On CNN yesterday, Obama strategist David Axelrod claimed that “most of the experts who have looked at this” have said that Paul Ryan’s plan to reform Medicare would put the program “in a death spiral” and “would raise costs on seniors by thousands of dollars.” A day earlier — as Representative Ryan was preparing to accept Mitt Romney’s offer to join his ticket — Obama Campaign Manager Jim Messina had said the plan involved “shifting thousands of dollars in health-care costs to seniors.”
The claim Axelrod and Messina are making is based on a hostile interpretation of an earlier version of Ryan’s proposal. Ryan has changed the proposal over the last year, however, and Romney has endorsed the new version. The Democratic criticism, applied to the new plan, is indisputably false.
The Romney-Ryan proposal — which has the support of liberal Democratic senator Ron Wyden of Oregon — would let senior citizens choose a coverage plan provided either by the federal government or by a private company. The government would defray the cost of purchasing the plan selected. The providers would submit bids showing the premiums they would charge to cover the benefits Medicare has traditionally offered. The second-lowest bid would set the amount the government would provide for each beneficiary
Seniors who picked the second-cheapest provider would have their entire premium paid by the government, and seniors who picked the cheapest would get a check for the difference. Seniors who picked a more expensive plan would have to pay the difference out of pocket.
We have reason to be confident that this arrangement would restrain the growth of costs. A study has just shown that applying the second-cheapest-bidder approach to even the much less robust form of competition in Medicare Advantage would have resulted in a 9 percent reduction in Medicare costs in one year alone. The savings from years of real competition could be enormous.
If, however, competition does not restrain costs, the growth of government spending per beneficiary will be capped at a level a bit above the growth rate of the economy plus inflation. That is the exact level that the Obama administration envisions as well. The administration, however, hopes to reach the target by setting low prices for medical providers and otherwise micromanaging medical markets. There have been many past efforts along these lines, and they have always failed.
Under a worst-case scenario, then, the Romney-Ryan plan costs senior citizens no more than current law. It offers the hope of doing considerably better: of reining in the costs of Medicare, the principal cause of long-term debt disaster, without sacrificing patient choice, the quality of health care, or medical innovation.
Republicans should explain that they have found a promising strategy to stave off national bankruptcy while improving senior citizens’ health care, and explain also the alternative of bureaucratic rationing Obama has in store for them. If Obama and his aides persist in claiming that the Romney-Ryan plan will increase costs for senior citizens or shift risks to them, Republicans and fair-minded observers should not hesitate to call these charges what they are: lies.