One of the Democratic Party’s prominent voices on fiscal issues has thrown a hand grenade into the debate over the long-run sustainability of Medicare, the signature Great Society health program for the elderly.
Alice Rivlin, the 79-year-old former budget director under President Clinton, has teamed up with 40-year-old Rep. Paul Ryan, R-Wis., the incoming chairman of the House Budget Committee, on a plan to essentially privatize Medicare for those turning 65 a decade from now.
It’s very similar to Ryan’s “Roadmap for America’s Future” in that seniors would get lump-sum payments for the value of their Medicare benefits and use them to buy coverage in the private marketplace. The payments would climb slightly faster than consumer inflation, but they wouldn’t climb as fast as health care costs have been for decades. As a result, people now in their thirties would likely end up paying for a much bigger share of their health insurance when they retire than today’s seniors. On top of that, people now in their thirties would no longer even know how high their future out-of-pocket costs were likely to climb.
That’s why the idea has been such an anathema to Democrats, not to mention senior citizen groups like the AARP.
Though Rivlin’s approach wouldn’t slash Medicare spending as quickly as Ryan’s Roadmap, analysts say both plans would ultimately end Medicare as we know it.
It’s a concept that’s “a little bit to the left” of the Roadmap, said Andrew Stern, former president of the Service Employees International Union. Like both Rivlin and Ryan, Stern is a member of President Obama’s bipartisan deficit commission.
Rivlin and Ryan seen like the classic odd couple. But Rivlin said she’d gotten to know Ryan through testifying before the House Budget Committee, where Ryan has been the ranking member since 2007. Through their work on Obama’s deficit commission, she said, it became clear they agreed about many of the problems regarding entitlement spending.
Rivlin has long backed the idea of a “premium support” program, which would keep traditional Medicare as the default for seniors but would charge them more out of pocket. Seniors who didn’t want to pay the higher premiums could take a voucher and enter a “Medicare Exchange,” similar to the health care exchanges being set up for uninsured people under the new health care law.
It’s an idea few Democrats have openly endorsed outside of John Breaux, who drafted a similar Medicare proposal as a senator from Louisiana in 1999 with then-House Ways and Means Chairman Bill Thomas, R-Calif.
That idea found support from fiscal commission co-chairs Erskine Bowles, a former Clinton chief of staff, and former Sen. Alan Simpson, R-Wyo., who in a preliminary report two weeks ago listed it as one of a handful of options for lowering long-term Medicare cost.
Rivlin said her voucher plan is a blend of her premium support plan and Ryan’s Roadmap proposal. Rivlin cautioned that their voucher idea should be viewed more as a “concept” than a fully fleshed-out plan, and that they were still in the information-gathering stage. “It’s a first cut at whether we can agree on a set of principles,” Rivlin said. “We’re a long way from a bill.” Rather than torpedo the commission’s chances for a bipartisan agreement, Rivlin said: “I’m trying to help.”
Rivlin, now with the Brookings Institution, said the pain would not be as acute as some might think, because seniors’ out-of-pocket costs would go down as managed care plans competed for their business. And no one could be turned away from the Medicare exchange.
Opponents on the left like Rep. Jan Schakowsky, D-Ill., who also serves on the fiscal commission, argue the best way to hold down costs is to expand traditional Medicare so it can compete directly with private insurers. A “robust public option” also emerged on the preliminary list released by Bowles and Simpson a week ago, which is Schakowsky’s preferred approach and that of many progressives.
Schakowsky told National Journal that a voucher plan would find even less support than the public option did during the health-reform debate, with seniors across the country likely to revolt.
“It’s basically coming out and saying ‘less benefits, more money’” out of seniors’ pockets, she said. “Even if there were some positive words in the [commission] room, outside in the real world it has absolutely no support. I told Alan Simpson that if he tries this, seniors -- they will come and find him in Wyoming.”