Articles

The Politics of Saving 'Granny'

February 02, 2011

ObamaCare has recently been dealt three body blows. Speaker John Boehner pushed a bill to repeal it through the House. GOP leader Mitch McConnell will get to put Senate Democrats on record with a vote on repeal as well. And this week, U.S. District Judge Roger Vinson declared the law unconstitutional.

The White House's reaction is dismissive. The nation doesn't want to "re-litigate" ObamaCare, we're told. So long as Mr. Obama sits in the Oval Office, repeal is going nowhere. The Supreme Court will uphold the law. And by 2012, health care will be a winning issue for Democrats.

I'm not so sure. Take the question of Granny. In a speech last Friday defending his health-care law's effect on seniors against GOP attacks, Mr. Obama said, "I can report that Granny is safe." She may not feel that way if she's one of the 700,000 seniors whose private Medicare Advantage insurance policy was not renewed last year because her insurance provider quit the business.

There will be more nonrenewals in 2011. This year's funding cuts to Medicare Advantage will be $2 billion; next year's will be $6 billion. The Centers for Medicare and Medicaid Services (CMS) estimate that half of those with Medicare Advantage policies—seven million seniors—will lose their coverage eventually. And 60% the doctors surveyed by the nonprofit Physicians Foundation said health-care reform would "compel them to close or significantly restrict" the number of patients in their practices, especially those on Medicare or Medicaid.

Granny's daughter, son and grandchildren are not all that safe, either. Providers such as Guardian Life and the Principal Financial Group are dropping their health-insurance businesses. And companies will be tempted to drop coverage for their employees and dump them onto the government's tab.

No taxpayer is safe, either. Last week Richard Foster, CMS's chief actuary, confirmed to Congress that ObamaCare's Medicare cuts couldn't be used to reduce both Medicare's unfunded liability and to pay for ObamaCare's expense. Since the Obama administration is relying on this double counting to rig the numbers, Mr. Foster's testimony was particularly damaging.

What the country most needs—and what the GOP must now advocate—is a fundamentally new approach to containing health-care costs.

The most promising model for Medicare comes from Clinton Budget Director Alice Rivlin and House Budget Committee Chairman Paul Ryan (R., Wis.). Under their plan, starting in 2021 those turning 65 and going on Medicare would get a fixed contribution to use to purchase insurance, allowing them in many instances to keep their existing coverage. Consumers will be in charge.

Annual support would grow at the same yearly rate as the economy plus 1%. Medicare payments would be adjusted by income, geography and health risk. Poor seniors would get extra help for out-of-pocket expenses.

This bipartisan model builds on the success of the Medicare prescription drug benefit passed in 2003. This market- and competition-oriented experiment gave seniors a fixed sum they could use to purchase drug insurance coverage. In response, drug companies and insurance providers flooded the market with options that drove prices for consumers down.

Though more seniors signed up for the benefit, signed up quicker and used it more than expected, the program costs much less than estimated (the original Congressional Budget Office estimate was $552 billion for the first 10 years, but the estimated cost is now $385 billion). Competition and consumer choice are far more effective in containing costs than is bureaucratic price-setting.

We're at an unprecedented moment. The huge historic advantage Democrats have enjoyed on the health-care issue has evaporated. ObamaCare is increasingly less popular. Its unpopularity is up nine points in the last month, to 50%, in a Kaiser/Harvard survey. The public is now taking a close look at what the Republican Party might have to offer.

The Rivlin-Ryan alternative plan is bold and not without risk. Past efforts at entitlement reform haven't been successful. Having worked in the Bush White House during the 2005 Social Security battle, I know of what I speak. Still, the Rivlin-Ryan plan is right on substance. And unlike 2005, it may also be the right moment.

Thanks in good measure to Mr. Obama's profligacy, the entitlement crisis is no longer a vague, abstract concern. More and more Americans understand the current course leads to a disaster for the nation's finances. And so the public may be willing to go places and do things that in the past it may not have.

This is an unusual and fluid moment. My hunch is voters are more inclined than ever to reward the political party that addresses entitlement reform—and more inclined than ever to punish the one that fiddles while America's fiscal house burns.

This article originally appeared on WSJ.com on Wednesday, February 3, 2011.

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