Ryan-Wyden Medicare Plan: Great Political Trap, Dubious Policy

Ryan-Wyden Medicare Plan: Great Political Trap, Dubious Policy

Anyone who thought that the 2012 election battle over health care would be a simple matter between President Barack Obama and a candidate who wants to privatize Medicare and "repeal Obamacare" is waking up to new complications today, as Rep. Paul Ryan (R-Wis.) and Sen. Ron Wyden (D-Ore.) are teaming up on a new Medicare reform plan that has both men pitching and yawing leftward and rightward from their previous positions. As Brian Beutler and Benjy Sarlin put it, this plan is going to "turn the fight over Medicare on its head." It could also alter the competitive dynamics of the 2012 race in significant ways. Will the plan improve the lives of ordinary Americans, though? That's debatable.

Ryan and Wyden rolled out their idea in an interview with Lori Montgomery in the Washington Post, and the conventional way of looking at the matter is that Wyden is willing to embrace health care subsidies in the form of "premium support," while Ryan is now open to "maintaining the current Medicare system." Ryan also makes a significant concession -- the Medicare subsidy would be tied to the ebb and flow of health care costs instead of inflation. Ryan's previous plan did the opposite, which is what made it a joke: health care costs have risen ahead of inflation, which meant the subsidy he offered would likely get less and less valuable over time, until it was no help at all. The essence of Ryan's previous Medicare plan was that he'd save the government money by ceasing to spend it altogether, while pretending otherwise. Under Ryan-Wyden, those "premium support" vouchers are more valuable, but you also don't affect the budget bottom line as significantly.

What you do get from this plan, however, is an influx of taxpayer cash headed in the direction of private insurers. Wyden-Ryan creates an insurance exchange where consumers can opt for Medicare or choose to spend their subsidy on an array of private options. According to the plan, it works like this:

The Medicare Exchange would provide seniors with a competitive marketplace where they could choose a plan the same way Members of Congress do. All plans, including the traditional fee-for service option, would participate in an annual competitive bidding process to determine the dollar amount of the federal contribution seniors would use to purchase the coverage that best serves their medical needs. The second-least expensive approved plan or fee-for-service Medicare, whichever is least expensive, would establish the benchmark that determines the coverage-support amount for the plan chosen by the senior. If a senior chose a costlier plan than the benchmark, he or she would be responsible for paying the difference. Conversely, if that senior chose a plan that cost less than the benchmark, he or she would be given a rebate for the difference. Payments to plans would be risk adjusted and geographically rated. Private health plans would be required to cover at least the actuarial equivalent of the benefit package provided by fee-for-service Medicare.

All of which sounds pretty! But I'm having a hard time getting my head around how seniors avoid "waste, fraud, and abuse." In this arrangement, seniors get buffeted by private insurers with large advertising budgets and the propensity to build tricks and traps into their coverage contracts. I'd be more confident if I felt that Congress was devoted to robust consumer protection, but the recent refusal by Congress to confirm Richard Cordray to the Consumer Financial Protection Bureau teaches me that thematically, one of the factions in Congress is congenitally predisposed to these tricks and traps proliferating.

Beyond that, the policy seems like it's going to end up hobbling Medicare anyway. As Ezra Klein observes:

The reforms would reduce Medicare’s bargaining power by diverting beneficiaries into private plans, which would in turn mean Medicare has less market power. Nor is there an access-for-cost trade. Paul Ryan and the Republicans continue to work to repeal the Affordable Care Act, and they have not proposed an alternative approach to achieving universal coverage.

So it’s not clear to me exactly what Ron Wyden is getting in this trade. After speaking with him last night, I think the answer, put simply, is he’s not really getting anything. Ryan has climbed down from some of the more extreme elements of the GOP budget, but a compromise with an extreme-right proposal that will never pass is no compromise at all.

And, as Igor Volsky points out, there's a "larger problem":

But the larger problem is that competition between traditional Medicare and private plans — which, the plan says “would foster innovation and quality, while ensuring that the program is financially stable” — could also allow private plans to cherry-pick the healthiest beneficiaries and leave sicker applicants to traditional Medicare. Although the Wyden/Ryan incorporates “risk- adjustment tools” and would require CMS to “conduct an annual risk review audit of all insurance plans,” these mechanisms are still “less than fully effective in adjusting payments downward based on how much healthier these enrollees are” and private plans participating in Medicare Advantage continue to, on average, enroll healthier beneficiaries.

This bipartisan proposal requires private insurers to “cover at least the actuarial equivalent of the benefit package provided by fee-for-service Medicare,” meaning that plans won’t have to offer standardized benefits and would be able to attract a healthier population (and thus select against sicker applicants) by ratcheting down services that sicker beneficiaries rely on (like chemotherapy) and building up coverage for healthier applicants (like preventive services). If healthier applicants leave the traditional Medicare program, costs will skyrocket, forcing even more seniors out of the government program. Seniors who are priced out of traditional FFS over time would enroll in private plance and receive care through more restricted provider networks relative to what they enjoyed under traditional Medicare (where nearly all hospitals, doctors, nursing homes participate). Wyden/Ryan says “regulations governing the Exchange would include…community rating (i.e., the inability to impose prohibitively disparate costs on seniors),” but does not specifically state that all seniors would be charged the same rate, regardless of age.

So, we have a policy whose benefits on the American public are, at best, dubious -- from the pair's admission that it will have a limited budget, to the fact that it will weaken Medicare's bargaining power, to the real concern that it will toss seniors into uncertain consumer waters. In short, it looks pointless.

But it's going to be wildly, insanely popular all the same! And the reason why is that what Ryan-Wyden lacks in policy merits, it more than makes up for in terms of atmospherics. Here we have a Republican and a Democrat, grand-bargaining their fannies off, with the guy who roiled the debate last year with his own "Apple Of Discord" Medicare plan climbing down from the extremes that made his idea a political non-starter. This plan isn't so much designed to solve a policy problem as it is designed to maximize its appeal with the establishment-hack set of reporters and pundits. (There's a reason this was rolled out with Lori Montgomery's byline. And, as Dean Baker notes, the Washington Post definitively declares that this plan will "preserve" Medicare without having Montgomery actually, explicitly attempt to prove this claim.)

The Ryan-Wyden plan is thus going to have the Beltway press, who have eternally favored the potential for bipartisan pageantry over policies that actually redound to the benefit of ordinary Americans, reaching for the closest bucket of knob-polish. And that's good news for Mitt Romney and Newt Gingrich, whose own plans "closely mimic" Ryan-Wyden. This allows both presidential hopefuls to have an answer to the question, "How would you preserve Medicare?"

And between giving Romney and Gingrich this Medicare advantage and the clamorous media support that's certain to come as soon as they catch a whiff of bipartisanship sauce, it puts President Barack Obama in a box. After all, he's the only party in the race who currently actually has to take responsibility for the long term trajectory of health care policy.

The easy way out, of course, is for Obama to get behind Ryan-Wyden too, but that's nevertheless problematic. As we've seen in the various debt fights, the press is perfectly happy to become self-induced amnesiacs whenever Obama does put forward a compromise -- anything short of Obama stripping to a hairshirt and walking around in front of the Chamber of Commerce ringing bells and wearing a clapboard sign that reads, "Support The Ryan-Wyden Plan" will be insufficient to win the approval of the Brooks-Friedman Axis. And beyond that, the obvious problem for ordinary Americans is now you'll have all the candidates loudly sounding support for a bad policy out of purely political reasons. Which means everyone's either going to get fooled, or become substantially more cynical.

For the moment, it looks like the White House isn't going to opt for the easy way out. In a statement released this morning, White House Communications Director Dan Pfeiffer says: "We are concerned that Wyden-Ryan, like Congressman Ryan’s earlier proposal, would undermine, rather than strengthen, Medicare ... The Wyden-Ryan scheme could, over time, cause the traditional Medicare program to 'wither on the vine' because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans. And it would shift costs from the government to seniors. 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."

As I've indicated, these concerns are justified. Unfortunately, it puts Obama in the position where he'll be the one criticized for inhibiting the bipartisan fantasia we're told is both possible and world-changing. That's precisely what Ryan is angling for here (Wyden just seems to be the unwitting ally of his party's gravedigger) -- because the larger 2012 argument is going to be over who did the obstructing and who failed to compromise during a time of economic peril. And this frame got set in place before I could even get this story published:

In short, it's less useful to think of the Ryan-Wyden Plan as an authentic piece of policy as it is to understand it as a political stratagem. The whole point of Ryan-Wyden is for it never to be enacted. It's value is entirely theoretical. It's an ethereal prop for the 2012 campaign. And if you read Montgomery's article introducing the plan, there's a big "tell":

The pair said they would not draft legislation. With Congress at an impasse over more immediate deadline matters, such as the extension of a temporary payroll tax cut, Ryan said he does not expect action on major issues such as Medicare until a new Congress is seated in 2013.

"There’s no point in drafting legislation if you know it’s not going to pass," Ryan said.

So, let's get this straight -- curbing the federal deficit and enacting entitlement reforms is a matter of such urgency that it merits multiple government shutdown threats and staging a hostage crisis where the possibility of credit default hangs in the balance, but there's no point to even drafting legislation for this plan at the moment? And if bipartisanship isn't the obvious balm for everything that ails America, how does one account for Ryan's pessimism. It's almost as if the last thing he wants is for this idea to be tested in the legislature -- it's certain failure would shatter the illusion that the longed-for bipartisan compromise is possible and take the White House entirely off the hook.

If your internal bullshit alarm isn't clanging at the moment, get defibrillated, stat.

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