GOP VP pick's Medicare plan back in spotlight

[August 13, 2012]  WASHINGTON (AP) -- Republican Paul Ryan's blueprint for Medicare could prove as polarizing in the campaign as President Barack Obama's health care overhaul has been. Even Mitt Romney may not want to go there.

Romney's new running mate has built a strong reputation on Capitol Hill for bold ideas to restrain health care costs and federal spending overall. His centerpiece idea is to steer future retirees into private insurance plans, with a fixed payment from the government that may or may not cover as much of a retiree's costs as does the current program.

Ryan, a conservative Wisconsin congressman and chairman of the House Budget Committee, calls his idea "premium support." Democrats call it a voucher plan. In theory, Ryan's plan could work, economists say. But the devil's in the details. Lots of them, and yet to be ironed out.

Ryan would also turn Medicaid over to the states, and sharply limit the growth of future spending on that safety net program. Between them, Medicare and Medicaid cover about 100 million people, touching nearly every American family in some way.

While expressing support broadly, Romney has yet to spell out where he stands on specifics of his running mate's proposals. And that could get tricky.

Mindful of the risks, Romney put gentle but unmistakable distance between his agenda and Ryan's hot-potato budget proposals on Sunday, a day after announcing his running mate's selection. The presidential candidate singled out Ryan's work "to make sure we can save Medicare." But Romney never said whether he embraced that plan himself. During the Republican primary, Romney had called Ryan's budget a "bold and exciting effort" that was "very much needed."

Democrats wouldn't let them off the hook, criticizing the "Ryan-Romney" Medicare plan at every turn.

"From the standpoint of public understanding, the Romney-Ryan ticket has a hill to climb," said health economist Joe Antos of the business-oriented American Enterprise Institute. "I think they can do it, but it's going to require some explaining. I think there are a lot of independents who are going to be nervous."

Seniors vote at higher rates than younger voters, and Medicare matters to them. Concern about Medicare cuts in Obama's health care law helped drive older voters into the Republican camp in the 2010 congressional elections, delivering control of the House to the GOP.

"This puts Medicare in play as a central issue in the campaign," said John Rother, president of the National Coalition on Health Care, a nonpartisan group representing a broad swath of players in the health care system.

The political sensitivities are clear. Polls find that Americans lean heavily on Medicare to help keep them secure after retirement and are suspicious of proposed alternatives, such as Ryan's plan. Surveys also give Democrats an edge over Republicans when people are asked which party people most trust to handle Medicare. Democrats held a 48 percent-39 percent advantage on that issue in a June 2011 AP-GfK poll.

In an interview Sunday on CBS' "60 Minutes," Romney and Ryan both offered words meant to reassure the elderly.

America is about more choices, Romney said, and "that's how we make Medicare work down the road." He said the program won't change for seniors currently counting on the program. Ryan pitched in that his mother is a "Medicare senior in Florida."

For the most part, Ryan's plan would not directly affect people now in Medicare. One exception: In repealing Obama's health care law, Ryan would re-open the Medicare prescription coverage gap called the doughnut hole.

Under his plan, people now 64 and younger would go into a very different sort of Medicare. Upon becoming eligible, they would receive a government payment that they could use to pick a private insurance plan or a government-run program like traditional Medicare. The payment would be indexed to account for inflation, and that could be a problem if health care costs race ahead of the inflation rate.

The private plans would be regulated by the government, and low-income people, as well as those with severe health problems, would get additional assistance. People who pick plans with relatively generous benefits would pay more out of their own pockets.

The transformation would mirror the shift in workplace pension plans taking place over the last 20 years. Medicare would start looking more like a 401(k) plan than a plan that provides open-ended coverage for a set of benefits.

Ryan would also gradually raise the Medicare eligibility age from the current 65 to 67. In more general terms, Romney has also spoken of providing "generous" but undetermined subsidies to help future retirees buy private insurance, or let them have the option of traditional Medicare. He's also endorsed a gradually increasing age to qualify for benefits.

Some prominent Democrats have supported Ryan's general approach, even teaming up with him on different versions of his proposal. The GOP-led House has passed budgets written by Ryan two years in a row.

Backers say the result of his Medicare plan would be a more affordable and sustainable program, both for taxpayers and beneficiaries. Currently, Medicare's giant trust fund for inpatient care is projected to run out of money in 2024.

But critics see a massive cost shift to beneficiaries.

"The only way to drive real savings is to set a lid on the growth in the voucher," said Democratic economist Judy Feder. "That most likely means shifting costs to beneficiaries, not controlling costs."

Antos, however, called the latest version of Ryan's proposal a "reasonable plan" that "provides a decent benefit for people."

In an analysis earlier this year, the nonpartisan Congressional Budget Office said some of the effects of Ryan's plan "would of necessity be a great deal stronger" than current law, which includes Medicare cuts in Obama's health care law yet to take place.

Under the most likely current budget scenario, Medicare spending for the typical 66-year-old would rise to $9,600 in 2030, or about 75 percent more than now, the CBO projected.

But under Ryan's plan, spending would rise more slowly to $7,400, or about 35 percent more than current levels.

That difference would result in a cost shift of thousands of dollars to individual retirees, critics say.

Under the previous version of Ryan's plan, a typical 65-year-old retiree would have been responsible for about two-thirds of his or her health care costs in 2030.

Ryan's proposal for turning Medicaid into a block grant program for the states would also have far-reaching consequences. It sharply reduces the future size of the program relative to the overall economy, the CBO said.

Even if states can run Medicaid more efficiently, they'd still face the difficult choice between cutting the program or pouring more of their own money into it, the CBO said.

[Associated Press; By RICARDO ALONSO-ZALDIVAR]

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