The other day I was watching former Vermont Gov. Howard Dean on CNBC do his best to bash the Medicare reform plan authored by Paul Ryan and endorsed, with a key change, by presumptive Republican nominee Mitt Romney.
Dean botched it and the other panelists called him on it. He simply didnt know the details.
You can almost smell the panic. Dean and many Democrats try to dismiss the Romney-Ryan plan as a voucher, suggesting it would send checks to seniors with a note saying, This is for your health insurance. Good luck.
Well, no. Todays seniors wouldnt be affected at all. The plan wouldnt be implemented for 10 years. And the money wouldnt go to individuals. It would go to providers (see below).
Last week President Barack Obama joined other Democrats in recycling the end Medicare as we know it line, which the PolitiFact site labeled the 2011 lie of the year. The original version of Ryans idea would have offered only private-sector policies, but the latest iteration includes traditional Medicare as one of the choices. How would that end Medicare?
As Yuval Levin wrote at National Review, it is only now dawning on Democrats that it is Obama not Romney who would cut Medicare for current seniors. The Congressional Budget Office recently estimated that Obamacare will yank $716 billion from Medicares planned spending over the next 10 years.
Under Romney, Medicare wouldnt change at all during that time. Ryans version, adopted by the House, called for the same amount of Medicare savings as Obama, but without endorsing specific cuts such as Obamas planned $260 billion reduction in payments to hospitals built into the 2013-2022 budget baseline.
Medicare actuary Richard Foster has estimated that those reductions will cause one in six U.S. hospitals to become unprofitable. Democrats say theyre committed to saving Medicare, but what good is this entitlement if more doctors and hospitals close their doors to new Medicare patients?
Heres how the Romney-Ryan plan would work.
Seniors would receive premium support they could use to purchase insurance, or choose Medicare. The money would flow to government-approved providers. Each policy choice would have to cover the full range of Medicare services.
How much would each person get in premium support? It would be based on annual competitive bidding by participating insurance companies, with the amount based on the cost of the second-least-expensive plan. Seniors who choose the cheapest plan would get a cash rebate. Those who choose the pricier plans would pay more out of pocket. Sick and low-income people would receive more support. Wealthier recipients would get less.
Suddenly, you would have something new in health care systemwide pressure to offer more cost-effective deals. Insurance companies, eager to offer the most competitive plan under premium support, would push providers to reorganize, become more efficient and combine services. This competitive element would offer a way around Medicares innovation-killing, fee-for-service model that pays lousy hospitals the same as good ones.
Historically, politicians proposing entitlement reform lose in the face of hysterical attacks from the programs defenders. Two things are different this year. The Obama administration, not Romney, approved cuts in Medicares growth for todays seniors. That means the usual Mediscare campaign will have diminished credibility.
And a long-running movie has been playing in Europe, showing what happens when countries refuse to get their fiscal houses in order. Theres a good chance Americans dont want to be in that movie.