Your Road Map To Paul Ryan’s Plan To Privatize Medicare

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Since Donald Trump stunned Washington and won the White House earlier this month, Republicans in Congress have been frantically dusting off their legislative wish lists and prepping for the new era in which their party is in the driver’s seat.

For House Speaker Paul Ryan (R-WI), overhauling and privatizing Medicare – the popular, single-payer health insurance plan for senior citizens – is a top priority. What exactly the House’s plan would look like remains unclear, as Republicans have just begun ruminating about overhauling Medicare. But there is a treasure trove of past Medicare ideas and blueprints from Ryan that give us insight into what his plan might look like.

Ryan has been pushing his privatization plan – or what he calls “premium support” – for years. It’s been part of his annual budget blueprints, and it has evolved over time. The basic idea is that Ryan would give the elderly a set amount of money to buy health insurance rather than Medicare’s fee-for-service system where the government pays doctors and hospitals based on the services they provide.

How much money the elderly would receive to buy insurance, the quality of the plans available, how the government would regulate them and the rate at which the benefits would increase have varied over the years and sometimes have been unclear.

As Medicare is currently configured, American workers and employers contribute equally to the public insurance program via the Medicare payroll tax. When people turn 65, they become eligible for Medicare’s guaranteed coverage, pay premiums and receive a robust package of benefits.

Looming as the biggest unknown is whether Medicare – in its current form as a single-payer, guaranteed-coverage, fee-for-service system – will remain intact.

Will Medicare be eliminated explicitly, as it has in past Ryan plans? Will it be changed so substantially that the long-term effect will be to weaken it so that phasing out it out is inevitable? Or will Ryan seek to change Medicare in fundamental ways while still preserving its most important protections?

How committed President-elect Trump and Rep. Tom Price (R-GA), his nominee as secretary of Health and Human Services, are to Medicare privatization is another wild card in the mix.

“It is quite clear at this point that Ryan and Price would say they are retaining traditional Medicare as an option, but the question is under what terms. Is it provided under terms that would allow traditional Medicare to continue and flourish? Or is it conversely under terms that would cause it to wither and perish?” said Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities.

Over the years, Ryan’s plans have evolved, in part because of pressure from his own members. Ryan told the New Yorker in 2012 that he recognized his plan needed to be accepted by more than just a few conservatives in the House. He needed to develop a plan that met the vision for the broader Republican conference.

He told the New Yorker in 2012, shortly before he became the Republican Party’s vice presidential nominee, that his early plan “was just me, unplugged.”

“When you’re writing a budget you’re representing an entire conference, and so you have to get consensus,” Ryan said.

But the underlying principle for Ryan’s plans comes from the conservative idea that private businesses are more efficient at managing health care than the government would be. That, some experts argue just isn’t true. Medicare, by and large, is a fairly efficient program. Seniors manage to get a lot of health care they are happy with for a decent price.

“Medicare is more efficient than private insurance for two main reasons. One it is able to pay providers less and second it also because of its size, it has lower administrative costs as well,” Van de Water said.

Health care experts who have spent years analyzing Ryan’s plans note that there are still a lot of questions to be answered. Here’s what we do know:

Ryan’s 2008 Plan On Medicare: Ending Medicare

In 2008 when he was the ranking member of the House Budget Committee, Ryan proposed that traditional Medicare should be replaced with a voucher program. The idea was that individuals would get a set amount of money from the government to purchase health insurance and eventually Medicare would be phased out.

The plan wasn’t well received by Ryan’s colleagues even as conservative think tanks embraced it. Many viewed it as too radical, and touching a program as beloved as Medicare – not to mention phasing it out– was politically a major gamble. According to that New Yorker profile from 2012, Ryan got just 8 co-sponsors on the legislation at the time.

Ryan’s plan eventually gave recipients of Medicare a stipend of “up to $9,500– adjusted for inflation and based on income” to purchase health insurance. Ryan argued that “low-income individuals” would receive “greater support” and that “those with greater medical needs” would “receive a higher payment” but how that would be determined and the specific distinctions were left blurry. As a result, many worried that it put an undue burden on the sickest and oldest beneficiaries and that the vouchers wouldn’t keep up with the rising cost of medical care.

Ryan’s early plan tied the increase each year to combination of inflation as measured in the Consumer Price Index and medical inflation. It also raised the Medicare eligibility age over time from 65 to 67.

Ryan and Rivlin Take On Medicare In 2010

Ryan worked on a more moderate plan in 2010 with Democrat Alice Rivlin, who had been the director of the Office of Management and Budget under President Bill Clinton. The plan differed from Ryan’s earlier plan in one very significant way. The elderly still received subsidies to buy health insurance, but the rate at which their subsidies increased was more generous, an attempt to limit the government’s exposure while still accounting for rising health care costs.

It was unclear if that plan phased out traditional Medicare or kept it. In an email to TPM, Rivlin said this week that the proposal was “unclear,” but that she believed any plan for premium support should preserve traditional Medicare and ensure there are enough protections to keep all the healthiest beneficiaries from switching to private plans leaving the sickest and oldest on the Medicare rolls. That kind of transfer of patients, for example, would be unsustainable, she said.

Ryan and Rivlin’s team work was short lived.

Ryan’s 2011 Budget: Ryan Works To Phase Out Medicare

In 2011– after months of listening sessions with his Republican colleagues–Ryan released his budget, titled Path to Prosperity, which again proposed a major overhaul to Medicare, but had greater support in the wake of Tea Party takeover of the House of Representatives by Republicans who ran on cutting the federal deficit. It left Medicare intact for existing beneficiaires but newly eligible participants would be funneled to an exchange where private insurers competed and individuals could choose private plans. This was Ryan’s phaseout plan.

Some Republicans still worried it was too wonky and complicated to survive the scrutiny of an election year.

“House Budget Committee Chairman Paul Ryan has just released a recklessly bold, 73-page, 10-year budget plan. At 37 footnotes, it might be the most annotated suicide note in history,” conservative columnist Charles Krauthhammer wrote.

Individuals were again given a set dollar amount for health care coverage.

“Beginning in 2022, all newly-eligible Medicare beneficiaries (i.e., individuals turning 65 as well as younger, disabled individuals becoming eligible for Medicare) would only have access to health coverage through private
insurance plans, rather than through the current government-run Medicare program (i.e., traditional Medicare),” Kaiser wrote about the plan right after its release.

Experts argued that the plan would put more cost on individuals than they would incur under traditional Medicare and that administrative costs associated with the plans actually eradicated any savings to the government.

“The Congressional Budget Office estimates that under the Ryan plan the cost-increasing effects would swamp the cost-reducing effects, so much so that by 2030 the overall cost of care for the Medicare population would be at least 41 percent higher than it would be under Medicare and the amount that enrollees would have to pay directly would more than double,” Henry Aaron – a Brookings Institution fellow who co-wrote his own premium support plan in the 1990s– wrote in a paper on premium support.

Ryan claimed in numerous interviews that his proposed changes to Medicare actually were based on the plan that he and Rivlin developed together. “Alice Rivlin and I designed these Medicare and Medicaid reforms,” Paul Ryan said at the time, according to the Washington Post. Rivlin, however, fully rejected Ryan’s revised “premium support” plan.

For one, Ryan’s 2011 plan was tied to the consumer price index or inflation, rather than a health cost indicator which Rivlin and other economists worried would transfer over time an ever-increasing burden for health care costs onto the elderly.

“That’s a reason for me saying very strongly that I don’t support the version of Medicare premium support in the Ryan plan. It’s both because the growth rate is much, much too low, and because it doesn’t preserve fee-for-service Medicare as the default option,” Rivlin told the Washington Post .

It also gave some health policy experts heartburn as they worried that Ryan’s plan wouldn’t be able to keep pace with rising costs of medical care.

“When you put an index in you create a great deal of uncertainty and concern about whether the benefits might shrink over time,” said Paul Ginsburg, Director of Public Policy at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

Ginsburg – like other health care policy experts interviewed for this story – didn’t think premium support plans in of themselves were bad, but he argued he had deep concerns about Ryan’s.

“In concept, [premium support] could be a good idea. There are many plans I don’t like because of the details,” he added.

Aaron has argued that Ryan’s privatization plans over the years have been intentionally light on the details. How, for example, will the government decide how much money to give individuals for health care insurance? How will the government ensure that the available insurance plans are adequate? How will the government make sure that the oldest and sickest can be covered without driving up the cost of premiums for everyone else?

“It is sort of like if you are planning to travel from DC to San Francisco and you want to know what the route is going to be and someone says ‘head west,’ Aaron said. “The details aren’t there.”

Ryan’s Plan Has Evolved To Leave Some Form Of Traditional Medicare In Place

In more recent years, Ryan’s plan has evolved. The idea is still the same. Senior citizens would get a set dollar amount to buy health insurance. Yet, instead of giving voucher recipients only the option to buy private insurance on a health insurance marketplace, the elderly could choose to use their subsidy to buy traditional Medicare.

“Seniors would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange,” Ryan’s 2015 budget blueprint states. “Medicare would provide a premium-support payment either to pay for or offset the premium of the plan chosen by the senior, depending on the plan’s cost.”

Ryan’s 2016 Better Way outline, which Ryan’s office highlighted when asked about his evolution on Medicare, proposed something along the same lines.

“Beginning in 2024, Medicare beneficiaries would be given a choice of private plans competing alongside the traditional Medicare program on a newly created Medicare Exchange,” Ryan’s Better Way plan states.

But some health care policy experts argue that traditional Medicare could still be jeopardized under Ryan’s later privatization plans. Here’s the issue. Under Ryan’s privatization plan, it’s understood that the government will give a set amount of money for individuals to buy insurance, but that dollar amount would be determined by a bidding process of private insurers. Experts are not convinced that quality protections would be strong enough so they worry that the competitive bids could be far cheaper than traditional Medicare in many places, but not be near the quality of the coverage. In that case, individuals who might be interested in going with traditional Medicare to ensure they had more protections may have to pay out of pocket.

“They might have to pay more and they might have to pay a considerable amount more depending on where they are,” said Stuart Guterman, a senior scholar at the Commonwealth Fund. “It’s not overtly phasing out Medicare, but it does clearly put pressure on some folks in some areas.”

Guterman also worries that even if traditional Medicare were an option, it might be strained if enough younger, healthier beneficiaries opted for private plans, older, sicker individuals stayed with Medicare. It could result in Medicare slowly losing it’s power to set competitive prices for services.

“I think it’s a legitimate concern if the mix shifts so that fewer and fewer Medicare beneficiaries are enrolled in traditional Medicare. Then it would be harder for them to set prices effectively,” said Guterman.

2016: Ryan Blames Medicare Overhaul On Obamacare

On the campaign trail, Trump boldly declared that Medicare would remain the same for seniors. He argued that the program was not going to be touched. But as soon as Trump won, Ryan appeared on Fox News and argued that something had to be done about Medicare and hinted that it might come as part of the repeal to the Affordable Care Act.

“Because of Obamacare, Medicare is going broke,” Ryan said in an interview. “So you have to deal with those issues if you’re going to repeal and replace Obamacare.”

The reality is that changes to Medicare made by Obamacare actually made the program more solvent, not less. The Medicare trustees wrote in 2010 that “the financial status of the Hospital Insurance trust fund is substantially improved by the lower expenditures and additional tax revenues instituted by the Affordable Care Act. These changes are estimated to postpone the exhaustion of HI trust fund assets from 2017 under the prior law to 2029.”

How exactly Ryan plans to reform Medicare and whether Trump will go along remains to be seen.

ABOUT THE AUTHOR

Lauren Fox is a reporter at Talking Points Memo.

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