Paul Ryan's Medicare Compromise

When Rep. Paul Ryan, the Chairman of the House Budget Committee, drew up his big-picture budget plan earlier this year, he compromised with himself. The plan offered a kinder, gentler version of the Medicare reforms he'd been pitching for years: premium support rather than vouchers, government-regulated insurance exchanges rather than an unencumbered marketplace.

Now, Ryan has compromised further, this time with Democratic Sen. Ron Wyden. In a co-signed op-ed for The Wall Street Journal, Ryan and Wyden jointly propose an exchange-regulated, premium-support overhaul of the seniors' health program that pits private plans against a government-run Medicare plan which seniors would be able to buy into using their premium support dollars. As with most such reforms, the major changes wouldn't kick in for ten years, and anyone 55 or older would face no changes. Here's the gist, as they describe it:

Starting in 2022, our plan would introduce a "premium support" system that would empower Medicare beneficiaries to choose either a traditional Medicare plan or a Medicare-approved private plan. Unlike Medicare Advantage, these private plans would compete head-to-head with traditional, fee-for-service Medicare on a federally regulated Medicare exchange.

But the option they describe as "traditional" Medicare wouldn't quite be Medicare as-we-know-it. Seniors would have to buy in using capped premium support payments (similar to vouchers, but with the federal government serving as a go-between for seniors and insurers). If "traditional" Medicare couldn't hold down costs and premiums, seniors might have to spend some of their own money in order to stay in the program. The idea is to create savings through competition, on the assumption that seniors will pick plans that represent the best value for their own health needs. And, at least in theory, that's how this plan restrains the growth of Medicare: The value of the premium support payments is capped at GDP plus 1 percent, meaning that spending on the program grows only a little faster than the economy.

The political advantages of a plan like this should be obvious: Leaving a government-run Medicare option in the mix insulates the proposal from the sort of you're-killing-granny! criticism that Ryan's earlier reform plans drew. Cosponsoring the plan with a popular, health-policy focused Democrat (Wyden offered a health policy overhaul during the late Bush years that Obama mostly ignored) further insulates the plan from partisan criticism, and may even help make it politically plausible—which even the most compromised version of Ryan's plan never was—at some point in the future. More importantly, it isolates President Obama, who can be accused of ignoring a genuine bipartisan reform option if he doesn't support the joint proposal. 

But there are political complications as well, for both Republicans and Democrats. The Ryan-Wyden plan looks a lot like ObamaCare with the addition of a public option. That makes it somewhat harder for Republicans to oppose last year's health care overhaul, but it also makes it more difficult for Democrats to oppose, given that they passed a law essentially doing for the middle class what Ryan-Wyden would do for seniors.

Now, this was true of the Ryan plan as well, but it was easy to ignore because Ryan didn't have any Democratic cosponsors. I still think that the GOP has the better side of the argument: The key difference is not what the plans would transition to, but what they're transitioning from: ObamaCare created a brand new health entitlement; the Ryan-Wyden plan reforms an existing, clearly unsustainable one.

Make no mistake: This is a compromise for Ryan, who opposed the inclusion of a government-run public option during the ObamaCare debates. And yet that's essentially what he's talking about when he refers to keeping a traditional fee-for-service Medicare option on the menu. But in conversations with people close to Ryan, it's been made clear to me that his priority is ending the Medicare's unlimited commitment and putting it, and in turn the rest of the federal budget, on a more sustainable path. He cares about the nuts and bolts of the policy mechanics, but he cares even more about crafting legislation that actually has a chance of making it through Congress; good plans that won't pass aren't very good plans. His job, as he sees it, is to be positive, a booster for change in the right direction, even if that means that means signing on to a plan that's less than ideal. He doesn't want to let the perfect be the enemy of the good, or even of the very slightly better.

This seems entirely reasonable to me, given Ryan's leadership position in the GOP firmament. And the Wyden compromise, built around premium support and competition, would be an improvement over the slow-motion budgetary disaster that is the Medicare status quo. But this watered-down reform plan's potential flaws and failings are also significant, and not to be overlooked.

As with the Ryan budget (and ObamaCare, for that matter) the hoped-for cost-savings may be unrealistic. So is the hope that the government can spur cost-saving competition while leaving a government-run Medicare option in the mix. That's because it's hard to create a level playing field between private and public insurance: Look at what's happened in Florida, where a public property insurance program knocked out private competitors using artificially low rates essentially subsidized by taxpayers. The program is now woefully underfunded, and when a big insurance tab eventually comes due, the state's taxpayers will have to foot the bill through increased taxes or spending cuts. Medicare, meanwhile, already hides its administrative costs and inefficiencies within the unmappable jungle of federal spending; what guarantee is there that it wouldn't do the same under this plan?

More fundamentally, the Ryan-Wyden compromise seems like an effort to work around the major difficulty rather than solve it: If federally run "traditional" Medicare is the problem—and it is—then why propose an overhaul that promises to keep it in place? That already tough fight may have just become more difficult thanks to this compromise.

Is this a step toward a better Medicare system than the one we currently have? Perhaps. But it may also be a step—or two—toward a too-easy, politically driven compromise that fails to fix the real problem.

Read "Paul Ryan: Radical or Sellout?" my March, 2010 feature on the man behind the plan.