pres.rmc@wnycwa-council.org

Part of the Paul Ryan Plan Gets a Bad Review from its own Creator

The co-creator of the concept that Rep. Paul Ryan (R-Wis.) is relying upon to “reform” Medicare no longer thinks it will work. Henry Aaron, now of the Brookings Institution, and former Urban Institute president Robert Reischauer came up with the idea of “premium support” in 1995. Aaron got the chance to tell Ryan about his change of heart at a recent Capitol Hill hearing.

The basic idea of the Aaron-Reischauer plan is to let people pick their health insurers in the private market, subsidize the premiums, and let competition drive down costs. That’s also the theory behind Ryan's plan. It differs from Aaron's original vision -- in part because it has fewer protections for beneficiaries -- but the essential concept is the same. Aaron said this isn’t the time to test it out.

“In the years since Bob Reischauer and I put this idea forward, I've changed my mind,” Aaron told the House Ways and Means Committee. The big reason is that Aaron has seen no evidence since the two men came up with the idea that their assumptions have been borne out.

As reported and explained more fully in The Huffington Post at http://huff.to/KeR30B, a key assumption was that risk would be better adjusted among companies, so that if one insurer suddenly were saddled with an unusually expensive population, it would share the costs with other insurers or the government. That would keep costs down, because it would remove some of the incentive to cherry-pick healthier customers or shun sicker ones.

“At least when the plan was originally created, Congress regulated private industries and insurers more,” said Edward F. Coyle, Executive Director of the Alliance. “The Ryan plan would take the concept and remove the regulation part.”

Visit http://1.usa.gov/J0nJ9Y to view Aaron's full testimony. The Alliance thanks Karen Spivey, who posted a link for this story on our Facebook page and originally brought the story to us.