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    Wyden-Ryan Medicare plan: ObamaCare for seniors

    12/15/2011

    Senator Ron Wyden (D-OR) and Rep. Paul Ryan (R-WI) have just unveiled a new Medicare reform plan that purports to be a bipartisan “third way” that would give both political parties what they want: 

    • For the Democrats, it would guarantee continued existence for the original 1960s Medicare program, “now and forever."
    • For the Republicans, it would get Medicare spending under control, and thus avert national bankruptcy, by injecting more consumer choice and competition into the system. 

    Or so the authors claim.

    In response to this development, some in the Washington conservative establishment are hailing the plan as a policy breakthrough, a milestone event, and a political coup for Republicans that provides the basic ingredients of, and moves us closer to, needed Medicare reforms. Because of this bill, in 2012, some of these conservatives seem to hope, Democrats won’t be able to use demagogic “Mediscare” tactics against Republicans. Sen. Wyden, they believe, has graciously provided the GOP with a political shield.

    While I have a great deal of respect for these conservatives, I must confess I find this view extremely optimistic. 

    Indeed, I fear it’s not the brainy Ryan who has pulled off a coup, but rather the wily Wyden, a dyed-in-the-wool progressive who makes no secret of wanting single-payer, government-run health care.* 

    The Plan

    The plan outline – it’s not a bill yet – says that, beginning in 2022, private health plans would be allowed to compete with original, 1960s Medicare for seniors’ business on a “level playing field” within a new federal "exchange" or pseudo-marketplace. The Medicare bureaucracy would oversee and referee this competition. And the result, the authors claim, will be savings for taxpayers.

    But if not enough savings materialize -- if the reform fails to keep spending to below a certain level -- then there’s a fallback cost-control mechanism: automatic cuts will be imposed upon the fastest-growing areas within Medicare. The specific growth ceiling would be the growth rate of the entire economy plus one percent, or “GDP+1.”

    (These provider cuts could be fairly described as "rationing," to the extent they cause doctors and hospitals to go out of business, drop out of the program, or look for ways to move Medicare patients to the back of the line.)

    Problem: Government Regulating Its Own Competition

    The plan's authors argue that "allowing the private sector to compete with Medicare" will enable Medicare to "offer seniors better-quality and more-affordable health care choices." 

    This sounds appealing, until we read more carefully. In the outline (which incidentally shows much more of the influence of Wyden than of Ryan), there is never a clear affirmation that original, 1960s Medicare will actually have to compete with private plans on a level playing field. It's hinted at, it's suggested, but it's never quite made explicit. And yet the outline is very clear that original Medicare will be regulating those private plans. So it would seem the one thing we can be sure of is that the Medicare bureaucracy will be regulating its own competitors. 

    Ryan's staff insists we're getting it all wrong; instead, they say, original Medicare will be "inside the exchange," not outside it. But this is cold comfort, because the Medicare bureaucracy will also be "outside" the exchange, managing the whole system. The Centers for Medicare and Medicare Services (CMS) will be both "inside" and "outside" the exchange.

    And incidentally, even if some separate, presumably neutral agency -- the North Pole Commission, for example -- were brought in to manage both Medicare and the private plans, that separate agency would itself be answerable to the White House, meaning there's no way to impose "competition" on a "level" playing field within the executive branch of our government. Fans of premium support are chasing a mirage.

    Problem: It Won't Save Money -- Except by Rationing

    Because Wyden-Ryan doesn’t appear to subject original Medicare to true competition, I have to conclude that the reform itself probably won't save money, except through government rationing (i.e., that “GDP+1” haircut). Perhaps other parts of the plan -- such as imposing higher premiums on certain seniors -- will save money. But the "premium support" (managed competition) system won't. 

    Problem: It's ObamaCare for Seniors

    My most serious concern with the plan is that I can’t discern any difference in principle between it and ObamaCare. (The progressive pundit Ezra Klein agrees -– and celebrates the fact.) Indeed, I would go so far as to describe Wyden-Ryan as ObamaCare for seniors, except it’s worse in that it includes the sort of government-monopoly “public option” (i.e., original Medicare) that Congress rejected during the ObamaCare fight. 

    To understand why Wyden-Ryan is basically the same thing as ObamaCare, we need to understand the concept of “managed competition.” 

    Managed-competition plans can take various forms, but they always have three essential elements:

    1. Compulsory participation.
    2. A government-run “exchange” or “marketplace.”
    3. Bureaucratic price controls. 

    (There may also be subsidies for the participants, but that’s not essential.)

    In managed competition, the “consumers” are not permitted exit the system. They are trapped. And prices aren’t set by true market forces; they’re managed by the bureaucracy, to keep everything “fair,” as defined by whoever set up the system. Hence the name, “managed” competition. 

    Medicare Advantage = Managed Competition

    An example of managed competition is Medicare Advantage, an option within Medicare that lets you receive your Medicare benefits from a private, but government regulated, health plan. (It's optional within Medicare, but Medicare itself isn't optional.) In a sense, Wyden-Ryan is just a larger version of Medicare Advantage, except that original Medicare is to be included as one of the options "inside" the exchange.

    ObamaCare = Managed Competition

    Other examples of managed competition include HillaryCare and the Heritage Foundation’s “consumer choice” proposal from the early '90s.

    Also: RomneyCare.

    Also: ObamaCare.

    Yes, ObamaCare is a managed competition plan. It has the three basic elements I mentioned. It is compulsory, has a government-run exchange, and relies on bureaucratic price controls.

    The same was true of its ancestor, HillaryCare. It was compulsory, had a government-run exchange, and relied on bureaucratic price controls.

    Similarly, the Heritage Foundation plan -- which many Republicans (most famously, Newt Gingrich) endorsed as a "market-oriented' alternative to HillaryCare -- was compulsory, had a government-run exchange, and relied on bureaucratic price controls.

    More recently, the RomneyCare plan adopted in Massachusetts is compulsory, has a government-run exchange, and relies on bureaucratic price controls.

    Starting to see the pattern?

    Wyden-Ryan = Managed Competition

     Well, guess what. Wyden-Ryan -- are you sitting down? -- is compulsory, has a government-run exchange, and relies on bureaucratic price controls.

    Wyden-Ryan is "ObamaCare for seniors."

    But wait a minute, Clancy. How do you get off calling Wyden-Ryan "compulsory"? 

    Because Medicare itself is compulsory. You have to join it. That's right, you have to join Medicare. You're not given a choice. Well, technically, you are. But If you don’t enroll, the government withholds your Social Security check. And even if, despite that penalty, you don't enroll, or you drop out, you won't be able to find alternative health coverage outside of Medicare, because the government has basically outlawed private health insurance for people over 65 (except as wraparound or supplemental coverage). With Medicare, everything is -- you'll pardon the expression -- "inside the exchange." 

    Monopolies hate competition. Put the Medicare monopoly in charge of a “managed” competition, and you know in advance who will eventually win: the bureaucracy. And you also know who will lose: you. 

    (By the way, the most popular health care plan in America -- the Federal Employees Health Benefit Program (FEHBP), which is the plan Members of Congress use -- is often touted as the model for "managed competition" at its very best. But guess what? While it does employ a kind of "exchange," it's not compulsory and has no bureaucratic price controls. It's "un-managed" competition. Could that help explain why it's so popular?) 

    Solution: Make Medicare Voluntary

    If Republicans embrace this plan, they could be giving Democrats a political “get out of jail” card on ObamaCare, because they will have endorsed for people over 65 essentially the same system they claim they want to repeal for people under 65.

    And yet the GOP will still be attacked by the Left for “ending” Medicare, because the Wyden-Ryan plan purports to make original Medicare compete with private insurance companies. 

    Back in April, Congressman Ryan showed true statesmanship when he brought out a solid Medicare reform plan and persuaded the entire House Republican caucus to vote for it.  The Left attacked it viciously, of course. But it was and remains basically defensible. It gave seniors more choice, without including the mirage of "premium support" or the fatal poison of a "public option." 

    It was, however, flawed in one important respect: It left Medicare compulsory. Republicans could have easily corrected that defect by coming out for something like Sen. Jim DeMint's "Retirement Freedom Act."

    Instead, Rep. Ryan has chosen, in effect, to negotiate with himself. By moving left, he apparently hopes to guide his fellow Republicans under a great iron shield that will deflect the Left's arrows. But at what price? (And will it even work?) 

    As a political matter, the only sure way to make Medicare a non-lethal issue for Republicans is to make Medicare voluntary for individuals.  

    As a policy matter, making Medicare voluntary is also the only sure way to "allow the private sector to compete with Medicare" and thus "offer seniors better-quality and more-affordable health care choices." 

    Dean Clancy is FreedomWorks’ Legislative Counsel and Vice President, Health Care Policy

    * If it’s a Wyden health care bill -- "Republican, beware." The Wyden-Brown “state waiver” bill, cosponsored by Sen. Ron Wyden (D-OR) and Sen. Scott Brown (R-MA), claims to let states "opt out" of ObamaCare (they wouldn't really be able to, but it's supposed to look like they are). It's a bill well-designed to weaken the ObamaCare repeal effort. which helps explain why President Obama has endorsed it. Likewise, the Wyden-Bennett health care reform bill, which would have been yet another "managed competition" scheme, played a great part in ending the political career of Utah Republican Senator Bob Bennett, whose conservative, liberty-loving Utah constituents weren't impressed. 

    + + +

    Update (4/27/2012): With former Massachusetts governor Mitt Romney looking likely to win the GOP presidential nomination, the Wyden-Ryan plan appears likely to be made part of the Republican Party platform in the 2012 election. 

    Update (3/29/2012): Wyden-Ryan has passed the House in conceptual form, as part of Congressman Ryan's comprehensive "Path to Prosperity, version 2.0" budget plan for the fiscal years 2013 through 2022. The plan is not expected to be taken up by the Senate, and no further legislative action on Wyden-Ryan is expected in 2012.

    Update (1/31/2012): Wyden-Ryan has been endorsed by GOP presidential contenders Romney, Gingrich, and Santorum. Gingrich's support is notable, because he had blasted the 2011 version of the Ryan Medicare reform proposal as "right-wing social engineering." For our take on Mr. Gingrich's outburst, and to learn what we found admirable and what we found troubling in Mr. Ryan's (first) Medicare plan, see this piece from the Wall Street Journal.

    11 comments
    Ryan Bourinski
    03/02/2012

    If you want to bash this plan, along with romney and obamacare, then bash huntsmancare too.

    mustafa yandl
    02/01/2012

    Reaction to the Wyden-Ryan plan has been strong and swift from both sides of the political spectrum.

    In a recent briefing with reporters, White House press secretary Jay Carney criticized the plan for shifting too much of Medicare's cost from the government to seniors and eventually taking it private by causing traditional Medicare to "wither on the vine."

    "It would end Medicare as we know it for millions of seniors," said Carney. "It's just the wrong way to reform Medicare."

    In contrast, the ideas of Wyden and Ryan have drawn praise from several GOP presidential contenders. Newt Gingrich described their plan as "a very important breakthrough," while Mitt Romney called it "good news" because it could "deal with the country's mounting debt."

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    mplsfreedom
    01/12/2012

    with private sector hc costs rising 16-20% annually, isn't it worth taking a look at some alternatives? what is it about Medicare for all that's so threatening to your freedoms? did you have the same reaction when you were required to buy auto insurance in order to drive your car? I'm not following the logic in the hatred toward national health insurance. if you hate Medicare, why don't you just keep your private hc policy in force and not enroll in Medicare?

    Dean Clancy's picture
    Dean Clancy
    01/13/2012

    Medicare is mandatory. If you refuse to enroll in it, they won't send you your Social Security checks. Plus, private insurers are not permitted to sell health benefits that duplicate those of Medicare. Medicare is a government monopoly. That's the problem.

    Carly EngageAmerica
    12/20/2011

    Since the Ryan–Wyden proposal is based on working principles, there are still many policy questions to resolve. For example, it is silent on the future of Obamacare. Make no mistake: Structural Medicare reform should begin after full repeal of Obamacare. Furthermore, given the depths of our fiscal crisis, the proposal is slow to take effect. The Heritage proposal (http://eng.am/vXRGCN) transitions to premium support beginning in 2016; Ryan–Wyden does not begin until 2022, the same date embodied in the House budget resolution.

    Nonetheless, Ryan–Wyden continues the conversation about the need for fundamental structural Medicare reform. Trying to save Medicare through more government price controls will not do. Converting the outdated Medicare program into a premium-support model is the best and more honest way forward (http://eng.am/v8wSp9).

    Robert Jones
    12/18/2011

    It's incredible. Ryan comes up with a plan, bi-partisan at that, and you even have the gall to savage HIM? Does Freedomworks even have a soul? These are our Seniors we're talking about here! My parents, your parents! What is WRONG with you people? Dick Armey, you should be ashamed of yourself. Absolutely repugnant and pathetic.

    Mike Reiter
    12/19/2011

    "Managed Competition" is an oxymoron. It seems Wyden has out maneuvered Ryan. What was Ryan thinking?

    @Robert Jones: It would be helpful if you made a coherent argument instead of an emotional ad hominem attack supported only by you own subjective value judgments. None of this contributes to the discussion. Shame on you.

    Craig J. Casey
    12/18/2011

    Price controls do not work. Competition dries up and the product gets even more expensive. Mandates do not work. People will claim jump and pay the penalty. Expanding unsustainable programs will not work. The FDA certified itself corrupt. Department of Education = The Blob. Postal Service?

    clairesolt
    12/17/2011

    I am very concerned about what is going on right now! Yesterday I learned that the VA across the street in W Palm Beach is scheduling military funerals 43 minutes apart. A holocaust is being visited on seniors and sick people denying lifesaving emergency intervention to people 70 and over and using the FDA to create drug shortages of medicines people need. Is this an example of politicians trying to select their voters or just an episode of Orwellian eugenics?

    timothy sutton
    12/17/2011

    After the last debate, I began thinking that maybe Romney was the guy (Ron Paul, sadly, will not get the nomination). Romney is squeaky clean and will probably do well in the general election. However, in the december 16 interview with Greta on fox, Romney stated that he intended to REPLACE obamacare. this statement by Romney is very concerning. What is he going to PEPLACE obamacare with????? This is a scary statement.

    Norma Jean Onyschuk
    12/17/2011

    This plan is unacceptable. I want people to have choices for their whole life in regards to their medical plans. Medicare must compete with the private sector on a level playing field. I just went on Medicare and was surprised by the amount of time it takes to get doctors paid and for statements to be sent to the members letting them know who much they owe. Medicare is a disaster and I can only seeing it getting worse unless it is reformed. One savings would be to modernize it. The management should be given to the private sector such as Aetna who did a great job in manging my insurance before I was forced to go on Medicare.

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