This morning, House Budget committee chairman Rep. Paul Ryan, R-Wis., and Sen. Ron Wyden, D-Ore., formally released a bombshell in Washington – a bipartisan Medicare proposal that could turn out to be the biggest news story of the year. Not only will it have an immediate impact on the Republican primary race and reshuffle the deck for the 2012 elections, but it could represent the future basis for reforming the program that’s the primary driver of the nation’s debt crisis.
The blueprint, which the lawmakers described in a joint Wall Street Journal op-ed and outlined further in a pamphlet, represents a modified version of the House budget proposal that Ryan unveiled this April. That means that a liberal Democrat is now on record endorsing Ryan’s basic model for transitioning Medicare for those under 55 into system in which individuals are given subsidies, called premium supports, to choose among competing health insurance plans. But in a major concession that is likely to rattle conservatives – for good reason, in my view – Ryan has agreed to keep traditional Medicare as a permanent option for seniors. And in case you don’t understand quite how permanent, Wyden wanted to reassure liberals at a joint event this morning hosted by the Bipartisan Policy Center.
“What this bill does is it embeds for all time a program that progressives have felt very strongly about, and that is traditional Medicare will always be part of this program,” Wyden said. “Not something that will be shrouded in ambiguity. It will be permanently there. That, of course, is important for progressive folks.”
Wyden and Ryan said that no actual legislation would be written until after the 2012 election, but they thought it was necessary to get the ball rolling and show that there is a path toward a bipartisan solution.
Politically, this development places Newt Gingrich in a difficult spot on the Medicare issue. Gingrich got into trouble in May for attacking Ryan’s plan as “right-wing social engineering” and last week attacked Mitt Romney’s Medicare proposal. Though Romney’s plan is virtually identically to what Wyden and Ryan outlined today, Gingrich didn’t want to be seen attacking Ryan yet again, so he tweeted, “Ron Wyden and Paul Ryan deserve credit for having the courage to work across party lines on a very difficult large challenge.” Expect Romney to be doing a victory lap on this. Gingrich, if I were to guess, will emphasize an argument he’s made in the past -- that instead of waiting 10 years to implement the changes, current seniors should be allowed to use premium supports to buy into private plans immediately.
Moving toward the general election, this undercuts the Democrats’ strategy of running a campaign to scare seniors about Republicans Medicare plans. Wyden’s support now provides the GOP more cover and makes Ryan look like a more conciliatory figure, rather than the extremist that he’s being portrayed as by Democrats.
When asked about this, Wyden said, “Nobody ducks their past votes and previous statements.”
And on that front, vulnerable Republicans may be gritting their teeth that they had to go on record voting for Ryan’s budget when Ryan is now embracing a more moderate alternative. Ryan tried to argue that the plan isn’t as big a shift as is being described, noting that when he unveiled his original budget in April, he said he was open to preserving traditional Medicare.
“At that time, we said yeah, we should consider doing that, looking into that,” Ryan recalled. “Well, we spent the intervening months looking at how to make that work. And we think it’s clearly an option that can work. And we believe we ought to let our constituents and the American people decide.”
But moving beyond the politics into the policy details, the proposal faces a number of questions. For one, as I noted in my criticism of the similar Romney’s proposal:
One of the biggest potential problems is that it would be hard to create a level playing field between traditional Medicare and private plans, for many of the same reasons conservatives vigorously opposed a "public option" in Obamacare. But in some ways, creating fair competition would be even more difficult under Romney's proposal.
(I)n 2024, according to projections from the Centers for Medicare and Medicaid Services, there will be 71.2 million seniors enrolled in traditional Medicare, giving it market power to set prices and shift costs onto private plans.
The Wyden-Ryan proposal theoretically kicks in during 2022, but the basic argument still applies. Ryan clearly understands that the “public option”/Medicare issue could spook conservatives.
At one point, Wyden said, “What a lot of progressive folks have talked about is that in effect, traditional Medicare operates like a public option. Now, that’s not very appealing, as you know, to conservatives.”
Ryan joked back, “Try not to use those words.”
During the question and answer session, I asked him to respond to conservative concerns that there wouldn’t be a true level-playing field.
“Look at the context in which Medicare operates now,” Ryan responded. “It is all a public option for practical purposes. So this is moving us from that toward a patient-centered choice-based system.”
It’s true that providing some element of choice would be an improvement over the current system. But if we’re talking context, it’s worth comparing this to Ryan’s original proposal, which did not include any government-run plan, or “public option” at all. This also doesn’t address the question of whether there could be fair competition between a plan that has government power behind it, and private options.
The other major policy issue is cost. Ryan’s original plan controlled future Medicare spending by setting the growth of the subsidies at a slower rate than projected health care inflation. This new plan adjusts the formula, relying on something known as “competitive bidding,” where insurers offer bids for covering the average beneficiary of a given region, and the second-lowest bid sets the benchmark. If this mechanism doesn’t work to contain the growth of Medicare, there’s a backstop that would limit growth to 1 percent more than gross domestic product. But here’s the catch – it will be up to future Congresses to make sure that happens. But doesn’t Congress routinely find away around such requirements? And what can be done to ensure they actually implement any needed cuts?
“This is a framework, this isn’t infinite detail,” Ryan said. “Because we think it’s more constructive to put a framework out there now to show Democrats and Republicans are talking to each other. Just to show that we’re sitting here on the same stage is a step in the right direction to get that future right. So we’re not getting into that level of detail.”
In other words: to be determined.
Beyond Medicare, the proposal also includes a significant reform to the broader health care market that would provide an option for employees of smaller businesses to purchase their own insurance on a tax-free basis, with the help of whatever their employer would otherwise spend on their policy. As Brian Beutler and Benjy Sarlin pointed out, it’s something that Wyden originally pushed into the national health care law, but Obama agreed to get rid of it during the government shutdown fight, much to the chagrin of Wyden. (This morning, Wyden quipped that it was “vaporized.”)
“I think this is great policy,” Ryan said of this provision, noting that it was a step toward, “De-link(ing) the tax benefit from the job and reattach(ing) it to the person.”
But here’s the wrinkle. When Ryan voted against the Bowles-Simpson fiscal commission proposal, he said undoing the employer health care link would accelerate Obamacare as long as it’s still in the books, because individuals would flood the newly created, government-run exchanges. Would he still support this provision if Obamacare remains intact? On the flip side, Wyden has proposed de-linking health insurance from one’s employer, but only in the context of a regulated exchange akin to Obamacare. Would he still support this provision if Obamacare is repealed? This morning, Wyden and Ryan pushed aside any questions about Obamacare.
“We have a successful relationship because we don’t talk about (the Patient Protection and Affordable Care Act),” Ryan said, a reference to the formal name for Obama’s health care law.
Wyden pushed back similarly. “You’re going to keep trying to start a fight,” he said when the moderator had raised the health care law issue. When pressed by a reporter after the event, Wyden said, “Our sense was you can’t go forward with a conversation unless you look to the future instead of re-litigating the past.”
Of course, Obamacare isn’t in the past – its major provisions aren’t scheduled to get implemented until 2014, and whether or not it gets repealed has a dramatic effect on this alliance.
So where does this leave conservatives? I’d agree with Ryan that viewed in context, this would be an improvement over the current system. And I understand that given the political realities, it will be hard for conservatives to get their ideal plan. But I fear this will prove a premature capitulation on Ryan's part. Were a Republican president to come into office and propose the original Ryan plan, and, after a bitter fight, had to make the concession to preserve traditional Medicare as an option, it would be more understandable. But if this is the new starting point, we can only assume that the final product will be further compromised. Democrats abandoned the public option in the health care legislation the 11th hour, to secure Senate passage. Obama didn’t preemptively abandon the public option during the campaign.