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Paul Ryan’s Plan To Privatize Medicare – Will It Work?

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If House Speaker Paul Ryan has his way, the 115th Congress won’t just repeal Obamacare, it will dramatically reform Medicare, turning the program into a form of private insurance.

Ryan has long supported the controversial idea and, immediately after the election, he suggested that any Obamacare reform should include Medicare reform. Another key player, House Budget Chairman Tom Price, said Medicare reform was a top priority for the unified Republican government.

President-elect Donald Trump has yet to commit to further privatization of Medicare—which could cause a tidal wave of unease among senior citizens—and a Trump spokeswoman did not respond to a request for comment. At a minimum, though, Ryan’s Medicare plans are a topic of negotiation between the speaker and the president-elect.

Could it actually happen? The tools appear to be in place. Even with the threat of a filibuster by Democrats in the Senate, GOP leaders could use a parliamentary maneuver to make big Medicare changes on a simple majority vote in both chambers. But the path remains fraught with challenges. Trump has never shown much interest in entitlement reform and, at times, even has spoken about protecting Medicare. And Ryan also must navigate a maze of competing interests among GOP lawmakers, including Senate Republicans who have voiced lukewarm support, at best, for Ryan’s favored Medicare changes.

It’s a game that Ryan has long played successfully. To earn his colleagues’ support over the years, as POLITICO detailed earlier this year, the speaker has made a series of compromises, resulting in contradictory or mathematically tenuous proposals. But now that the GOP has a unified government, the stakes—and rewards—are much higher. To finally accomplish his dream of privatizing Medicare, Ryan must figure out how to reconcile these competing priorities
—without losing the support of ever-cautious lawmakers or Trump.

Ryan has long been interested in addressing some of the biggest challenges facing the country, including the tax code and entitlement programs. He’s a devotee of supply-side economics and a deficit hawk intent on reforming Medicare, Medicaid and Social Security, which are responsible for the majority of federal spending. They are the linchpins of the safety net, but Ryan considers them too expensive.The very first bill he introduced in Congress, in February, 1999, was a resolution that Congress should take action to make Social Security sustainable. (It never received a vote.) But for most of Obama’s presidency, using his perch as the top Republican on the Budget Committee, Ryan has focused on changing Medicare.

His preferred strategy, called “premium support,” would change Medicare from a single payer system in which the government pays directly for seniors’ health care to one where beneficiaries could use their government benefits to buy private insurance. Supporters say it would inject much-needed competition into the health care space, leading to lower costs and better coverage. Critics respond that this would end Medicare as we know it; instead of being able to count on basic health care after 65, seniors would be forced to navigate a maze of insurance options, like Obamacare customers today. They also argue that Medicare is less expensive than private insurance and that seniors would receive substandard care under a premium support system.

When Ryan first made premium support a priority at the beginning of the Obama administration, even his friends believed it was a doomed mission. “Everyone [thought] this is the third rail and this is going to kill him,” Peter Wehner, a former George W. Bush speechwriter and close friend of Ryan, told me last year. And at first, its outlook looked bleak. When Ryan included premium support in his budget proposal for fiscal 2011, just 14 Republicans agreed to co-sponsor it. And when Ryan became Mitt Romney’s vice presidential nominee, a progressive group ran an ad that depicted Ryan rolling a person in a wheelchair off a cliff.

The political stakes were thus very clear to congressional Republicans. But Ryan, a happy warrior like his mentor, former Congressman Jack Kemp, worked his colleagues hard, meeting with them individually, explaining the plan and answering any questions. Most importantly, Ryan filled his budgets with other conservative ideas to bring others aboard. He made huge cuts to nondefense discretionary spending—funding for items like education, housing and veterans’ programs—while boosting defense spending. He promised a budget that balanced in 10 years and repealed Obamacare. It was enough to get his GOP colleagues to support the Ryan budgets—meaning, by definition, they’d cast a vote for premium support.

It was an impressive political achievement. But independent experts also noticed something else about Ryan’s budgets: The numbers didn’t add up. His “balanced budget” claim used revenue estimates based on current law, not on the effects of his tax-reform proposal, which experts said would almost certainly reduce revenue to the government. And by using the current-law revenue estimates, he also assumed taxes from Obamacare would keep rolling in, despite promising to repeal the law.

More broadly, Ryan has long spoken about the need to restrain spending in the entitlement programs. But in his final budget, of the more than $5 trillion in spending cuts in the first decade, less than 20 percent came from Medicare, Medicaid and Social Security.

Why would a self-processed fiscal hawk ignore the true drivers of the long-term debt? People close to Ryan say it came down to politics. House Republicans may have come around on premium support, but it was still politically risky. To placate nervous seniors, the reform wouldn’t apply to anyone currently aged 55 or older. The result was that within the 10-year budget window, Medicare spending would decline by just $129 billion compared to current estimates. Social Security was also left untouched with Republicans still scarred from Bush’s ill-fated attempt to reform the retirement program a few years earlier.

That meant most the cuts had to fall on discretionary spending—and specifically, nondefense discretionary spending, because defense hawks in the Republican caucus weren’t going to accept any defense cuts. His final budget actually increased defense spending by nearly $500 billion over a decade. The plan slashed nondefense discretionary spending to 1.7 percent of gross domestic product, far below its 40-year average of 3.8 percent of GDP. Overall, more than two-thirds of the cuts came from programs for people with low or moderate incomes.

As a former staffer on the Budget Committee told me, “He’s got to throw the conservatives some red meat, of course. If it’s a question of defense or labor, defense is going to get [the money].”

There are signs that even Ryan felt the cuts to nondefense discretionary spending were excessive. When Ryan released his own anti-poverty plan in 2014, he said it was deficit-neutral. But that was impossible to square with his budget, which made large cuts to anti-poverty spending, including $137 billion to food stamps alone. In other words, when Ryan wasn’t using his budget as a political tool to get his colleagues onboard with premium support, his proposed cuts to anti-poverty programs shrunk.

With Obama in the White House, it didn’t matter whether Ryan thought the cuts to nondefense spending were extreme or the revenue numbers were overstated. They would never become law, so the Ryan budget was simply a political document, a tool to move his Medicare idea forward.

But starting in January, with Trump in the White House, that is going to change. Ryan is finally in a position to govern, but if he wants to pass premium support, he has to somehow reconcile these competing priorities. Why? Because with at most 52 seats in the Senate, Republicans must use an arcane parliamentary maneuver, called reconciliation, to pass legislation without Democratic support. Reconciliation allows for legislation that affects spending and revenues to pass with just a simple majority.

But that starts with passing a budget—and Ryan got a taste of how hard that is last year. (The budget cannot be filibustered and does not carry the force of law, as it is never signed by the president, Obama or otherwise.) After becoming speaker, Ryan promised to return to normal budget processes, but neither the House nor Senate passed a budget. Fiscal hawks wanted larger spending cuts, defense hawks wanted more defense spending and Obama and former Speaker John Boehner had already agreed to topline spending numbers the previous fall. Republicans didn’t want to waste political capital on a doomed document. They never passed a budget, instead relying on a continuing resolution, which expires on December 8 of this year. (Republicans look set to extend the CR until March 31 next year.)

The dynamics will be different in 2017, but those competing priorities will still exist—and Republicans will also be under pressure to repeal Obamacare and reform the tax code. Like last year, fiscal hawks in the party are likely to push for deep spending cuts while defense hawks will want more defense spending. The result likely will be less nondefense spending. But major cuts to such programs also carry political risks, and it’s unclear how willing moderate Republicans—and Ryan himself—will be to accept major cuts to basic government programs. It’s one thing to propose those cuts in a budget that will never become law; it’s another to actually enact them, and face the ensuing political consequences. With its slim Senate majority, the GOP has little margin for error, and unlike House Republicans, their Senate counterparts are not on record supporting premium support.

Julia Lawless, a spokeswoman for the Senate Finance Committee, which has jurisdiction over Medicare, said making the health care program sustainable remained a top priority for the committee but declined to say whether Orrin Hatch, chairman of the committee, supported premium support. “Chairman Hatch is open to hearing all ideas on how to address the issue and will be talking to members on how they would like to move forward,” she said.

Another long-term priority for Ryan—tax reform—faces an equally difficult road and could test his commitment to reducing the long-term debt. Earlier this year, the House GOP released its own tax-reform plan, which tax experts estimated would lose $200 billion to $2.3 trillion, depending on whether the plan is dynamically scored (the inclusion of additional revenue generated through stronger growth). Because of how the budgeteers score legislation in Congress, the cost is likely to be far greater than $200 billion (even with the use of dynamic scoring). That may force Ryan to decide between fulfilling his pledge of deficit-neutral tax reform and making major changes to his tax plan.

Asked about reconciling all of these competing priorities, Ryan spokeswoman AshLee Strong directed POLITICO to Ryan’s comments at his news conference last Thursday. But at the news conference, the speaker largely refused to talk about the GOP agenda. Asked five times about Republican priorities next year, Ryan demurred each time. When asked about Medicare and Medicaid reform, he said, “We’ll get into all this stuff down the road.” How long will it take to unravel Obamacare? “Too early to know,” Ryan responded. What legislation is a priority in the first 100 days? “We’ll have plenty of time to talk about that later,” the speaker said.

All of it makes for a long road ahead for Ryan’s dreams of Medicare and tax reform. He has long talked about a repeat of the 1980 election when Ronald Reagan swept into office and Republicans took the Senate, setting the stage for the 1986 tax overhaul. Trump may never fill the role of Reagan, but he doesn’t need to, Grover Norquist, the head of Americans for Tax Reform, previously told me. “The Republican Party has an agenda,” he said. “We’re not asking for the Republican president to come in like big brother and tell us what to do.”

Yet Norquist’s theory assumes that the GOP president would sign the Ryan budget into law. But Trump is no ordinary Republican president. His transition website includes a sentence about modernizing Medicare, a hint that the president-elect is on board with premium support. But Trump remains hard to pin down on any policy. And during the campaign, he spoke openly about protecting Medicare, what many saw as a rebuke to Ryan’s proposed reforms. If the Republican Congress does manage to deliver Medicare reform to Trump’s desk, it’s unclear whether he would actually sign it.

Ryan also knows the importance of having a mandate from the American people. He said that was a lesson he learned from his 2012 presidential campaign. But Trump doesn’t have a mandate—he lost the popular vote by more than 2 million to Hillary Clinton—and certainly not one on tax and entitlement issues. If the Republicans have a mandate on anything, it comes on trade and immigration, the two issues Trump made central to his campaign (and two issues on which Ryan and Trump disagree).

That will make it all the harder for Ryan to get his Republican colleagues on board with his radical reform to Medicare. But then again, that’s what even his friends said when he put premium support in his budget in 2011—and look how that turned out.

(via: Politico)

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