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Henry Aaron, Inventor Of Paul Ryan's Medicare Reform Concept, Explains Why It's Wrong
By Michael McAuliff
WASHINGTON -- 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, got the chance to tell Ryan exactly why at a recent Capitol Hill hearing.
Aaron and former Urban Institute president Robert Reischauer came up with the idea of "premium support" in 1995, after the failure of then-First Lady Hillary Clinton's bid to reform the health care system.
The basic idea is simple: let people pick their health insurers in the private market, subsidize the premiums, and competition will drive down costs. That's the theory behind Ryan's plan, recently endorsed by Sen. Ron Wyden (D-Ore.) in a white paper the two wrote.
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 said at a hearing of the House Ways and Means Committee last week.
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.
Aaron also has a major problem with the way Ryan's plan contains costs -- by mandating that Medicare inflation be capped at no more than the growth of the Gross Domestic Product, plus 0.5 percent or 1 percent. Health care costs have escalated much faster than that, so premium support plans capped at a little more than GDP growth would buy smaller and smaller benefits.
Aaron also argued that there's another problem with trying to ensure a premium support model works -- it requires stringent regulation to make sure companies don't game the system. Aaron said he can't see that happening with a Congress fired by anti-regulatory zeal.
"The regulatory climate has changed," Aaron said. "It is far more hostile to the kinds of regulatory intervention that Bob Reischauer and I thought were essential."
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