Paul Ryan Convinces Ron Wyden To Support Greater Privatization Of Medicare

Rep. Paul Ryan (R-WI) and Sen. Ron Wyden (D-OR) will unveil a new Medicare premium support plan during an event at the Bipartisan Policy Center this morning that is a stark departure from the Budet Committee Chairman’s proposal to end the traditional Medicare program that most Republicans voted for.

Under the new bipartisan plan, beginning in 2022, seniors will receive a pre-determined premium support voucher to purchase benefits through an exchange of private plans or the existing fee-for-service program. The government subsidy would be determined by the “second-least expensive approved plan or fee-for-service Medicare, whichever is least expensive” and “rise or fall along with the actual cost of the policies — creating more protection for seniors and saving potentially far less in the budget.” Ryan’s budget grows the government’s contribution substantially slower than actual health care costs, shifting health care costs to beneficiaries. The plan maintains the Affordable Care Act’s cap on spending at Gross Domestic Product growth plus 1 percent and would also “add catastrophic coverage with a cap on out-of-pocket costs.”

The proposal is similar to the Rivlin/Domenici plan and it shares some of its problems. Connecting the premium support credits to the second lowest plan in any given geographic area would shift lest costs to seniors than determining the credits independent of the actual bids (via indexing), but in high cost Medicare areas, the second lowest plan will be cheaper than coverage available through traditional Medicare. Thus, seniors who chose to stay in the fee-for-service could still experience a cost-shift: they would be responsible for the difference between the amount of the premium credit and the actual cost of the policy (conversely, if a “senior chose a plan that cost less than the benchmark, he or she would be given a rebate for the difference”). Lower-income residents would receive additional assistance.

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 here, in a nutshell, is the problem: In an interview with the Washington Post, “Ryan and Wyden acknowledged that their plan might not bring in more savings than under the current law.” Yet they’re willing to set the nation on an untested path of private competition that breaks up the large market clout of Medicare (which is now experimenting with more efficient ways to pay providers) and pushes seniors into less efficient private plans. It moves the health care system closer to the Ryan ideal in which future Congresses would be able to reduce federal costs by eating away at the premium credit seniors receive. Over time, Medicare will start bleeding beneficiaries, becoming an ever smaller program.