from Ryan’s. In fact, Ryan himself has said he would back both of these elements as completely in line with his vision for reform and, according to Jeb Henserling, the Republican members of the supercommittee proposed this very idea to their Democratic colleagues and were rebuffed.


All that is surely annoying. But if such justifications are necessary to ease the Democrats’ consciences, so be it. The news that even a few of them are coming around to see that a premium-support reform of Medicare is necessary and wise is very welcome news indeed. It certainly doesn’t seem like President Obama is coming to that view. But if a president who does share that view takes over in 2013, it would be very helpful for him to have an even modestly bipartisan coalition to work with in Congress. The Times suggests there might be hope for such a coalition.


If true, this is, among other things, evidence of the extraordinary influence that the Ryan proposal has had on our politics in just a few short months. It is evidence, in other words, that in these times of trouble, political courage in the cause of serious reforms to get us beyond the liberal welfare state can pay off. 

Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.


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