Ryan Plan For Medicare Is ‘Pure Budget Solution, Not A Health Policy Solution’ -The KHN Interview

Alec Vachon has his doubts about the workability of a GOP proposal – called premium support – to transform Medicare into a system of limited government help. Vachon, a health care consultant who worked for top Republicans on Capitol Hill for more than a decade, says the idea, put forth last week by House Budget Committee Chairman Paul Ryan of Wisconsin, would be a problem if federal contributions were insufficient to help seniors buy an insurance policy.

Premium support would be a monumental change from the current Medicare entitlement program. The government now pays whatever is necessary to care for seniors and disabled people.

Ryan Plan For Medicare Is 'Pure Budget Solution, Not A Health Policy Solution' -The KHN InterviewRyan’s Plan (Alex Wong/Getty Images)

Vachon worked for Republican Bob Dole when he was Senate majority leader and then for the Senate Finance Committee, which has jurisdiction over health care issues. Vachon left Capitol Hill in 2001 to start Hamilton PPB, where he advises investors. Marilyn Werber Serafini of Kaiser Health News recently spoke with Vachon, and edited excerpts of the interview follow.

Are Republicans moving in the right direction with proposals to reduce spending in Medicare?

House Budget Committee Chairman Paul Ryan’s signature Medicare idea – premium support, [giving individuals] an amount to buy private health insurance, although [annual] increases would be less than medical inflation, thus shifting more costs to beneficiaries – is a pure budget solution, not a health policy solution that would improve the budget. By contrast, a health policy solution would recognize drivers of health costs, especially those generated by government policy, such as tax treatment of health benefits.

Would a premium support approach work?

Ryan would limit the federal contribution for the private purchase of insurance. That works on paper – not sure it would work in the real world if seniors are unable to buy insurance with the available subsidy.

What else could Congress do?

Another approach is an annual global budget for Medicare spending. The next step then is a transparent process to decide what Medicare pays for and what seniors should pay for on their own. Of course, that evokes the charge of rationing by some Republicans. OK, if a private insurance plan does not cover or pay for medical care, even if death is the result, that’s not rationing. If Medicaid does not pay, that’s not rationing. If an individual chooses not to pay, that’s not rationing. Only when Medicare does not pay, that’s rationing.

Medicare is popular with seniors. Does it really need to change?

It’s insanity to have public programs like Medicare and Medicaid that have an unlimited draw on the federal Treasury. Simply put, at a minimum, Medicare and Medicaid shouldn’t be allowed to grow faster than revenues. Social Security and Medicare were meant to be pay-as-you-go programs, and they should become pay-as-you-go again.

How worried should the health care industry be about the big push in Washington to reduce the federal budget deficit?

The overarching investor risk for all health industry sectors is the push for deficit reduction – with potential cuts to Medicare, Medicaid and biomedical research. By investor, I include first companies looking to spend money to develop new products or services – and looking to [get a return on investment] as well as purchasers of stocks and bonds of health care companies. Regarding Medicare savings, Democrats and Republicans generally take different approaches – Democrats look for more ‘efficient’ care delivery and lower rates; Republicans shift more costs to beneficiaries. But both mean less spending.

You also advocate increasing spending in one area.

Missing from the debate over health care is the importance of biomedical science. For example, there is lots of talk about the costs of chronic disease as a key driver of health care spending. What is chronic disease but acute disease that is not cured, or often even effectively treated? Think diabetes, health disease and the rest. Since Pasteur, we have had a scientific basis for medicine, and although we do not know the result of any single experiment, the more experiments we do, the more knowledge we gain. Only research will cure disease – and more, have a medicine that improves human performance and even adds new functionality.

Will the health care overhaul law survive?

There are three risks to the Affordable Care Act. Congress could repeal or defund it. The courts could strike down provisions of the law. Or, state officials could refuse to implement it. Right now, the Republican Party is trying all three routes. Interestingly, at the state level, although no Republican officeholders appear to be vocal advocates of health reform, many are looking for ways to implement the law. That’s because state officials are much closer to the reality of citizen needs than Congress is.

Marilyn Werber Serafini is the Kaiser Family Foundation’s Robin Toner Distinguished Fellow based at Kaiser Health News. The fellowship honors the late Robin Toner, the New York Times long-time health and politics reporter whose work often framed the public debate on health issues. KHN is an editorially independent news service of the foundation.

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