Where the Ryan-Wyden Medicare Plan Leaves the Entitlement Debate

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The Medicare reform plan released Thursday by GOP budget prophet Paul Ryan and wonky Democratic Senator Ron Wyden is a rare hybrid strain. Politically, it’s the result of a collaboration between two men with very different ideological inclinations. On the policy, it maps out a kind of DMZ for the entitlement debate: an expansion of subsidized private health insurance as an alternative to government-paid care–basically a scaled back version of the voucher system Ryan proposed in his “Path to Prosperity”—while maintaining traditional Medicare as an option for seniors and preserving the program’s “guarantee” that the social safety net will remain in tact.

As Joe points out, this isn’t an insignificant political moment. The Medicare plan Ryan released in the spring became one of the central struts of his party’s policy platform. Every presidential candidate pays it homage and when one, Newt Gingrich, dismissed it as “right-wing social engineering,” Republican retribution was swift and fierce. (He’s singing a different tune now.) Ryan has now put his stamp of approval on a much gentler plan alongside a Democrat whose partnerships haven’t always ended happily. TARP may have been the biggest albatross around ousted Utah Senator Bob Bennett’s neck, but his collaboration with Wyden on a compromise health reform proposal in the run-up to Obama’s overhaul was not forgotten by the Tea Party activists who claimed Bennett’s scalp in the 2010 primaries. That seems an unlikely fate for the revered Ryan, and despite some conservative reservations, his role could make future bipartisan collaborations easier.

Wyden, meanwhile, has slightly blunted one of the sharpest knives in the Democratic political arsenal for 2012. In the wake of Ryan’s plan, Democrats ran a dogged campaign to cast the GOP as the party of entitlement cuts, even swinging a hotly contested special congressional election in New York with TV ads tying the Republican candidate to Ryan and his plan. Democrats are eager to cast themselves as champions and protectors of the social safety net in 2012, while continuing to bludgeon Republican candidates on Medicare. Wyden’s support for an expansion of privately-purchased insurance complicates that message. And the White House has already come out against it. “We are concerned that Wyden-Ryan, like Congressman Ryan’s earlier proposal, would undermine, rather than strengthen, Medicare,” White House Communications Director Dan Pfeiffer said. “At the end of the day, this plan would end Medicare as we know it for millions of seniors. Wyden-Ryan is the wrong way to reform Medicare.”

Just about every discussion of health policy begins with cost–it’s going up, and fast. That goes doubly for discussion of Medicare, which is one of the major engines of projected long-term budget deficits. The ultimate goal of reform is to lower the cost of care for whoever is purchasing it or, barring that, shift some of those costs away from the government. The biggest changes in Ryan’s original plan concerned the latter. It achieved cost-shifting by proposing to pay seniors fixed subsidies that would grow at a rate slower than that of health care cost inflation; overtime, seniors would take on more financial responsibility for their own care. The joint Ryan-Wyden plan doesn’t do that. The word “guarantee” is everywhere in the proposal and Wyden swears a growing cost burden will never fall on seniors in need.

Instead, it seeks to lower the cost of care by relying on private sector innovations and competition among private health insurance plans. But as the deeply knowledgeable Jonathan Cohn explains, there’s no real evidence that these things produce significant cost savings. Medicare, despite its ballooning price tag, achieves some of the cheapest care in America by virtue of being absolutely enormous–few health care providers can afford not to do business with it–and dictating prices. There are other potential pitfalls: healthy seniors might flood into cheap private insurance leaving Medicare unsustainably hobbled with the members who are most expensive to treat.

If savings don’t materialize by 2023, the Ryan-Wyden plan would cap the growth of Medicare spending at GDP plus 1% and inflation. But here’s the rub. Where would the extra costs fall? “If costs go up, Congress has to do its job, figure out why costs are going up, and Congress can cut payments to providers, to drug companies, to those who are responsible,” Wyden told Bloomberg. Figuring out why costs are going up and how to stop it without shifting costs is the whole problem in the first place.