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Privatization or Bust: The Big Reveal in Ryan's Latest Medicare Plan

Rod Lamkey/Getty Images

Earlier this month, Loren Adler—a policy analyst at the Center for a Responsible Federal Budget—noticed a highly technical, but pivotal change to Paul Ryan's plan to overhaul Medicare.

A few years back, Ryan wanted to do away with Medicare's government payer altogether, and fold everything else over time into a single, subsidized private insurance program, with a strict cap on the growth of those subsidies.

It was a radical idea in that it proposed to transition Medicare from a defined benefit to a defined contribution plan; to hold the contributions at unsustainably low levels; and to run them through private insurers.

Over the years he's softened the proposal significantly. In 2012 he reintroduced the traditional Medicare payer as an option seniors can choose alongside private plans. This year's big concession is that he's set the contribution at a higher level, and removed the cap on its growth altogether. If seniors' health care costs increase, the contributions would increase along with it.

There are a lot of things to say about these changes, some commendable, some less so. A generous interpretation is that Ryan has absorbed the fact that Medicare spending has slowed way down and so there's no need to make draconian benefit cuts an immediate feature of the program. A more cynical reading is that he's come to accept the fact that the politics of capping Medicare spending are very tough, particularly if you propose doing so in the context of privatizing the program.

From my vantage point, though, the most interesting thing about the change is the way it reveals an ordering of the GOP's priorities vis a vis federal programs in general.

In 2011, Ryan introduced the immaculate version of his Medicare plan—the "end Medicare as we know it" plan. And every year since he's been retreating from that ideal toward something closer to a hybrid between the existing Medicare system and the one conservatives truly want. Along the way he's jettisoned the explicit phaseout of the public payer, the formula for setting premium contributions at a low level, and the cap. In so doing, he's actually given up on the most concrete sources of near- and long-term savings, when producing savings was supposedly the point of reforming the program in the first place.

What he hasn't, and won't ever give up on, no matter what experts ultimately conclude, is partial privatization. When push comes to shove, breaking government monopolies (and age-restricting eligibility) are the only things that really interest the GOP with respect to reforming entitlements.

If you cap spending, and simultaneously introduce premium support, you can argue, in a way, that the two components are complementary—that there needs to be a real cap on Medicare spending for fiscal purposes, particularly in the long-term, but that it's inappropriate for the government to determine what and how much to cut (a la IPAB) when that process can be handed off to insurers and consumers instead.

Without the cap, all you have is privatization. At best, the argument for transitioning into a premium support system rests on a quasi-religious belief that competition between payers will do a much better or more equitable job of holding down costs than government rate setting. But CBO says a plan like Ryan's would generate extremely modest savings relative to current law. Which suggests what's really driving the privatization push is ideology. Here, for instance, is Mitt Romney (Ryan's 2012 running mate) arguing that devolving almost all federal programs, including FEMA, to the private sector is an inherent good.

I think it's been obvious from the outset that privatization is the sine qua non of Ryan's Medicare plan. If politics demands spending money on seniors, then at the very least, Republicans will be there to support using the distributive mechanisms to enhance corporate welfare. Even if it means making dramatic changes to a popular program that reap little-or-no fiscal savings. But now that goal is completely undisguised.