Two powerful members of Congress, a Democrat and a Republican, were leading a federal commission to find a secure financial path for Medicare. Instead of relying entirely on public insurance for older Americans, they argued, the government should help seniors buy private health plans.
The idea was polarizing, and, by a single vote, the commission ended a year of debate by failing to recommend the change to the White House or Congress.
The Bipartisan Commission on the Future of Medicare finished its work in 1999. But a dozen years later, the core ideas — championed then by a centrist Louisiana Democrat, Sen. John Breaux, and a brainy and acerbic chairman of the House Ways and Means Committee, Republican Bill Thomas of California — live on in the proposal to change Medicare that the House has embraced in recent weeks.
The proposed change is known as “premium support,” because the government would pay part of the insurance premiums charged by private insurers that compete for older Americans’ business.
The idea’s lineage reflects a more complicated reality than either political party acknowledges today. Although Democrats are now vilifying it as a dangerous creation of the GOP, it has had Republican and Democratic proponents alike for more than three decades.
But even some of the leading health policy and economic thinkers who have advocated premium support are distancing themselves from the specific plan drafted by House Budget Committee Chairman Paul Ryan (R-Wis.).
Among these critics is Alice M. Rivlin, a Brookings Institution scholar who wrote a rough outline of such an approach with Ryan as members of a recent presidential commission on the federal deficit. “I think it’s still a valuable concept,” Rivlin said. “I wouldn’t support the version that he has.”
Such hesitancy is echoed by public skepticism: Only one-third of Americans favor changing Medicare in the way Ryan suggests, according to a WashingtonPost-ABC News poll. The House has adopted the change as part of a budget proposal written by Ryan, but the Democratic-controlled Senate is reluctant. President Obama has condemned the idea, saying it would create a“fundamentally different society than the one that we have now.”
Still, Ryan and conservative allies are not alone in believing that market forces may be the best way to slow spending in the massive entitlement program — a lifeline to care for 47 million elderly and disabled people — that imperils the nation’s fiscal stability. “Medicare as we know it is going to end by itself if we don’t make some changes,” said Breaux, the Democratic senator-turned-lobbyist who still favors the ideas considered by his commission.
There is a broad consensus that Medicare in its current form will be overwhelmed by the financial pressures of the aging baby-boom generation, longer life spans and sophisticated medical treatments. Various estimates say the fund that pays Medicare hospital bills will run short in a decade or two; the program’s trustees are to release new predictions in a few weeks.
The thinking about Medicare and market forces has long bipartisan roots. In the early 1980s, then-congressmen Richard A. Gephardt, a Missouri Democrat, and David Stockman, a Michigan Republican, proposed vouchers to help people on Medicare buy private health plans.
The term “premium support” was coined in 1995 by two respected health policy experts, neither a conservative: Henry Aaron, a Brookings economist, and Robert Reischauer, president of the Urban Institute. “The idea of vouchers was abroad in the land,” Aaron recalled. “We thought there was sort of a free-market-will-cure-all mentality.”
Their idea was to marry market competition in Medicare with regulation to ensure proper benefits and enough financial help. The Medicare commission’s work was an heir to their ideas. Proponents point out that the popular Medicare drug benefit created in 2003 relies on a such a model.
Ryan’s plan would be a more extreme form. Starting with people who turn 65 in 2022, it would eliminate the original, fee-for-service version of Medicare, which guarantees specific benefits no matter the cost and allows patients to visit any doctor they want. Instead, the government would chip in a specific amount, with less help for the wealthy, toward the price of a private health plan sold through a new “exchange.” The exchanges would be similar to ones that will be created by 2014 under the new federal health-care law for younger Americans to buy coverage on their own or in small groups.
Eliminating Medicare as it was originally conceived is a major, controversial difference from earlier proposals. James Capretta, a conservative budget expert on health care whom Ryan consulted, said that fee-for-service Medicare “is a big part of why we have fragmentation and inefficiency in health care.” But Rivlin says it is important to preserve the original program as the default alternative.
Another difference involves the subsidies. Breaux and Thomas had wanted them to keep up with the price of insurance premiums, with the government typically paying 88 percent. Ryan would adjust subsidies based on consumer prices, which rise more slowly than health-care prices. He has not described the portion of premiums the government would pay but contends that the arrangement would slow the growth of insurance prices.
Rivlin, Aaron and the Congressional Budget Office predict that older Americans would end up paying for ever more of their care. “Unless history turns on its head, there is no way” medical costs will slow to the pace of consumer prices, said Stuart Altman, a Brandeis University health economist who was on the 1999 Medicare commission. Back then, he voted against the panel’s proposal, in part because of “ambiguity” over how much the government would pay.
Still, Altman said, “I am enough of an economist to believe there are some advantages to markets — both in terms of forcing private companies to do a better job and forcing Medicare to do a better job . . . . If you separate premium support from the Ryan plan, it’s worth a discussion.”