Paul Ryan’s plan to save Medicare
Originally posted June 29, 2012
Update: With the announcement that Human Events Conservative of the Year for 2011 Rep.Paul Ryan (R-Wis.) will be Mitt Romney’s choice for vice president, the Obama campaign will certainly begin drumming up the false narrative that Medicare, as we know it, will cease to exist if Republicans are to take back the White House. As Budget Committee chairman, Paul Ryan lead the charge on the plan of revamping Medicare and placing it on a sustainable and sensible path.
We sat down with Paul Ryan at the end of June and he reiterated his plan to save Medicare. The exclusive interview is below.
Q: Most experts agree that Medicare is on an unsustainable path. Can you provide the dimensions of the crisis and why you think the program needs to be reformed?
Paul Ryan: There are 10,000 baby boomers retiring every day, with fewer workers paying into the program to support Medicare beneficiaries. This demographic transformation is taking place as health care costs increase at an unsustainable rate, directly threatening Medicare’s ability to deliver quality, affordable care to seniors. Non-partisan experts—from the Congressional Budget Office to Medicare’s own actuaries—warn of the looming bankruptcy of Medicare just as today’s seniors are in the heart of their retirement. Roughly one decade from now, the available funds to cover seniors’ hospital benefits will be fully exhausted. Absent reform, tens of trillions of dollars of empty promises will painfully become broken promises.
Q: What is the president’s plan to address Medicare’s costs?
PR: The president already passed a law—The Patient Protection and Affordable Care Act, or Obamacare—that makes drastic changes to Medicare.
Obamacare raids Medicare. It takes more than $500 billion from Medicare to spend on the president’s health care law, not to extend Medicare’s solvency. Just as people have complained for years that we are raiding the Social Security trust fund, the president’s health care law does the same to Medicare.
Obamacare rations Medicare. The health care law establishes an unaccountable board of 15 unelected bureaucrats—called the Independent Payment Advisory Board—to cut Medicare in ways that will result in restricted access and denied care for current seniors.
Obamacare fails to avert Medicare’s bankruptcy. It adds layers of new red tape and bureaucracy that have failed to control Medicare’s explosive growth over its 50-year history. The top-down, government-centered approach is unworkable, fails to control cost growth, and is more likely to drive providers out of the system and further diminish the quality of care for America’s seniors.
Q: You have proposed premium support payments as a major reform of the current program. Can you explain how Medicare would work under your reformed system?
PR: The first step to protecting and strengthening Medicare is to repeal the president’s health care law. Repeal will prevent Obamacare’s raid of hundreds of billions of dollars taken out of Medicare in order to fuel new open-ended health care entitlements and protect seniors from Obamacare’s board of 15 unaccountable bureaucrats empowered to restrict access to Medicare. Next, policymakers must come together to advance real reform that averts Medicare’s looming bankruptcy and strengthens its guarantee.
The reforms we proposed in the House Republican budget earlier this year ensure no changes for those in and near retirement. Future retirees—those currently 54 or younger—would take part in a reformed program that works likes the health coverage enjoyed by Members of Congress, harnessing the power of choice and competition to deliver high quality care while addressing the root drivers of health inflation.
A future retiree would receive a list of Medicare-approved guaranteed coverage options, including a traditional Medicare option, offered on a regulated Medicare exchange and would select the plan that best meets his or her needs. For these plans to be offered on the Medicare Exchange, they must meet minimum requirements to ensure the coverage option is comprehensive and that no senior can be discriminated against.
“Premium support” simply means that the premiums that pay for that plan would be supported by Medicare and paid directly to the retiree’s health plan choice. The premium-support payment would guarantee affordable health coverage would be available for all seniors. Lower-income seniors and those with greater health risks would receive more financial support, while wealthier seniors would receive less.
Program growth would be put on a sustainable path through a competitive bidding process. Allowing seniors to choose the plan that works best for them would force providers to compete for the patient’s business, thus curbing the unsustainable rise of health care costs that is threatening both Medicare and the affordability of health care for all.
Q: Critics argue that your reform simply shifts costs to beneficiaries. How do you respond to these charges?
PR: Patient-centered reform—using true choice and competition—tackles the root drivers of health cost inflation. Our reforms draw upon the lessons of Medicare’s prescription drug program (Medicare Part D), in which patients have the freedom to choose among competing Medicare-approved coverage options.
In the decade since creation of Medicare Part D, the actual costs have come in 40 percent below cost projections, while satisfaction with the program remains high. Because the power rests in the hands of the patient, plans are forced to compete against each other on the basis of cost and quality. Choice and competition remain the only means by which costs can be brought under control without sacrificing quality. These lessons must be applied to the rest of the Medicare program.
The president’s approach, which gives power to unaccountable bureaucrats to set prices, is a recipe for government rationing. The approach not only restricts access to the critical care seniors deserve, but it fuels the very cost-shifting that proponents of the president’s approach decry.
Paying doctors less through bureaucratic controls creates the perverse incentives that drive costs up for the rest of the population. The choice facing doctors: make up for the lost revenue by increasing costs to your other patients or leave the system entirely. We are already seeing this dangerous trend happen in Medicaid, where physicians are reimbursed cents on the dollar relative to non-government patients.
As a result, roughly half of all doctors are increasingly turning away new Medicaid patients. Under the president’s health care law, Medicare’s reimbursement rates will drop well below what Medicaid pays doctors. This bureaucratic approach to out-of-control costs is economically unworkable and—most distressingly—threatens Medicare’s ability to deliver quality care to seniors.
Q: Where did you get this idea for how to reform Medicare, and what makes you confident you can build support for these ideas?
PR: There is a long history of bipartisan support for the premium support approach to strengthening Medicare. It was a concept embraced in 1999 by President Clinton’s Bipartisan Commission on the Future of Medicare, co-chaired by Democratic Senator John Breaux of Louisiana and Republican Congressman Bill Thomas of California.
More recently, former Clinton budget director Alice Rivlin and former New Mexico Senator Pete Domenici coauthored a Medicare reform effort rooted in choice and competition. I’ve worked with Alice Rivlin and Senator Ron Wyden, a Democrat from Oregon, to advance similar reforms, and House Republicans have embraced these kinds of reforms in our past two budgets.
Structural entitlement reform is the only way to balance the budget and lift the crushing burden of debt without sacrificing economic growth. The reforms repair the federal government’s fiscal health by inviting market-based solutions to a major entitlement program, which in turn provides the best means of strengthening health security of America’s seniors.
It makes sense that these ideas have attracted leaders in both parties. Patient-centered Medicare offers the only guarantee that Medicare can keep its promise to seniors for generations to come. Unlike the president’s health care law, which was jammed into law on a partisan basis, I believe we must build a broad coalition for reforms that save and strengthen Medicare. With the right leadership in place and with the support of the American people, I am confident that we can find common ground and advance common-sense solutions to save and strengthen Medicare.
Paul Ryan represents Wisconsin’s 1st Congressional District and serves as Chairman of the House Budget Committee.