New Medicare Reform Proposal Offered by Senator Wyden and Representative Ryan

The Chairman of the House Budget Committee and a senior member of the Senate Budget committee in the U.S. Senate have issued a bi-partisan option for the reform of Medicare. Senator Ron Wyden (D-Wa.) and Representative Paul Ryan (R-Wis.) issued a report outlining their proposal to reform Medicare entitled “Guaranteed Choices to Strengthen Medicare and Health Security for All” before the Bipartisan Policy Center (BPC).  Founded in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell, BPC combines politically-balanced policymaking with strong, proactive advocacy and outreach and has played an influential role in debt reduction discussions.

The Ryan/Wyden proposal would offer beneficiaries beginning in 2022 the choice to stay in traditional Medicare or the ability to purchase health insurance from a private insurer through a Medicare exchange. All plans including the traditional Medicare fee-for-service plan would participate in a process to determine the dollar amount of the federal government’s contribution to the cost of coverage and in the exchange. Individuals who purchased insurance from a private insurer would receive a subsidy from the government.  That subsidy would be the equal to the second least expensive approved plan, or the amount spent on traditional fee-for-service Medicare.  If a beneficiary chose a plan with a premium higher than the subsidy amount, they would be responsible for paying the difference.  If a beneficiary chose a plan lower than the subsidy amount, they would receive a rebate for the difference. The difference between this proposal and an earlier proposal made by Rep. Ryan, is that the subsidy would rise or fall depending on the actual cost of the policies.

These subsides would be risk-adjusted to ensure that those with greater health needs are guaranteed affordable coverage. Participating plans could not refuse coverage based on pre-existing conditions, nor could they charge discriminatory rates based on health status.  Health plans would be required to cover at least the actuarial equivalent of the benefit package provided by fee-fore-service Medicare. Program growth after 2022 could not exceed nominal Gross Domestic Product growth plus 1 percent.  If costs per beneficiary rose faster than this established limit, reductions would be made to the segment most liable for this increase, including providers, drug companies, and means-tested premiums.

Ryan and Wyden said in an interview in the Washington Post published on Wednesday December 14, 2011, that they joined forces in hopes of lifting the Medicare debate above the divisive political rhetoric and forging a genuine compromise that could save the program along with the government’s solvency.  Since unveiling his premium support plan last spring, Ryan has been working with Democrats to modify the idea to build bipartisan support, the Washington Post reported. “We want to demonstrate that there is an emerging consensus developing on how to preserve Medicare. We want to move that consensus forward,” Ryan said to the Post. “This program’s got to be reformed to be saved. The country’s at stake.”

In the Washington Post article, the two said would not draft legislation at this point in time.  “There’s no point in drafting legislation if you know it’s not going to pass,” Ryan said. With Congress at an impasse over more immediate deadline matters, such as the extension of a temporary payroll tax cut, Ryan said he does not expect action on major issues such as Medicare until a new Congress is seated in 2013.  As such, they have not yet sought a cost estimate for their plan from the Congressional Budget Office.