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U.S. Lawmakers Offer Bipartisan Proposal for Medicare With Private Option

By Alex Wayne and Heidi Przybyla
December 15, 2011 10:57 AM EST

A bipartisan proposal to give the elderly a choice between the government’s Medicare program and private insurance plans is intended as a “framework” to overhaul the entitlement, Representative Paul Ryan said today.

Ryan, a Wisconsin Republican who heads the House Budget Committee, proposed replacing Medicare with a private insurance system in the spring. He has now teamed with Senator Ron Wyden, a Democrat from Oregon, on a new plan to amend the U.S. health program for the elderly and disabled.

The proposal, presented today by the lawmakers, may alter the debate in next year’s congressional campaign as both parties hope to sway voters with their arguments on Medicare’s future. The plan gives people turning 65 starting in 2022 the ability to choose between the existing system, where the government pays hospital and doctors’ bills for seniors, and an alternative system of regulated private insurance plans.

“What we’re trying to do here is plant the seeds for future bipartisan compromises,” Ryan said at an appearance with Wyden this morning in Washington.

Medicare covers an estimated 49 million Americans and accounts for 15 percent of total federal government spending, according to the Kaiser Family Foundation, a nonprofit research group based in Menlo Park, California.

The U.S. is expected to spend $556 billion on Medicare this year, according to projections from the Centers for Medicare and Medicaid Services. Spending grew at a rate of about 8 percent per year from 2005 to 2009.

Campaign Attacks

Democrats criticized Ryan’s original plan to privatize the health program, included in a fiscal 2012 budget resolution and passed in the House with only Republican votes, as an effort to unwind the entitlement created in 1965.

Those attacks paid dividends for Democrats when they won a special election May 24 in a traditionally Republican congressional district in western New York. Democrat Kathy Hochul accused her Republican opponent, who endorsed Ryan’s plan, of shortchanging elderly Medicare recipients to protect tax breaks for “millionaires and billionaires.”

Republicans “have got to deal with the fact that they are viewed as destroying Medicare,” said Representative Jim McDermott, a Democrat from Washington who is a psychiatrist by training, in an interview yesterday. The Ryan-Wyden proposal ‘is really a PR bill to deflect criticism,” he said.

Wyden, in an interview yesterday, said he wants to show that liberals and conservatives can agree on a plan to “come together and strengthen” Medicare.

‘Social Safety Net’

“I consider the Medicare program the single most important fiber in the social safety net,” he said. “I will never do anything to hurt it in any way.”

Representative Patrick McHenry, a North Carolina Republican, said the earlier Ryan proposal had caused political problems for his party. “This is better, when you are providing people a choice,” he said in an interview.

Under the Wyden-Ryan proposal, the government would pay a stipend toward the cost of the private insurance alternative, equal either to traditional Medicare or the second-least expensive private plan, determined through an annual bidding competition. People who wanted more expensive coverage would have to pay the difference out of pocket.

The Wyden-Ryan plan would cap the growth of spending in Medicare at the rate of the gross domestic product plus 1 percent. If costs exceeded that growth target, Medicare beneficiaries wouldn’t have to pay more out-of-pocket for coverage, Wyden said. Ryan’s original plan capped the amount the government would contribute to the cost of insurance.

Saving Seniors Money

“We rule that out,” Wyden said. “If costs go up, Congress has to do its job, figure out why costs are going up, and Congress can cut payments to providers, to drug companies, to those who are responsible.”

Wyden and Ryan haven’t yet asked the Congressional Budget Office to examine their proposal, Wyden said, so it is unknown how much it might save compared with current Medicare spending projections.

Wyden has reached out before to Republicans on health issues. In 2009, he and Senator Robert Bennett, a Utah Republican, offered an alternative to the health-care overhaul eventually signed by President Barack Obama in March 2010. The health overhaul bill passed with only Democratic support.

Bennett faced criticism from his party over the effort and wasn’t nominated for re-election in 2010. His seat was won by Republican Mike Lee.

To contact the reporters on this story: Alex Wayne in Washington at awayne3@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net; Mark Silva at msilva34@bloomberg.net;

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