Earth to Republicans: You Are In Big Political Trouble Over the Ryan Medicare Plan

Update: The Wyden-Ryan Medicare Plan - Paul Ryan and Ron Wyden Blow the Medicare Reform Debate Wide Open!

It should now be clear to Republicans they are in trouble over the Ryan Medicare plan.

Yesterday, they lost a seat in a solid Republican New York House district. Their candidate had benefited from lots of money and House leadership attention. The big issue was the Ryan Medicare plan.

All month, Republican Presidential candidates have been walking a tightrope over the Ryan plan--don't embrace it but don't criticize it either for fear of offending the base who will drive the primary outcomes next year. You only had to watch the Gingrich implosion to see what happens if you fall off that tightrope.

Next the Senate will take up the Ryan budget. Senate Democrats can’t wait for a vote on it and are making the Ryan Medicare plan the central issue. Already, at least three Senate Republicans have said they will not vote for the House budget over the Medicare issue. Leader McConnell, sensitive to its political vulnerability, has told Senators they are free to vote their conscience on this one.

Apparently, Republicans don’t understand that they didn’t win the 2010 elections so much as the Democrats lost them. Their fixation on appeasing the right wing of their party misses the critical point that it is independent voters who make the difference in winning or losing an election.

In 2006 and 2008, independents went Democratic. In 2010, they abandoned the Democrats for the Republicans out of concerns for where the Dems were taking the county—not the least over health care.

But an apparent arrogance among Republicans that their 2010 victory was more about them than a rejection of the Democrats quickly led the House to pass Ryan’s budget and Medicare plan with all but four Republican votes. They seemingly never considered the possibility that dismantling Medicare, as we know it, needed to be pre-sold to voters. Now, those House Republicans are hanging out on one giant limb the Democrats can’t wait to cut off in the next election.

That House vote has put Republican presidential candidates and Republican Senators in a really tough spot: Keep independent swing voters happy by backing way from the Ryan plan but offend the Republican base, or support the Ryan plan by giving those House members now out on that limb political cover for their ill considered vote and suffer their own longer-term political consequences?

Ryan’s Medicare plan has been called courageous and farsighted. It may be more foolish and hardly good policy.

Readers of this blog know of my criticisms of the Affordable Care Act particularly over its lack of cost containment—the fundamental health care issue we face.

Ryan’s Medicare plan is poor politics and it is poor policy.

It is poor politics because it is nothing but a cost shift strategy. It is poor policy because it is nothing but a cost shift strategy.

It is hardly courageous. Apparently Republicans have no more courage to face the cost issue—and the politically powerful provider community—than Democrats do.

Now, for those of you ready to criticize these comments for my “lack of understanding of defined contribution health care policy,” please read this first: Defined Contribution Health Care—The Conservatives' Silver Bullit

The Lightweight Romney Health Plan

Mitt Romney has outlined his new health plan. He outlined five key steps in an op-ed in USAToday. Here is a summary:

Step 1: Give states the responsibility, flexibility and resources to care for citizens who are poor, uninsured or chronically ill.who are poor, uninsured or chronically ill.

Step 2: Reform the tax code to promote the individual ownership of health insurance.

Step 3: Focus federal regulation of health care on making markets work…For example, individuals who are continuously covered for a specified period of time may not be denied access to insurance because of pre-existing conditions. And individuals should be allowed to purchase insurance across state lines, free from costly state benefit requirements. Finally, individuals and small businesses should be allowed to form purchasing pools to lower insurance costs and improve choice.

Step 4: Reform medical liability. We should cap non-economic damages in medical malpractice litigation.

Step 5: Make health care more like a consumer market and less like a government program. This can be done by strengthening health savings accounts that help consumers save for health expenses and choose cost-effective insurance.

It looks to me like his health care outline is more intended to make conservative Republicans happy then to really propose ways to reform America’s health care system.

There isn’t one new idea here and it all comes straight from the 2010 Republican campaign playbook.

I have a number of questions:

1. We all seem to agree that the biggest problem is the cost, and therefore the affordability, of health care. Where’s the cost containment in his plan?
2. He talks about giving states the “resources” to take care of the uninsured and the poor. Just what resources, how much money, and where will that money come from?
3. He wants to reform the tax code to permit individual ownership of insurance. But the real premium support most working Americans get is from their employer. When an employer provides health insurance it does so by paying an average of 70% of the cost–worth about $9,000 for family health insurance today. The health insurance tax benefit is worth perhaps 20% of that cost for most workers. How does Romney intend to make an individual system as effective in supporting the purchase of health care? How much support is he willing to provide and where will the money come from?
4. He proposes guaranteeing insurability for those who are continuously covered. But to be continuously covered, an individual has to be able to afford the insurance. How will he assure consumers not just have access to insurance but also affordability?
5. He proposes allowing people to purchase insurance across state lines so that they have access to lower cost insurance. Just which state has low cost and affordable health insurance?
6. He proposes that individuals and small business be able to form purchasing pools to lower costs and improve choice. Presumably, the only difference from these pools and those now offered by insurance companies are that his pools would be exempt from state benefit mandates. How would he protect the existing small group and individual markets from “cherry picking” as the healthy would be enticed to leave the existing state-regulated pools while the sick remained where they could get more comprehensive coverage?
7. He proposes medical malpractice reform. Experts generally believe the kind of reform he is proposing would lower the country’s health care bill by about $60 billion a year. However, that is only about 3% of our annual costs. What other cost containment proposals does he have?
8. He says that his market reforms, such as expanding Health Savings Accounts (HSAs), will drive down costs. HSAs, in various forms, have been around for 20 years–since 2004 in their present form. Yet the free market has only embraced HSAs as a very small part of the system—about 10% of the market. Why does he believe the tinkering with their plan design he is proposing will quickly make them a significant part of the market or make them more affordable?
9. What about Medicare? The Romney op-ed in USAToday doesn’t even contain the word, Medicare. His speech in Michigan today only made a passing reference to the Ryan Medicare plan, while promising a plan of his own in the future.
10. What about Medicaid? He briefly mentions block grants for the states. But how much money would he give the states compared to what they have now?

It looks to me like Romney’s newest health care plan is more about embracing the conservative Republican “free market” campaign talking points list of aging health care ideas in order to prove his bona fides in the primary states, more than it is a serious health care reform proposal.

I doubt even the “Tea Party” Republicans, it is meant to please, will buy it.

Neither the Republicans Nor the Democrats Want to Face the Provider Cost Problem But Both Want to Dump the Problem on the Consumer

A key piece of Paul Ryan’s deficit reduction plan is to change Medicare as we know it. It appears his bold Medicare premium support proposal is failing to gain traction--it is dead as part of any deficit reduction deal this year. Worse, his Medicare proposal looks to be giving Democrats lots of political ammunition for the 2012 elections.

What lies at the heart of Ryan’s Medicare difficulties is that he would all but abandon future seniors (those now under age-55) to a health care system whose age-adjusted premium support would increase each year only at a rate equal to the increase in the consumer price index while their health care costs would likely continue to increase far faster.

Simply, Ryan just shifts the future burden of uncontrolled Medicare health care costs from the federal government to the senior. That will solve a big part of our federal deficit problem but hardly help people.

Yes, he offers a defined contribution health care solution with the promise of invigorating the markets and making costs lower. But we have had a form of Medicare premium support and private competition for years (Medicare Advantage) and there isn’t a lot of evidence the market can get the cost control job done on its own. (See: Defined Contribution Health Care—The Conservatives' Silver Bullet)

The Democrats have had a field day scaring people over the Ryan proposal because, quite frankly, the Ryan plan gives them a lot of legitimate ability to do so. I guess the definition of a terrible policy proposal is one your opponents can successfully attack without having to mislead people.

But Ryan isn’t the only one guilty of trying to put consumers into a health care system that limits federal spending by shifting the excess cost burden from the government to the consumer.

I call your attention to Jim Capretta’s recent column at Kaiser Health News. Here is a key paragraph:

Ryan's critics have focused particular attention on his plan's indexation of the Medicare "premium support credits" to the CPI in the years after 2022, suggesting that this idea is somehow beyond the pale. But this is sheer hypocrisy on their part because the indexing of government-financed premium credits below cost growth is in the president’' plan too, and yet not a complaint has been heard about that from its advocates. That's right. After 2018, if the aggregate governmental cost of premium credits and cost-sharing subsidies provided in the state-run exchanges exceeds about 0.5 percent of GDP (a condition that the Congressional Budget Office says will be met), the recently-enacted health law requires the government's per capita contribution to health plan premiums in the exchanges to rise more slowly than premiums. The administration actuaries interpret the law to mean that the government's contributions toward coverage will rise with GDP growth after 2018. CBO appears to have a different interpretation. Still, under all interpretations and projections, it's clear that the exchange credits in the new law will not keep pace with expectations of rising health costs. And that's exactly what the president is now saying is so wrong with Ryan's Medicare plan.

In fairness, Capretta also makes the broader point that he believes the Ryan plan would create the rigorous competition Medicare needs to control costs.

But in my mind, the real issue here is that both Ryan and the Democrats have made the same mistake.

Both are mostly avoiding the fundamental health care problem in the first place—chronic escalation in costs much higher than either GDP growth or the consumer price index. Neither side has offered a bold plan designed to change the current fee-for-service provider payment incentives that just keep fueling these unaffordable costs. Neither side seems either willing or capable of taking on the provider.

But both are willing to control future federal spending by dumping the excess health care cost problem on the consumer.

I don’t think we are going to have a real health care debate in this country until the voter/consumer/patient comes to understand the long-term threat they face from health care costs that show no sign of abating and they demand that the politicians aim for a solution not on their backs but on the backs of the people sending them these bills.

Recent post: What It Will Take to Bring America’s Health Care Costs Under Control––We Have to Change the Game