December 15, 2011


A Bipartisan Way Forward on Medicare: Allowing private plans to compete with traditional Medicare will help lower costs and spur innovation. (RON WYDEN AND PAUL RYAN, 12/15/11, WSJ)

Under our plan, Americans currently over the age of 55 would see no changes to the Medicare system. For future retirees, 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.

This reformed Medicare program would include the toughest consumer protections in American government.

Low-income seniors who qualify for both Medicare and Medicaid would continue to have Medicaid pay for their out-of-pocket expenses. Other lower-income seniors would receive fully funded savings accounts to help offset any increased out-of-pocket costs, while wealthier seniors would receive less help.

All health plans that participate in the Medicare exchange would be required to offer benefits that are at least as comprehensive as those covered by traditional Medicare, and participating plans would be forbidden to charge discriminatory premiums and would be required to cover everyone regardless of age, gender or health status.

The direct federal contribution to health plans that cover the sickest seniors would be higher than it would be for plans that cover healthier seniors, thus ensuring that more help goes to seniors with greater health-care needs.

Our plan wouldn't merely ensure that American retirees have more health-care options than they have today. By allowing private plans to compete directly with traditional Medicare, our plan would also spur a wave of innovation to lower health-care costs and provide higher-quality health care.

The reason is simple: In order to offer better benefits and lower costs than traditional Medicare, private plans will have to develop better delivery models and design better ways to care for patients with chronic illnesses. Imagine health plans tailored to help patients manage diabetes, prevent heart disease, or combat high blood pressure.

A Medicare reform plan that just might work (Howard Gleckman, December 15, 2011, CS Monitor)

Ryan-Wyden would work like this:

    Those 65 and older would receive a subsidy to purchase insurance. They could either buy traditional Medicare or a private policy that met government benefit and marketing standards.
    Private insurers would have to offer plans at least as good as fee-for-service Medicare and be barred from denying coverage based on pre-existing conditions.
    The subsidy would be tied to the cost of the second-lowest cost private plan or traditional Medicare. This would be relatively generous.
    Seniors would buy coverage through an insurance market that would very likely mimic the exchanges in the 2010 health law.
    For the first time, the proposal would cap Medicare cost growth. Thus, instead of continuing Medicare as an open-ended entitlement whose costs automatically rise with health expenditures, the program would impose a global budget on the program. In theory, at least, the combination of market competition and this overall budget would slow the growth of Medicare costs. This could be the most contentious element of the entire plan.
    The plan would provide additional subsidies for low-income seniors but increase premiums for those with high-incomes. It would also offer a new catastrophic benefit.
    It would apply only to those who turn 65 in 2022 or later.

Another Step Toward Medicare Reform (Yuval Levin, December 14, 2011, National Review)

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.

Everyone knows what the eventual reforms of the Welfare State look like, it's just a matter of facing your own party after compromising with the other.

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Posted by at December 15, 2011 9:02 PM

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