Paul Ryan Medicare Reforms Still On The Table, Says Adviser Yuval Levin

WASHINGTON, DC - JANUARY 21: U.S. Rep. Paul Ryan (R-WI) arrives during the presidential inauguration on the West Front of the U.S. Capitol January 21, 2013 in Washington, DC. Barack Obama was re-elected for a second term as President of the United States. (Photo by Justin Sullivan/Getty Images)
WASHINGTON, DC - JANUARY 21: U.S. Rep. Paul Ryan (R-WI) arrives during the presidential inauguration on the West Front of the U.S. Capitol January 21, 2013 in Washington, DC. Barack Obama was re-elected for a second term as President of the United States. (Photo by Justin Sullivan/Getty Images)

WASHINGTON -– It was a cold day in the nation's capital when I visited Yuval Levin at his downtown office to talk about a subject of mutual interest: Rep. Paul Ryan.

Levin is the founding editor of a conservative journal, National Affairs, and is a fellow at the Ethics and Public Policy Center, where he keeps an office. He is 35, but his demeanor makes him seem older. He joked wryly as we sat down that since he is Jewish, his colleagues at the think tank -- mostly Catholic -– had given him an office with the best view of St. Matthew's Cathedral across the street.

Levin's connection to Ryan, the Republican congressman from Wisconsin, is twofold. He knows the 43-year old House Budget Committee chairman personally and has his ear. Thusly, he influences policy-making from his perch outside Congress.

But Levin is also Ryan's avatar to the world outside Congress, in the sense that Levin and Ryan share many of the same ideas and Levin explains them with impressive clarity. Often, if you want to know where Paul Ryan is going on policy, Levin is a good signpost.

Since Mitt Romney's loss in the presidential election, I've wondered what would happen to Ryan and his ideas for overhauling Medicare.

Ryan often warned in the years leading up to the 2012 election that if Obama was reelected and his health care law was implemented, it would push the U.S. over a "tipping point," where more Americans were dependent on government benefits than those who were self-reliant. (Ryan has avoided such rhetoric of late, especially in the wake of Romney's infamous "47 percent" remarks.)

The 2012 election thus became a kind of Armageddon in the minds of many on the right, who saw (and still see) Obamacare as the first step toward single-payer health care and increased government control of virtually every aspect of American life.

"If Obamacare is implemented … you will be the generation that will have handed freedom, opportunity, prosperity (and) the greatness of America … away, and you will have given your children a country that looks more like George III's –- King George's -– England, than Ronald Reagan's America," said former Sen. Rick Santorum (R-Pa.), while campaigning for the Republican nomination in September 2011.

Ryan himself said in December 2010: "We will be choosing what kind of future we want to have for the rest of this century in the very near future in this country, probably in 2012."

Romney's choice of Ryan in August as his running mate signaled that the former Massachusetts governor wanted to press Ryan's ideas into law if they were elected.

But Romney lost. So now the country is firmly on the path to death panels, socialized medicine, and the end of baseball. Right?

Levin doesn't think so.

"The basic Medicare problem remains, and I think that's still the solution to it," Levin said of Ryan's plan. "Obamacare doesn't really get at Medicare costs, and doesn't structurally change the design of Medicare. And that's still what basically needs to be done. So I think that's still the right way to go."

Levin was also sanguine about the Independent Payment Advisory Board, the panel that got Sarah Palin so riled up about government rationing health care.

"I think IPAB is just not real," Levin said. "It's this board that's going to make politically impossible recommendations and the notion that those are just going to happen, even though they haven't happened for 40 years, is not very plausible."

Ryan himself said on Monday, in an interview with the Milwaukee Journal Sentinel, that he thinks Obamacare will "collapse under its own weight." Levin explained why. He talked at length about how he sees a tough road for Obamacare over the next two years, with insurance premiums spiking as a result of the law in the months leading up to the 2014 midterm elections.

"The implementation of Obamacare for under-65s, for what today is the relatively private health care market, looks right now like it's going to be a total disaster," Levin said. "Everything's behind schedule. The economic incentives are not lined up very well. The incentives are going to be there for younger, healthier people to not be insured, and that raises costs for everybody else. None of that is going away. I don't know what they can really do about it.

"It's not a well-designed system, so I do think it'll be very problematic. And having congressional elections 10 months after it gets started is going to be a big problem for the Democrats," Levin said.

Levin cited "adverse selection," aka the "insurance death spiral," as Obamacare's biggest problem. Because insurance companies can no longer deny coverage to people with preexisting conditions, most people will wait until they get sick or need some sort of ongoing health coverage to obtain insurance, driving up costs for those already paying into the pool, he said.

"If you're healthy, why should you get insurance? You should just wait until you're sick. Obviously, the solution to that that they attempted is the individual mandate, but the mandate has been remade into a tax by the Supreme Court. It's very low," he said. "So a young healthy man, if you're 25 years old, you don't have kids, and you have the choice of spending $95 on this tax, or spending $5,000 on insurance, it's not a very hard choice."

He predicted that if the problem spirals like he expects, it won't just be young singles opting out of getting insured.

"That same calculation becomes more and more powerful for more and more people, if that choice is, do I pay the fine or do I pay $2,000 in insurance, versus, do I pay the fine or do I pay $7,000 in insurance? Fewer people are going to get insured, the higher the premiums are," he said.

Even with the subsidies for many Americans under Obama's law to help purchase health insurance, Levin said he thinks premium increases will outpace that aid.

And keeping people from dropping out got harder thanks to Supreme Court Chief Justice John Roberts, Levin said. Roberts' decision last summer to uphold Obamacare, but to deem it a tax, made it much harder for the government to keep people from jumping in and out of the health insurance market.

"I think they always assumed that they could actually create other barriers to being uninsured if they really needed to. They could create closed enrollment periods or fines for not enrolling quickly, but the Supreme Court decision closes off all that stuff," he said. "Changing it to a tax basically means it's not a legal requirement."

I asked if Levin thought Roberts understood this implication of the ruling.

"It's hard to imagine that he did. I mean maybe, maybe he was talking to the right people. But I would imagine not," Levin said. "It's certainly not expressed in the decision, if he did. But it basically means you can't expand the mandate without a new law, and there's not going to be a new law with a Republican House. So, I think they're stuck with a pretty big problem."

As Avik Roy wrote in Forbes on Jan. 14, "people are starting to pay attention to this problem," citing a Politico report that health insurers are asking the Obama administration to impose late enrollment fees and other penalties to make it more attractive to sign up for health insurance, rather than forgoing it until it's needed.

Levin said he has been surprised also at how many states have declined to set up their own exchanges, or to expand their Medicaid programs under the Affordable Protection Act.

"The whole thing has gone very peculiarly," he said. "In reading the law originally, I don't think I personally grasped how much freedom it gave to governors to decide how this thing was going to work."

Levin left no doubt that the path forward for Ryan and the GOP on health care is to "define their alternative much more specifically in the next couple of years," hope that Obamacare falls on its face, and then pass a new law overhauling Medicare if they can elect a Republican president in 2016.

"To change the financing mechanism, it would take another law, so it's not impossible. It's just difficult. It was always going to be difficult," Levin said. "It was difficult for the Democrats too. It took them 60 years to do it."

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