Editorial: Ryan, Obama both fail Medicare test

Wisconsin Congressman Paul Ryan deserves credit for putting Medicare's soaring costs front-and-center in the raging debate over the nation's runaway spending.

But his prescription for fixing the federal health program for the elderly -- Ryan's plan would provide subsidies to buy private health insurance -- is too harsh and would shift unaffordable care costs onto seniors.

Younger generations ought to watch closely how the debate over this unprecedented overhaul of the 46-year-old Great Society program plays out. They will be the ones affected most.

Under Ryan's plan, those 65 and older who are currently in Medicare would see their coverage unchanged. But those 55 and under would enroll in a dramatically different program beginning in 2022.

Instead of paying premiums for a government-run health plan, Medicare enrollees would instead be given an age-adjusted sum -- generally, about $8,000 in 2022 dollars for a 65-year-old -- to buy private health insurance.

There's a lot to like about this from a purely budgetary standpoint, because the government would set a limit on how much it would spend per enrollee instead of paying all the claims for coverage. Premiums, a payroll tax and general funds are the main Medicare funding mechanisms.

The Ryan overhaul is similar to controversial changes made to pension systems nationwide. It converts Medicare from a defined-benefit system to a defined-contribution plan. This has saved employers money but has shifted the risk for adequate retirement savings onto employees.

The Ryan plan would shift the risk for health care onto seniors. It's unclear if the amount given to enrollees, especially those with serious health conditions, would buy an adequate plan.

(Just for comparison, the current premium paid for congressional health coverage is $9,012.) That amount will also be outstripped rapidly by rapidly rising health care costs, which Ryan does little to address.

Translation: Medicare enrollees would be on the hook for a greater share of health care costs. According to a recent Congressional Budget Office analysis, typical 65-year-olds would pay 68 percent of the total cost of their care by 2030 under Ryan's plan.

Under the current Medicare plan, they'd pay 25 percent.

Troublingly, this cost-shift would come in an era when many workers will also be relying on less-generous defined-contribution pension systems. It's a double retirement whammy that should make trailing-edge baby boomers, Generation X and the Millenials nervous.

But the Democrats' response also should be anxiety-inducing for anyone under 55. Last week, President Obama slammed the Ryan plan, saying it would dismantle Medicare.

The reality is that Medicare's current costs are an existential threat to the program. The total Medicare bill in 1999 was $212 billion: Ten years later, it had increased to $502 billion as the baby boomers prepared to retire.

Obama's speech offered reassuring but vague rhetoric about Medicare's future. He's right that there are alternatives to Ryan's plan, which paints in stark detail what it means to rein in entitlement programs without a tax increase.

But the president needs to provide details.

If a tax increase is necessary to sustain current Medicare benefits, how much is needed? Is it possible to rapidly scale up the cost-saving pilot programs -- such as those aimed at payment reform -- in the Affordable Care Act (ACA)?

More detail is also needed about the cuts and changes that could be made by the Independent Payment Advisory Board -- a promising cost-control mechanism in the ACA.

There should also be a ban on any politician using the word "efficiency." Let's be clear: Cutting costs means, to some extent, doing less.

Democrats have long pressed Republicans for more details on how they'd control entitlement-program costs. The GOP delivered.

Now the president and his party need to do the same. The nation can't afford to wait until after the 2012 election.

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