How Republicans Could Still Succeed At Privatizing Medicare

Republicans may be backing off their famously toxic plan by Paul Ryan to privatize Medicare, but they’ve doubled down on the broader concept and are taking strategic steps to get there over time. Democrats currently have the upper hand in their battle to protect traditional Medicare for the future, but unless they thwart the GOP’s drumbeat and build support for their alternate vision, it may not be for long.

There’s little disagreement that Medicare is currently on an unsustainable trajectory, with costs spiraling out of control thanks in part to aging baby boomers. Democrats and Republicans both want to rein in Medicare spending, and the two sides increasingly agree that per-beneficiary outlays should be held down to per-capita GDP plus 1 percent, a substantial reduction from projections. But they strongly disagree on how to get there.Republicans want to turn Medicare into a subsidized private insurance structure and cut costs on the beneficiary side. This concept — dubbed “premium support” by backers and “vouchers” by critics — would end the coverage guarantee and give seniors a fixed amount to shop for insurance on a private exchange. If the subsidy is too small, tough luck; they’re on their own.

The Ryan budget aimed to replace traditional Medicare with this concept. But after voting overwhelmingly for it last year, Republicans have grown conscious of the political reality that it’s too radical to pass, and are offering up gentler versions of its core components. Two months ago Ryan himself teamed up with Sen. Ron Wyden (D-OR) to unveil a new blueprint that keeps traditional Medicare alive as an option in the exchanges and has less harsh benefit cuts. Last week Sens. Tom Coburn (R-OK) and Richard Burr (R-NC) rolled out a more fully developed version of a similar plan, containing provisions clearly aimed at enticing Democrats.

The idea was first proposed by former Sen. Pete Domenici (R) and former Clinton budget director Alice Rivlin before Ryan ran with it. Wyden is the only Democrat to support the concept — the White House and Dems otherwise remain strongly opposed to any version of it.

Contrary to Republican claims, Democrats do have a plan to keep Medicare solvent: the plan is to keep its single-payer structure and cut costs on the provider side. The health care reform law lays the framework for such a mechanism starting in 2014 called the Independent Payment Advisory Board (IPAB), a panel of 15 presidential-appointed and senate-confirmed members that has the authority to restrict provider payments without congressional approval. (The theory is lawmakers won’t do it on their own.)

But keeping IPAB alive will be a hard slog. One reason is Republicans are determined to smother it in its cradle: they’ve threatened not to confirm any members to the board, and it’s unlikely Dems will have a filibuster-proof Senate majority anytime soon. The second reason is that health industry opposition to IPAB is so vociferous and united that some Dems are running away from it and signing on to GOP legislation to repeal the panel.

And fears about what IPAB will mean for their bottom line has led insurance and drug industry heavyweights to champion the premium support concept. Behind the scenes they’re part of a growing drumbeat to kill IPAB and move in the direction of vouchers, and Dems aren’t doing much to quell it as of now.

That could come back to haunt them. If IPAB dies, the only proposal on the table to keep Medicare solvent in the long run could well be something akin to the Ryan concept. And while Republicans are taking the political hits for sticking by the approach and portraying it as inevitable, Dems have barely worked to build support for implementing IPAB. If that doesn’t change, the momentum for phasing out traditional Medicare will grow.

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