The Ryan Republican Medicare Reforms: What They Are, What They’re Not, and What They Might Become

Key Points

• The Medicare part of the Ryan budget is superior to Obamacare but needs more definition.
• The current proposal would limit future Medicare beneficiaries’ choices to those selected from a federal exchange.
• Medicare beneficiaries would benefit more from Republicans’ clear commitment to restore Medicare Advantage, a popular alternative to the traditional Medicare monopoly that half of current beneficiaries will lose due to Obamacare.
• Republicans should advance Medicare reforms in a way that makes their benefits more clear to the public, by building on the popularity of Medicare Advantage and Medigap, rather than appropriating the language of “exchanges” from Obamacare.

The Medicare part of Paul Ryan’s budget proposal, Path to Prosperity, is superior to the status quo, or anything proposed by President Obama.1 However, it is somewhat more vague – and might differ significantly – from the high standard for reform that Ryan set himself last year, in Roadmap for America’s Future.2

Some of Ryan’s biggest fans did not initially appreciate the difference. The Wall Street Journal editorialized (incorrectly) that the Path to Prosperity “means that at age 65 you would be able to keep your same insurer, with the feds paying for that insurance instead of your employer.”3

But that was a feature of last year’s Roadmap, not this month’s proposed budget. The Wall Street Journal corrected the record the next day, clarifying that “the subsidies will flow through Medicare, only to regulated insurers and government-approved plans. It does not go as far as Mr. Ryan’s previous ‘roadmap’ which offered direct cash vouchers for individuals who preferred to buy insurance themselves.”4

The previous Roadmap contained a very precise Medicare “payment” (in Ryan’s words) of $11,000, to be adjusted for future inflation by a factor combining changes in the Consumer Price Index and changes in medical prices, for future Medicare beneficiaries who are now under 55 years of age. Path to Prosperity eliminates the payment in favor of the somewhat more vague “premium support.” Nor does it even report how it would calculate this premium support, beyond asserting that “wealthier beneficiaries would receive a lower subsidy” (p. 46).

Under the previous Roadmap, you could have taken the payment and used it to “to pay for one of the Medicare certified plans, or any other plan, such as those offered by former employers or available from the private market” (p. 51). In other words, you would have had the freedom to buy a Medicare Advantage plan, or to pay your employer for a retiree health plan, or buy an individual plan regulated by your state’s Insurance Commissioner.

Under the current proposal, we’d be forced to choose a plan from a federal “tightly regulated exchange.”5 This change is disconcerting for two reasons. First, “exchange” is Obamacare language. It makes little sense for Ryan and his colleagues to pledge to cut off funding for Obamacare’s state-based exchanges (which will provide the means whereby working Americans will lose our employer-based health benefits), while proposing to set up a new federal bureaucracy with the same name for Medicare beneficiaries. Second, people rightly associate an exchange with a limited choice of plans selected by a politically appointed board, offering benefits determined by bureaucrats’ whims.

Of course, the Wall Street Journal also notes that Ryan “moderated his ambitions” because “reforms of this order are so unusual,” and that Ryan’s Medicare would look a lot like Medicare Advantage.6 Ryan should have hired the Wall Street Journal’s editorial board to write his proposal, because using the term Medicare Advantage instead of “exchange” puts the reform in an entirely more positive light.

Medicare Advantage is a popular alternative to traditional Medicare, whereby seniors can choose Medicare through a private plan, which does not have to pay providers according to the government’s Soviet-style fixed-price schedule. Obamacare will drive about a half of participating seniors out of the program, as I discussed in a study of the costs and benefits of Medicare Advantage.7

Instead of jettisoning this popular program in favor of an Obamacare-style exchange, Republicans who wish to bring this valuable reform to fruition should combine the best features of Medicare Advantage with the best features of Medigap, another popular option used by Medicare seniors to supplement traditional Medicare. Such a reform would allow Medicare beneficiaries to use their Medicare “payments” (or whatever Ryan & Co. want to call them) to buy long-term, individual health insurance, which protects seniors from unanticipated premium hikes by guaranteed renewability, as more fully described in the study cited above.

Paul Ryan and his Republican colleagues have made a very serious proposal to reform Medicare by allowing seniors more choices while protecting taxpayers. Anticipating political risks, they camouflaged their proposal in language that makes the benefits unnecessarily difficult to perceive. As they move it forward, I trust that they will advance it in a way that makes those benefits more clear to the American public.

ENDNOTES

Paul Ryan, The Path To Prosperity: Restoring America’s Promise, Fiscal Year 2012 Budget Resolution (Washington, DC: House Committee on the Budget).

Paul Ryan, A Roadmap for America’s Future, Version 2.0 (Washington, DC: Office of Representative Paul Ryan, Ranking Member, Committee on the Budget, January 2010).

“The Ryan Resolution,” editorial, Wall Street Journal, April 6, 2011.

“Medicare for a New Century,” editorial, Wall Street Journal, April 7, 2011.

Paul Ryan, The Path To Prosperity: Restoring America’s Promise, p. 47.

“Medicare for a New Century,” editorial, Wall Street Journal, April 7, 2011.

John R. Graham, Medicare Advantage or Medicare Monopoly? (San Francisco, CA: Pacific Research Institute, January 2010).