Another Democrat (Wyden) doing the GOP's bidding [View all]

[markpkessinger]

From an article titled, The Bipartisan Political Alliance That Will Turn The Fight Over Medicare On Its Head, on TalkingPointsMemo.com:

Sen. Ron Wyden (D-OR) is teaming up with Paul Ryan, the House’s top budget guy and the author of the GOP’s controversial budget which proposes phasing out traditional Medicare and replacing it with a private plan. The two announced via The Washington Post that they’ll be teaming up on a different version of that Medicare plan — one that closely mimics plans offered by leading GOP presidential candidates Newt Gingrich and Mitt Romney, and a proposal authored by former Sen. Pete Domenici and former Clinton budget director Alice Rivlin, which loomed large in the Super Committee’s failed negotiations.

The move makes Wyden the first elected Democrat to endorse creating a premium-support system to compete with traditional fee-for-service Medicare, and for Ryan represents a de facto admission that his own plan was too radical to ever gain bipartisan support. That’s bound to affect how congressional and presidential candidates approach the issue, which will feature prominently in next year’s elections. But it raises a number of other questions, both about the merits of the policy and of the political calculus behind it.

The policy itself allows insurers to compete with traditional Medicare turning Medicare essentially into a public option on a private insurance exchange. Wyden and Ryan would give patients subsidies that could be applied to either private insurance or fee for service Medicare. It has features of both a “defined contribution” and “defined benefit” program. All plans including Medicare would have to meet a high benefit standard. But if seniors were to choose plans that exceeded a benchmark cost they would be required to pay the difference out of pocket. If Medicare itself were to come in below the benchmark, it would function no differently than Medicare does right now. If it Medicare were to exceed the benchmark, though, seniors would have to pay more out of pocket to enroll in it.

Unlike previous plans, those subsidies would rise and fall with the cost of the plans themselves — not at a fixed rate below the explosive rate of health care inflation. But capping subsidy growth is exactly how Ryan’s original plan cut federal spending so much. This plan relies mostly on the theory that competition among insurers could hold down costs — a proposition with little evidence behind it — and would therefore save the government much less, if any, money at all. If the private plans were to prove popular, traditional Medicare would wither; if they proved popular to younger, healthier seniors, Medicare would end up with a severe adverse selection problem and could begin to unwind (though the plan does feature a so-called “risk adjustment” mechanism to guard against this possibility).