The first flurry of political reactions to last week’s Ryan-Wyden proposal for a revamped premium-support version of Medicare reform suggests that old habits die hard—particularly the bipolar tendency to view such modest adjustments either as a fundamental threat to guaranteed benefits and protections of the traditional Medicare program under current law or as a definitive step to vigorous choice and competition that ensures seniors will receive healthcare of better value at lower costs.
The initial stance of the Obama White House was a predictable recycle of past political hyperbole, with spokesman Dan Pfeiffer claiming that the new plan would end Medicare as we know it, raise premiums, and cause the traditional Medicare program to “wither on the vine.” (At least there was no direct mention of its failing to relieve the heartbreak of psoriasis….).
A slightly more temperate discussion of “premium support” was staged at the Brookings Institution on Friday morning, but even a balanced panel of longtime health policy experts appeared to be speaking from parallel universe frames of reference.
The traditionalist home team still favors lots of regulation, standardized benefits, taxpayer cross-subsidies, and top-down management. Nearly every senior is portrayed as potentially about to be victimized by rapacious private health insurance scoundrels, but for the vigilant protection of the Medicare bureaucracy and its political defenders. The reformist visiting team wants more privately supplied variation, cost-conscious consumer choice, and means-tested floor guarantees, but fewer price-controlled ceilings—without seeming too hard-hearted or radical.
However, the Strurm und Drang of well-rehearsed Medicare politics posing as policy analysis should not obscure some serious achievements signaled by the new Ryan-Wyden collaboration that make the next stage of Medicare reform they propose more realistic and likely, albeit less transformative.
First, the revised premium support proposal acknowledges that the traditional Medicare fee-for-service program cannot, will not, and should not be abolished ten years from now, even for new entrants, from a cold start. The more relevant issue is how should both the “public” and “private” arms of Medicare change to adjust to economic reality and respond to increased competitive pressure to perform more efficiently and less expensively. The only workable mechanism for moving in this direction that does not become politically arbitrary and less defensible involves establishing need-adjusted levels of taxpayer subsidies for somewhat more diverse Medicare coverage options (“premium support”) that are anchored to the actual costs to deliver a common, baseline health benefit in better ways.
Second, Ryan-Wyden avoids trying to guarantee the market share of any particular way—public or private—to deliver politically promised benefits. Instead of steering future competition one way or another, it would allow Medicare beneficiaries to decide for themselves, within more realistic and sustainable fiscal limits. The key is to get the structure of competition in Medicare right, in order to reveal how much of a gap there might be between what voters might like to “guarantee” as coverage, how much it is likely to cost, and how much taxpayers are ready and willing to pay to support it. (Hint—those lines do not cross until they first become more transparent and then are bent by the forces of choice, competition, and compromise).
Third, Ryan-Wyden begins to move away from earlier temptations to assure cost savings through arbitrary formulas to index the future rate of growth of Medicare program spending (but not entirely; there is some backsliding toward a GDP + one percent annual growth ceiling, potentially enforced by a congressional fallback mechanism). The petty tyranny of federal budget scoring rules usually produces the illusion of aggregate fiscal progress that is sustainable only on a spreadsheet, and melts away in the real world of political give-and-take and economic uncertainty. Lasting Medicare savings will have to be achieved the old-fashioned way, through efficiency, innovation, and reallocation of resources used for healthcare consumption and delivery (including—gasp—even toward non-healthcare services alternatives, on occasion).
Fourth, Ryan-Wyden signals additional convergence toward a growing policy consensus on such Medicare housekeeping measures as (1) consolidating cost sharing across parts A, B, and D, and any other as-yet unused letters of the alphabet, (2) offering full cash rebates to beneficiaries who choose lower-cost plan options below premium support benchmark levels, and (3) re-targeting the exhaustible supply of taxpayer subsidies to be more sensitive to relative levels of health risk and income among beneficiaries.
All told, this is close enough for government work, but that would subject vital Medicare reform to the soft bigotry of low expectations. We still have to do even better, despite the political obstacles ahead, before external constraints reduce our future policy options. More on that tomorrow.