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Wyden-Ryan Voucher Plan would Privatize Medicare

V I E W P O I N T

On December 15, 2011, Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) released a paper, Guaranteed Choices to Strengthen Medicare and Health Security for All, outlining how they would convert Medicare from a defined benefit plan to a premium support - essentially a voucher - system.

The Wyden-Ryan plan would be based on competition between private insurance companies and traditional Medicare. The proposal lacks details and the sponsors have said they will not introduce legislation until after the 2012 elections. This proposal resembles Representative Ryan's budget proposal, released on April 5, 2011, that would restructure Medicare to a premium support or voucher program without keeping traditional Medicare as an option. It also resembles Rep. Ryan’s 2012 premium support proposal that does include traditional Medicare.

Key components of the Wyden-Ryan plan

  • Premium support/voucher. The government would provide a voucher for a fixed dollar amount to each Medicare enrollee to help pay their premiums for private insurance or traditional Medicare.

 

  • Choice of plans. Beginning in 2022, seniors could choose between traditional Medicare and an approved private insurance plan that offers comprehensive coverage at least equal to the benefits provided by Medicare.

  • Premium amount. The federal government would pay an amount based on the cost of the plan with the second-lowest cost determined through competitive bidding, whether it is a private health plan or traditional Medicare. Enrollees would have to pay for any charges above the government contribution. If they select a plan with a premium below the federal subsidy, they would receive a rebate. A new limit on out-of-pocket spending would protect seniors from catastrophic health care costs.

  • Consumer protections. The proposal states that the Wyden-Ryan plan would include the "toughest consumer protections" in American government, which would help ensure that seniors are able to enroll in the plan that best meets their needs.

  • Medicare growth. The growth of Medicare would be capped, for the first time, at the growth of the economy plus one percent, a slower rate of increase than Medicare has historically experienced. To stay under the limit, it is expected that Congress would cut payments to providers and suppliers responsible for the overspending and/or further increase Medicare premiums for high-income beneficiaries. If Congress did not act to reduce the growth in spending, it appears that the voucher would be automatically cut back, further increasing out-of-pocket costs for beneficiaries.

NATIONAL COMMITTEE POSITION

  • The National Committee is concerned that the Wyden-Ryan plan would shift costs to beneficiaries, threaten traditional Medicare, fail to contain health costs and generate few budgetary savings. The Wyden-Ryan voucher plan offers only a slight twist on the failed approach to privatize Medicare that was originally offered by Representative Ryan and rejected by the majority of Americans.
  • Seniors are already paying a large share of their income for out-of-pocket health care expenses. They cannot afford to pay more, as would surely be required under a voucher program.

• Costs for beneficiaries would continue to rise if competition among private plans is not successful in holding down costs, and if the federal subsidy is not linked to the increase in health spending.

• Low-income beneficiaries could be subject to higher costs and fewer plan choices which could limit access to a smaller network of health providers.

• Individuals could forego necessary health care services and end up needing more costly care for more serious illnesses, which would increase costs for the Medicare program.

• If younger and healthier beneficiaries enroll in private plans and the oldest, sickest and most costly beneficiaries remain in traditional Medicare, the program would be caught in a death spiral of rising premium costs and falling enrollment.

  • The Wyden-Ryan plan denies Medicare its ability to serve as a leader in controlling costs by diminishing the market power that comes with large enrollment.

• Medicare spending per capita, while growing more slowly than private health care spending, is increasing overall because of the growing number of beneficiaries reaching 65.

• The plan limits the growth in Medicare spending per capita to GDP+1%, and expects Congress to reduce spending if this cap is exceeded. It is unclear what would happen if Congress does not act to reduce the growth in spending, but it appears that the voucher would be automatically cut back, further increasing out-of-pocket costs for beneficiaries.

• Wyden-Ryan would rely on multiple private insurance plans, similar to Medicare Advantage plans, which have shown to be less effective in driving costs on their own.

  • There are many ways we can improve Medicare without dismantling it and making health care costs unaffordable for many older and disabled Americans. These include:

• Implementing reforms in the Affordable Care Act (ACA), such as Accountable Care Organizations, bundled payments, and reducing hospital readmissions, which are designed to improve quality and reduce unnecessary spending. We should wait until the ACA reforms are put into place before possibly destroying Medicare, a program that works for seniors.

• Allowing the Secretary of HHS to negotiate prescription drug prices in Part D which could save hundreds of billions of dollars.

• Offering a drug benefit in traditional Medicare, which would lower costs for beneficiaries and taxpayers, in part due to Medicare's lower administrative costs.

• Reducing payments to private Medicare Advantage plans to 100% of what it costs traditional Medicare to provide care for the same beneficiary. (Under the ACA, some plans will still be paid more than 100% of fee-for-service Medicare).

• Extending Medicaid rebates for drugs used by beneficiaries who are dually-eligible for Medicare and Medicaid.

  • Medicare should be improved to include additional benefits that seniors really need, such as hearing aids, eye glasses, and dental care, as well as a catastrophic cap on out-of-pocket spending.

Government Relations and Policy, January 2013



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