Ryan and Wyden Offer Ambitious Health Care Proposal

This morning, Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) unveiled their proposal to significantly change Medicare, one of the largest areas of the budget and one of the biggest drivers of our long-term debt. Rep. Ryan, who unveiled his own Medicare plan earlier this year, has joined with Sen. Wyden to craft a plan that would significantly improve the long-term fiscal imbalance. These lawmakers deserve credit for having the courage to propose specific reforms to help control rising debt levels.

The premium support portion of the Ryan-Wyden plan is more similar to the premium support plan contained in the Domenici-Rivlin plan than Ryan's premium support system contained in the House budget resolution that passed in the House earlier this year. Under the proposal, traditional Medicare and private insurance plans would compete starting in 2022 for the ability to provide coverage on a "Medicare Exchange." The value of the vouchers provided to seniors would be determined by either the cost of the second least-expensive private plan as determined through a competitive bidding process or by traditional Medicare, whichever is cheaper. Under this scenario, seniors could either get rebates if they pick a cheaper plan than the benchmark or have to pay more themselves if they pick a more expensive plan. These benchmarks would be adjusted for local differences in costs, and vouchers would be reduced for higher-income seniors. 

A major difference between Ryan-Wyden and the original Ryan proposal is the growth rate. Ryan's proposal had the vouchers growing at the rate of inflation, which many people criticized as being far too slow considering the rapid growth of health care costs. Ryan-Wyden sets a goal of keeping program costs per beneficiary to a growth rate of GDP+1 percent, in line with the target of the Independent Payment Advisory Board (IPAB). There does not seem to be an enforcement mechanism for keeping the program's growth rate to GDP+1 percent, as there is for IPAB. They merely say that Congress would be required to intervene in ways to get cost growth down to that level.

The premium support plan is only one part of the Ryan-Wyden plan. They would also reform traditional Medicare by simplifying the cost-sharing structure along the lines of Domenici-Rivlin or the Fiscal Commission. [Click here to read The Moment of Truth Project's closer look at the Fiscal Commission's cost-sharing proposals.] Specifically, the Ryan-Wyden plan mentions combining the Part A and B deductibles and introducing a catastrophic cap for out-of-pocket costs. In addition, the plan seems to include a permanent doc fix, so that physicians under Part B are not subject to massive reimbursement cuts.

In addition, the plan includes a provision that would allow workers currently receiving health insurance through their employer to receive a "free choice option" to purchase health insurance on their own. The benefit would be the same (both the deduction for employers and the tax-free benefit for employees), and employees who choose less costly health plans than their current insurance would receive a rebate. This provision does not seem to have direct budgetary effects but rather incentivizes employees to pick less costly insurance options.

Overall, these two members of Congress have taken a big swing at our dramatically rising health care costs with a proposal that touches many facets of our health care system. Obviously, the premium support aspect will save a huge chunk of change over the long-term, assuming that either Congress or IPAB is able to keep cost growth down to its intended growth level. They have also taken other steps -- the cost-sharing and the employer health insurance piece -- that could have significant sums through indirect budget effects by putting downward pressure on economy-wide health care costs. Ryan-Wyden is a welcome addition to the much-needed debate over how best to get control of runaway health care costs, a key to fixing our long-term budget issues.