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Analysis: GOP gets its turn on Medicare hot seat

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RICARDO ALONSO-ZALDIVAR
April 11, 2011
— Now it's their turn to try to fix the health care mess. Republicans, just like President Barack Obama, may discover that's easier said than done.

The GOP budget expected to go to the full House this week would remake health care programs for the elderly and the poor that have been in place for nearly half a century. Budget Committee Chairman Paul Ryan, R-Wis., says his approach would "save" Medicare by keeping the financially troubled program affordable for federal taxpayers.


But it turns out that people now 54 and younger would pay the price.


By one authoritative estimate, they'd be on the hook for most of their own health care costs after they become eligible for Medicare as retirees. The nonpartisan Congressional Budget Office says the typical beneficiary would be expected to pay more than two-thirds of his or her medical costs by the year 2030.


Costs wouldn't come down; they'd just get shifted.


"It's a political nonstarter," said health care consultant Robert Laszewski, a former insurance executive and strong critic of Obama's overhaul. "It kills Medicare as we know it, and that is simply too popular a program among seniors and their children."


Cue the Democratic political ads for the 2012 campaign.


Republicans may escape the full wrath of seniors, however, since the House budget isn't likely to get very far. It won't pass the Democratic-run Senate. House members can vote for the budget's tough medicine without having to dish it out before they run for re-election. But Democrats running against them in 2012 won't let voters forget the budget, just as Republicans hammered Democrats last year over Medicare cuts in Obama's health care law.


Whatever happens to his budget, Ryan's general idea that seniors should bear more direct responsibility for decisions that affect health care costs isn't going away.


"If everybody who bought health care was paying more when they get a more expensive plan, that would create a lot more pressure to bring costs down," said Mark McClellan, who ran Medicare for President George W. Bush. "There's reason to think that reforms that engage beneficiaries in getting less costly care will make a difference."


The principle behind Ryan's plan is that seniors making their own decisions about health insurance can do a better job of keeping costs in check than Washington bureaucrats playing whack-a-mole with rising prices.


That's different from the approach in Obama's health care law, which relies on government to police the market and would deny insurers that jack up premiums the right to sign up customers who are receiving taxpayer subsidies.


The GOP budget "will preserve Medicare through competition among health plans for the business of millions seniors," said Ryan.


But would it work as envisioned?


Under Ryan's plan, Medicare would remain largely the same for current beneficiaries and people within 10 years of retirement. The biggest change for this group would be the revival of the "doughnut hole" gap in Medicare prescription coverage that Obama's health care law eliminated. (The GOP budget calls for repeal of the new law.)


Then, starting in 2022, new retirees would get a fixed amount of money to buy private insurance from a choice of plans regulated by the government. The sick would get more money, the wealthy less. The payment would be adjusted for inflation.


Ryan calls his approach "premium support." Critics call it the voucher plan.


The Congressional Budget Office analysis suggested the new system would start running into problems right away.


Buying the Medicare benefit package from a private insurer would turn out to be significantly more expensive. Medicare typically pays hospitals and doctors less than private insurance. Without some kind of effort to control private health care costs, the government contribution toward premiums wouldn't go very far.


"I don't believe you can pursue this approach for Medicare and not at the same time address the problem of cost growth in the private health care sector," said economist Robert Reischauer, a former budget office director. "To do so would result in a two-tier health care system." Reischauer says he's sympathetic to the voucher system in principle, just not this version.


Ryan had developed an earlier form of his proposal jointly with a prominent Democratic economist, Alice Rivlin, a former vice chair of the Federal Reserve. Although Ryan publicly cited her in unveiling his plan, Rivlin said she doesn't support this version.


The government health care payment in the GOP budget would quickly fall behind medical inflation, Rivlin said. "Ryan has lowered the growth rate so that it's really punitive," she added. Rivlin also says seniors should be given a choice between staying in traditional Medicare and a voucher system.


She also differs with Ryan on raising taxes. "You can't do it all on the spending side, because the cuts required are Draconian," Rivlin said.


Despite the political risks Republicans take with their Medicare remake, they won't get much in savings over the 10-year estimating window that Congress applies to the budget. It's because the shift to a new system doesn't come until 2022.


That's not the case with Medicaid. The health care program for the poor would be turned over to the states and spending cut by more than $700 billion over time.


Although the GOP's 2012 budget reduces total government spending by more than $5 trillion over a decade, that still wouldn't bring the federal budget into balance.


One of Obama's top advisers, David Plouffe, says the president this week will offer his own plan for reducing long-term spending. The details will come from Obama, Plouffe says, although the adviser acknowledges that cuts to Medicare and Medicaid will be necessary.


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EDITOR'S NOTE — Ricardo Alonso-Zaldivar covers health care for The Associated



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