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Top Republican and Liberal Democrat Seek Medicare Compromise

They say plan would preserve Medicare, allow flexibility

A liberal senator and a conservative Republican have teamed up to try to cut through the political noise about Medicare reform by offering a plan they think could win over both sides.

The proposal by House Budget Chairman Paul Ryan, R-Wis., and Sen. Ron Wyden, D-Ore., would offer older people a set amount of money to pay for private health insurance but also would give them the option of sticking with the traditional Medicare program.

See also: AARP on Wyden-Ryan Medicare proposal.

Wyden says the proposal satisfies Democrats’ desire to preserve traditional Medicare and Republicans’ desire for market-driven competition.

“There’s a window of opportunity here,” Wyden said Thursday. He added, though, that a “high decibel” debate is about to break out with the coming election year. “We know there’s a campaign ahead … But at some point, you’ve got to start paving the way for the future.”

Ryan agreed on the urgency. “Medicare is going bankrupt. The status quo is the greatest threat to seniors,” he said.

The plan quickly drew fire.

For instance, the Obama administration opposes the plan.

White House spokesman Jay Carney said the Wyden-Ryan proposal could, over time, cause the traditional Medicare program to “wither on the vine,” because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans.  And it would shift costs from the government to seniors.
“At the end of the day, “ he said, “this plan would end Medicare as we know it for millions of seniors.  The Wyden-Ryan proposal is the wrong way to reform Medicare.  That’s our position.”

Lauren Weiner, spokeswoman for the progressive group Americans United for Change, called it “coupon care” and charged that the plan would increase participants’ out-of-pocket costs. “Leaving seniors to the mercy of the private insurance industry is just plain cruel,” she said.

That group also called the plan “lipstick on a pig” because it is very similar to the controversial plan Ryan presented earlier this year. There are two major differences from Ryan’s original proposal: The new plan would allow seniors to choose traditional Medicare and it would not automatically pay for shortfalls through higher costs for participants.

Rep. Pete Stark, D-Calif., called the plan an end to “Medicare as we know it, plain and simple. If these two get their way, senior citizens’ health coverage will depend on what big insurance offers and what seniors — most of them on modest, fixed incomes — can afford. That combination will jeopardize health and economic security for seniors.”

But Bob Moffit, senior fellow at the Heritage Foundation’s Center for Policy Innovation, says "Traditional Medicare is ending anyway." One consequence of the congressional supercommittee’s failure to reach a larger agreement is that Medicare providers now face a 2 percent cut. Further, the Affordable Care Act passed last year trims future spending for the private Medicare Advantage plans by $500 billion over the next decade.

“Ryan and Wyden are putting Medicare on a budget, but so is the current law,” he says.

By creating competition between private insurers for Medicare customers, prices will be driven down, Moffit says.

AARP Executive Vice President Nancy LeaMond said her organization is waiting to see more details. "AARP continues to review the Wyden-Ryan proposal, and just as with any proposal, we will examine whether it would reduce access to care, whether it will result in more cost shifting to older Americans, and whether it will improve health care quality and delivery."

Next: How does the plan work? >>

Here’s how the plan would work:

  • The program would stay the same for those 55 and older. Those who turn 65 after 2022 would choose between traditional Medicare and a private insurance plan. The federal government would give each person money to pay the premium, with the amount set at the cost of the second-lowest of the plans available, whether it’s a private plan or Medicare. Anyone who opted for a cheaper plan would pocket the difference. Those who wanted a more expensive private plan would pay the extra themselves.
  • To restrain growing health costs for the government, the Medicare system would be capped at the growth of the economy plus one percentage point. Wyden says he hopes the changes to the system will do enough to keep costs in line, but if they don’t, Congress will be charged with coming up with a way to cover the costs. That could mean higher premiums for older people. But Ryan said other options are available to Congress as well, such as limiting doctor payments or charging more to wealthier seniors. AARP has opposed charging people more. “We feel seniors already are asked to pay enough,” says Ariel Gonzalez, AARP’s director of health and family advocacy.
  •  Lower-income seniors eligible for Medicaid would get protection from premium increases and money to cover out-of-pocket costs.

  • Workers at companies with up to 100 employees would be able to use employer health insurance funding for private plans outside that company’s offerings, without any tax penalties. That idea, long pushed by Wyden, is aimed at holding costs down for employees who can shop around and at putting pressure on insurers to keep costs low.

Wyden and Ryan say the plan is not yet written with the kind of detail needed for a legislative proposal and realistically won’t be considered by Congress soon, but they wanted to prove a bipartisan solution is possible on the divisive issue. Both parties have used Medicare as a campaign issue, and because Ryan’s original proposal had been so roundly criticized, Democratic candidates were anxious to revive the issue. Wyden’s support complicates the politics.

Ryan, a leading advocate of cutting government spending, says the issue needs to be considered quickly before the Medicare system’s long-term shortfalls become more serious.

“We are in a precarious position as a country,” Ryan says, noting that ignoring the problem and ending up like debt-plagued European countries could lead to higher taxes and benefit cuts. “These entitlements are promising trillions of dollars in empty promises.”

Medicare reform has a long history of being a bipartisan effort, Moffit says. Wyden’s involvement with the proposal will make it harder for the White House to paint reform as a Republican effort to cut Medicare.

“It’s a new beginning for a national conversation on the future of Medicare,” Moffit says.

Also of interest: Saving Medicare. >>

Tamara Lytle has covered politics and government in Washington for more than 20 years.