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Opinion: Columnists

Stop demonizing and start discussing the Ryan plan

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Opinion,Diana Furchtgott Roth,Columnists

As the Republican convention kicks off in Tampa, Fla., Democrats are busy demonizing Republican proposals to reform Medicare.

Mediscare was in full swing Saturday, when President Obama, speaking of Republicans, said, "They want to turn Medicare into a voucher program. That means that instead of being guaranteed Medicare, seniors would get a voucher to buy insurance, but it wouldn't keep up with costs."

Obama is wrong. "Voucher" does not appear in the Republican plan. And future seniors, beginning in 2023, would continue to have a choice of traditional Medicare, as well as other plans, too.

Medicare is in trouble. The Congressional Budget Office's new Medicare cost estimates, released last week, raised projected spending by $136 billion over the next decade due to lower productivity and higher costs for goods and services. Since Medicare was established more than 40 years ago, projections have gone in one direction: up.

Yet the House Republican plan to reform Medicare is routinely vilified. Replacing Medicare with vouchers does not describe vice presidential candidate Paul Ryan's Medicare proposals in the fiscal 2013 budget resolution, passed by the House of Representatives.

The budget resolution and Medicare proposals are on the website of the House Budget Committee. In his 2010 Roadmap for America's Future, Ryan did propose replacing Medicare with vouchers. But the 2010 proposal is not the same as the 2012 version. Voucher programs give beneficiaries a set amount of money to use for a particular purpose -- education, groceries, insurance -- and to spend for any permitted school, plan or product they prefer. The most common example is the Supplemental Nutritional Assistance Program -- "food stamps" -- which confers a debit card for certain foods from any grocery store.

Ryan's new plan is known as "premium support." Modeled after the popular Federal Employees Health Benefits Program, Ryan's plan would let seniors who retire in 2023 and later choose from a variety of government-approved, competing and comprehensive health insurance plans, at different prices with different levels of service, including traditional fee-for-service Medicare

Unlike with food stamps, which allow recipients go to any store, seniors could only pick a preapproved plan.

The distinction between vouchers and premium support matters because premium support offers more protection for the consumer. With a voucher, consumers could purchase any health insurance plan. Some critics -- I am not among them, because I know how smart seniors are -- are concerned that seniors won't choose the right plan or insurance companies will take advantage of them. With premium support, the government has preapproved the permitted plans.

The amount of premium support would be determined by the second-least-expensive approved plan, or traditional Medicare, whichever is less costly.

The advantage of premium support plans such as the federal employees' plan is the variety of plans at different prices, ranging from traditional fee-for-service to managed care to health savings accounts combined with insurance for catastrophic care.

With more choice, plans have to compete for customers, and this translates into lower costs than would be the case otherwise. Competition is fierce among government plans during enrollment season for federal health plans. D.C.'s citizens are deluged with radio, TV and bus advertising with pictures of beautiful people promoting different plans.

Medicare Part D, the prescription drug benefit, charges lower premiums because insurers compete for seniors' business.

Providers of Lasik eye surgery and cosmetic surgery compete for business, too, and costs have declined.

The Healthy Indiana Plan, which encourages shopping around for health care, has saved Hoosiers millions of dollars.

Competition can lower Medicare costs too. It's time to stop demonizing the Ryan plan and start discussing it.

Examiner Columnist Diana Furchtgott-Roth (dfr@manhattan-institute.org), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.

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