|Paul Ryan’s New Medicare Reform Is Pro-Market|
By Ashton Ellis
Tuesday, December 20 2011
Like night following day, another Paul Ryan reform proposal is igniting another round of teeth-gnashing over the past, present and future of America.
Last Thursday, Representative Ryan (R-WI) and Senator Ron Wyden (D-OR) announced a plan to reform Medicare in a way that (1) gives seniors more options, and (2) reduces costs to taxpayers.
Here is an overview.
Medicare is the government-run, taxpayer-funded health care program for all Americans over the age of 65. (Private plans only supplement Medicare’s mandatory baseline coverage.) The retirement of the Baby Boom generation will add tens of millions of new enrollees in the coming decades, exploding the costs of the program. Serious people on all sides of the issue agree that the current level of taxation will not sustain Medicare, and that some changes to the entitlement program need to be made.
Earlier this year, Ryan proposed, and the House of Representatives passed, a budget resolution that would shift Medicare from a defined-benefit model (i.e. fee-for-service paid by the government) to a defined-contribution (i.e. “premium support” whereby government would give seniors a voucher to cover part of the cost of a private health plan). The change would mirror the move from defined-benefit to defined-contribution made by the private sector decades ago.
The key sticking point with liberals and a large segment of voters with Ryan’s original plan was the eventual elimination of the fee-for-service model for Medicare that many seniors have come to expect.
Last week’s Wyden-Ryan version of Medicare reform retained much of Ryan’s previous proposal with one significant difference: traditional fee-for-service Medicare would be one of the options that seniors carrying premium support vouchers could choose to buy. By keeping Medicare as an option, Ryan takes away one of the most repeated charges by liberals to scare seniors in 2012: Republicans want to destroy Medicare (a charge PolitiFact recently called the “lie of the year”). When the Republican House passed Ryan’s plan, Democrats promised to use it as a campaign weapon. But with Democrat Wyden’s involvement, Ryan can now point to a truly bipartisan approach to reform, perhaps as a springboard to greater Republican and Democratic support.
The road won’t be easy.
No sooner had Wyden and Ryan announced their plan than the White House spin machine denounced it as “destroying Medicare as we know it,” even though by its explicit design Wyden-Ryan retains traditional Medicare. Arguing the other, equally as preposterous extreme, Democratic campaign operatives tried to frame Ryan as retreating from his earlier position of privatizing Medicare. (Lost in the vitriol was the admission that the Medicare system is being privatized, which is the main conservative goal for all entitlement reforms.) Not to be outdone, a pollster working for Ryan’s Democratic opponent in next year’s election released a memo showing that Ryan was beatable, implying that Ryan’s leadership on entitlement reform is the main reason.
These criticisms are to be expected and can easily be brushed aside as talking points without substance. More telling was the range of reactions from conservatives.
Writing for National Review, conservative health policy expert Yuval Levin praised Ryan-Wyden for moving Medicare toward a more competitive system of choice and value for seniors. The Heritage Foundation, one of the leading intellectual fonts for entitlement reform, championed the plan’s use of premium support and competition, but wanted the changeover to start immediately, not in 2022, the year currently targeted. Decidedly in the No camp is Dean Clancy, a health policy expert at FreedomWorks, a pivotal organizing force in the Tea Party movement. Because of the cogency of his criticisms, Clancy’s views deserve closer analysis.
In a tightly argued essay, Clancy notes an important similarity between Ryan-Wyden and ObamaCare. Both plans seek to pit a government (or public) option for health insurance against a menu of government-regulated, privately provided health plans. In the ObamaCare fight, conservatives were able to remove the “public option” from the law by arguing that the government plan would be priced too low for private companies to compete, drawing more consumer dollars to the feds and ultimately driving the private sector out of the market. In essence, the public option was a Trojan horse for getting socialized medicine after rigging the system to prove the market “failed.”
Expanding his criticism of Ryan-Wyden, Clancy identifies three elements shared by all doomed-to-fail government health schemes: (1) the plan must be compulsory for everyone, (2) use a government-run exchange to define the limits of competition and (3) rely on bureaucratic price controls. Clancy says that Ryan-Wyden possesses all three elements and, as such, it should be rejected as an unjustified adoption of ObamaCare’s logic for Medicare, if not (yet) for those under 65.
But while Clancy understandably recoils at three of the features Ryan-Wyden shares with ObamaCare, HillaryCare and RomneyCare, he pays too little attention to the differences between reforming Medicare and socializing health care for non-seniors. With Medicare, America already has socialized medicine because everyone defaults into a government-run system. Ryan-Wyden introduces market competition by giving seniors vouchers and options. By contrast, liberal “reforms” of health care for non-seniors – ObamaCare, HillaryCare, RomneyCare – were all socialization schemes that eliminate competition by decreasing the choices available to consumers. The key difference between good health care reform and bad health care reform is the direction of change.
To reform Medicare, Ryan would move away from one-size-fits-all by giving consumers choices. This is the good kind of reform because it takes a government monopoly and exposes it to market competition. By contrast, reforms of health care for non-seniors like ObamaCare take away choices from consumers by limiting the available plans to whatever the federal government deems appropriate. Clancy is right to see Wyden-Ryan Medicare reform arriving at the same conceptual place as ObamaCare does for non-seniors. But the plans are going in opposite directions. Wyden-Ryan is probably a precondition for achieving Ryan’s original goal of eventually converting Medicare into a full-scale voucher program. ObamaCare’s use of market mechanisms is the price liberals paid to put America on a path to a national single-payer health system.
Thoughtful conservatives can disagree over the best way to reform entitlements into sustainable programs. Clancy may well be right that Ryan’s original plan to change Medicare into a voucher is the best way to bring down costs and improve quality. Ryan obviously agrees. But Ryan is also trying to build a bridge to reach that destination, and he knows he’ll need Democratic support like Ron Wyden’s to do it. If Wyden-Ryan is the necessary step to achieving real Medicare reform, it’s an important step in the right direction.
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