By John Reichard, CQ HealthBeat Editor
December 15, 2011 -- Sen. Ron Wyden emphasized early Thursday that a new Medicare "premium support" plan he and House Budget Committee Chairman Paul D. Ryan are championing would protect seniors from having to pick up the full tab if Medicare cost increases exceed an annual cap they would put on Uncle Sam's contribution to the program.
But Wyden, D-Ore., and Ryan, R-Wis., were unable to specify how they would be able to keep that from happening. That part of the proposal hasn't been fleshed out, they said.
It's a missing element that, depending on how it's filled in, could be key to how successful Wyden will be in selling this new plan to fellow Democrats.
The unexpected proposal may rekindle the debate about how to overhaul Medicare. And Wyden's work on behalf of seniors earlier in his career when he was a Gray Panther organizer, make him a good ally for Ryan to have on the Democratic side of the aisle.
But top Democrats scrambled Thursday to marginalize the plan. The White House and Rep. Pete Stark of California, the top Democrat on the House Ways and Means Health Subcommittee, issued statements slamming the proposal. And advocates for Medicare beneficiaries appear to be gearing up against it too.
Wyden and Ryan appeared at a Washington, D.C. forum sponsored by the Bipartisan Policy Center, their first public appearance to pitch the proposal. Wyden's backing, which made him the first senator in his party to embrace premium support, is likely to infuriate fellow Democrats. His party plans on using the GOP's endorsement of premium support to persuade seniors citizens to vote against Republican candidates in next year's elections.
Premium support refers to a system under which Medicare enrollees would pick from a menu of competing plans with a fixed government payment to help defray premium costs. Democrats depict it as ending "the Medicare guarantee," a step that would scrap the federal government's compact with seniors to provide them with decent, affordable health care.
Under the new Ryan-Wyden plan, premium support would begin in 2022. Medicare enrollees could choose from a menu that includes not only private plans but the option of staying in traditional Medicare. Americans who are now 55 or older would not be subject to the premium support approach.
Wyden contrasted the plan with Ryan's earlier premium support and one developed by former Congressional Budget Office Director Alice Rivlin, a Democrat, and former New Mexico Sen. Pete Domenici, a Republican.
"This is the only proposal—let me emphasize, the only proposal—that stipulates that if costs rise you don't automatically throw those costs onto the backs of senior citizens in the form of higher premiums," Wyden said.
Wyden and Ryan would allow the federal contribution to premiums to rise each year by no more than the increase in the Gross Domestic Product plus one percent, adjusted for (plus) inflation. That's how much Rivlin and Domenici would let it rise too. But if Medicare's costs exceeded that cap, the federal government wouldn't pay them under the Rivlin-Domenici plan—seniors would, in the form of higher premiums.
"Everything's on the back of Grandma," insurance industry analyst Robert Laszewski noted recently in commenting on the Rivlin-Domenici plan. Insurers, doctors, and hospitals also should have to absorb some costs if expenses increase, he said. "Most of the risk needs to be with the big boys in the system."
Ryan and Wyden appear to have taken that view to heart. They say in a summary of their plan that "any increase over that cap will be reflected in reduced support for the sectors most responsible for cost growth, including providers, drug companies, and means-tested premiums."
"What we explicitly say is we believe this kind of approach where traditional Medicare and private choices compete against each other will hold costs down," Wyden said at the forum Thursday.
"But we have a safety valve more generous than some of tying the cost, the bar, to Gross Domestic Product plus one percent, and then we say that if the costs were to go over that bar Congress would have to do its job and work through why those costs are going up and could look at reducing provider reimbursement, changes in policies with respect to drug companies, higher premiums for most affluent senior citizens—a variety of approaches."
Added Ryan: "We want to give Congress the opportunity to step in front of that cap before it kicks in—to give Congress the opportunity to change the spending in the program to better customize those reforms to be within the cap before the cap hits across the board."
Therein lies the rub, however. What if Congress doesn't act to cut payments to doctors, hospitals, or drugmakers? Would all the costs above the cap then be shifted to affluent seniors in the form of higher premiums? Wyden and Ryan said no. But they couldn't say yet how they'd require others to absorb the higher costs.
A Wyden aide said after the forum that "the mechanism hasn't been fleshed out, but it won't be defaulting to premiums. There will be a default, but it won't be on premiums."
Ryan stressed the urgency of action, saying that the government is making "trillions" in empty promises in talking about entitlement programs. Competition within Medicare would generate major savings without the cap ever having to come into play, he asserted.
As an example, he cited the cost of Medicare's Part D prescription drug program. It's yearly expense is more than 40 percent below original projections thanks to competition among plans, he said. Neither Ryan nor Wyden would hang a dollar figure on potential savings of their proposal, however.
"We want to show that a bipartisan solution is out there," Ryan explained. "We want to show that a bipartisan consensus is forming and can be formed."
Added Wyden: "We know there's a campaign ahead, and everybody who has cast votes and made statements is going to be accountable for those. But at some point you've got to start paving the way for the future," he said.
However, White House Communications Director Dan Pfeiffer said in a statement that "Wyden-Ryan is the wrong way to reform Medicare.
"The Wyden-Ryan scheme could, over time, cause the traditional Medicare program to 'wither on the vine' because it would raise premiums, forcing many seniors to leave traditional Medicare and join private plans," Pfeiffer said. "And it would shift costs from the government to seniors. At the end of the day, this plan would end Medicare as we know it for millions of seniors."
Stark said: "Despite Wyden's claims otherwise, the Wyden-Ryan plan ends Medicare as we know it, plain and simple. If these two get their way, senior citizens' health coverage will depend on what big insurance offers and what seniors—most of them on modest, fixed incomes—can afford. That combination will jeopardize health and economic security for seniors."
Interest groups also began commenting on Thursday.
"Make no mistake, the Ryan-Wyden proposal is a voucher program designed to make people with Medicare spend more for their health care so that the federal government spends less—with some bells and whistles that sound attractive, especially when key details are left out," said Joe Baker, president of the New York City-based Medicare Rights Center. "Once again, we are told that 'market forces will pressure plans to keep their premiums as low as possible in order to gain market share.' But these are the same market forces we have had over the last 30-plus years in the under 65 health insurance market, and costs have spiraled and been passed along to employers and, ever more frequently, to employees in the form of higher premiums, higher copays and lesser benefits."