Is the Ryan Medicare Overhaul Proposal a Good Idea? >
Paul Ryan's Medicare Plan Harnesses Consumer Power in Healthcare
Overhauling Medicare will help restore solvency to the federal government while improving healthcare
August 17, 2012
About James Capretta:
James Capretta is a fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.
The Medicare reform plan advanced by Rep. Paul Ryan is not just a good idea, it's essential both to restoring solvency to the federal government and to improving the nation's healthcare system.
It's important to note that the proposal is bipartisan in nature. Democratic Sen. Ron Wyden joined with Ryan in offering it in December 2011. Earlier versions of the idea were supported by Democratic Sen. John Breaux and other many other Democratic members of Congress.
There are two basic choices for slowing the pace of rising costs in Medicare. The first option—the one embraced by the Obama administration—is to rely on the federal government to impose price controls and otherwise try to micromanage how healthcare is delivered to patients. This approach has been tried for the past four decades in Medicare, and hasn't worked.
[See a collection of political cartoons on the budget and deficit.]
The alternative is to harness the power of consumer choice in Medicare. The proposal would be phased in gradually. Current beneficiaries and those age 55 and older would see no changes in the way the program works for them. Future entrants, however, would be entitled to a premium support payment which they would direct to the plan of their choice. They could choose to enroll in a private insurance option, or the government-administered fee-for-service program. The government's premium support payment would be the same regardless of the choices beneficiaries made. Thus, if a beneficiary chose a low-cost, high-value plan, his out-of-pocket premium would be low or perhaps zero. Beneficiaries electing to enroll in expensive plans would have to pay the added costs themselves.
This change in how the program is structured would give the beneficiaries strong incentives to find the best value for their money, which in turn would force the insurers and those providing medical services to find ways to cut costs and deliver better care.
This is exactly how the prescription drug benefit in Medicare is structured today, and it is working tremendously well. The average premium in 2013 will be $30 per month, which is the same as it was in 2012 and 2011. Moreover, it's just $7 more than it was in 2006. Overall, spending on the drug benefit is now more than 40 percent below what was expected when it was enacted. Costs are under control because competition works.
The Wyden-Ryan plan would import the model that is working so well in the drug benefit to the rest of the Medicare program.
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- Other Arguments
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#112052
No — Ryan's plan would destroy healthcare security for the middle class
ETHAN ROME, Executive Director of Health Care for America Now
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#26864
Yes — Ryan's plan gives seniors the right to make their own choices
NINA OWCHARENKO, Director of the Heritage Foundation's Center for Health Policy Studies
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#43959
Yes — Medicare reform needs to address underlying causes of rampant healthcare spending to control it
JOSEPH ANTOS, Wilson H. Taylor Scholar at the American Enterprise Institute
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#43454
Yes — The Ryan plan isn't perfect, but the country might well go broke without it
MICHAEL D. TANNER, Senior Fellow at the Cato Institute
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#62647
No — Medicare reform is too politically risky for Republicans
JAMIE CHANDLER, Political Scientist at Hunter College
