Paul Ryan’s Radical Plan To Reform Medicare not so Radical

by Dan Diamond, California Healthline Contributing Editor
Paul Ryan’s Radical Plan To Reform Medicare not so Radical

While Republicans' plan to transform Medicare into a voucher program is being hailed as groundbreaking, the model has been floated for decades. Here's a look back at the history of Medicare vouchers -- and what makes Ryan's plan different.

“Medicare can be bankrupt in two-and-a-half years … [it] has no demographic amelioration. It does not get better with the passage of time.” — Senate Budget Committee Chair Pete Domenici (R-N.M.), March 1983

“The open-ended, blank-check nature of Medicare’s subsidy mechanism is threatening the solvency of this critical program and creating inexcusable levels of waste in the system.” — House Budget Committee Chair Paul Ryan (R-Wis.),

April 2011

It’s springtime in Washington, D.C., and what was old is new again.

The nation is staggering out of a recession, and lawmakers are keying on federal spending and skyrocketing health costs. As usual, Medicare’s projected growth is in the crosshairs.

But there’s a new wrinkle: unprecedented entitlement reforms are officially on the table.

The Capitol is buzzing over Republicans’ fiscal year 2012 federal budget proposal, which cuts $6.2 trillion in federal spending, transforms Medicare and Medicaid — oh, and repeals the federal health reform law to boot.

Authored by the GOP’s Ryan, the plan already has sparked a public outcry, if winning plaudits from many conservative and some liberal commentators, and there’s no clear expectation that it will become law in a divided Congress.

Ryan’s proposal underscores several realities. First, it opens a new front of resistance to the Patient Protection and Affordable Care Act. Rather than rely on stagecraft, Republicans now have a tangible policy alternative that reframes the debate over Democrats’ health reforms.

Second, the plan reveals how in health policy circles, the radical proposal of the moment was yesterday’s idea de rigueur — even for one of President Obama’s senior advisers.

Ryan’s voucher proposal “was the health equivalent of déjà vu when I read it,” according to Forbes’ David Whelan.

History of Vouchers

Whelan may be in good company.

The very first issue of Health Affairs in 1981 reviewed the debate to offer vouchers for Medicare beneficiaries. The proposal was among five tactics considered by HHS that year to slow what was seen as unbearable health cost growth for the then 16-year-old program.

In the past three decades, the idea has flickered in and out of popularity, and even bounced between political parties.

Kaiser Health News
notes that President Clinton’s National Bipartisan Commission on the Future of Medicare floated a voucher model in the mid-1990s but never advanced the recommendation; participating legislators also failed to push a stand-alone voucher bill. As a presidential candidate in 2000, George W. Bush supported a privatization approach for Medicare that would have encouraged vouchers for seniors.

Mainstream politicians have increasingly avoided the voucher model because it’s seen as politically damaging. Kaiser Health News notes that seven out of 10 Medicare beneficiaries currently oppose the idea of vouchers for the program. Of late, Medicare vouchers have been the province of think tanks and fringe presidential candidates like Democrat Mike Gravel.

The closest that vouchers came to this White House was when Ezekiel Emanuel — a physician and bioethics expert — became one of Obama’s top health policy advisers ahead of the reform debate. Emanuel, who left the White House last year, in 2007 advocated replacing the current health care system with a plan that would allow people to buy health coverage with vouchers.

What Makes Ryan’s Plan So Different?

Ryan’s proposal draws from these previous models. What makes his plan notably different is the timing — in the wake of sweeping health reforms and in the midst of a debate over deficit spending — and that he’s put it forward at all.

Among other health reforms, Ryan’s Medicare overhaul would convert the fee-for-service program into a system that would annually allot fixed subsidies to beneficiaries. These individuals would then shop for private health coverage in a new Medicare exchange market. Ryan noted that the plan would shift more costs to beneficiaries, but said that high-income elderly residents would pay the most.

Ryan argues that these subsidies aren’t vouchers but “premium support” — a meaningless distinction, according to some analysts. The terms can be used “interchangeably,” notes John Goodman, president of the conservative National Center for Policy Analysis. Premium support “just means that the government limits the amount of money that it puts up, and people have to add to it if market prices are higher.”

A Congressional Budget Office report released on Tuesday found that while Ryan’s proposal would slice federal health costs — with mandatory health spending falling to 6% of GDP by 2030 — most beneficiaries would pay more for health care than under their current Medicare coverage.

The proposal has sparked widespread resistance from health care stakeholders. An American Cancer Society spokesperson warned that an “ill-defined voucher program with limited benefits could have devastating consequences for cancer patients.”

But some policy experts note the model may have promise. Economist Austin Frakt — who previously has argued against Medicare vouchers, citing Medicare Advantage as a failed attempt to use privatization to control spending — contends that vouchers could succeed if the government allows private insurers to engage in competitive bidding to lower costs. Similarly, economist Tyler Cowen argued that Ryan’s model may work better than Medicare’s new payment advisory board to allow individuals some choice while suppressing cost growth.

For his efforts, Ryan has burnished his reputation as the “most courageous man in Washington,” argued Slate‘s Dave Weigel. Few lawmakers disagree that the plan addresses core, necessary policy problems. But Ryan’s also created a “predicament” for the GOP, as even House representatives who have pledged to curb federal spending fear that backing the proposal exposes them to political attacks.

That dynamic is the driving factor behind why so many legislators have considered Medicare vouchers — but so few actually put them on Congress’ docket.

Looking Ahead

Ryan’s proposal may not “move the goalposts,” to invoke the common Washington phrase, but it does put a different team on the field.

Or as New York Times‘ columnist David Brooks wrote, the proposal “immediately reframe[s] the domestic policy debate.”

Even if the plan doesn’t advance, Republicans can use it to further debate the merits of conservative health reforms, rather than limit their health care legislation to attacks on the Democratic-backed PPACA. At the same time, Democrats can target senior voters for support and recast their own reforms as better propping up Medicare.

Ryan’s proposals are expected to ultimately pass the Budget Committee and House in coming weeks, but die in the Senate. Meanwhile, Democrats say they will soon offer their own 2012 budget plan. Ryan himself seemed aware that his health care proposals “have little chance of becoming law,” CQ HealthBeat notes.

But the Washington Post’s Ezra Klein noted that Ryan’s proposal may result in one accomplishment: “persuad[ing] Democrats — and perhaps some Republicans — to adopt something pretty close to the Fiscal Commission’s recommendations” on curbing federal spending.

While Washington debates the merits of Medicare vouchers, here’s a look at what else is happening in health reform.

On the Hill

Rolling Out the Reform Law

In the Courts

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