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Medicare: Could Rep. Paul Ryan's reform plan work?

The only big Medicare reform idea that's been pitched in public is called 'premium support,' championed by Rep. Paul Ryan (R). Here's how it would work, and here's why Democrats deride it as a 'voucher.'

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House Budget Committee Chairman Rep. Paul Ryan (R) of Wisconsin, seen here on Capitol Hill in Washington, says he thinks there are better ways to stop Obamacare than a government shutdown.

J. Scott Applewhite/AP/File

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President Obama recently dampened hopes for a bipartisan deal on Medicare reform this year, saying "it may be that the differences are just too wide."

In part, that's a reference to one fundamental rift: He has demanded that any entitlement overhaul be accompanied by new tax revenue, and Republicans have said "no" with equal firmness.

For now, the big reform idea that's been pitched in public is called "premium support," championed by Rep. Paul Ryan (R) of Wisconsin.

It's a free-market approach to reform. Enrollees who reach Medicare age in 2024, or later, would receive a government "premium-support payment" that they could use to buy health coverage. Insurers would compete for their business, with benefit packages that would have to be equivalent to today's Medicare, or better.

The annual growth of the government aid – Democrats deride it as a voucher – would be capped using a process of competitive bidding by insurers.

"The benchmark … would be either the second-least-expensive private plan" or traditional Medicare, whichever costs less, according to Congressman Ryan's budget blueprint. And the support level, per person, couldn't rise faster in a year than the rate of gross domestic product growth plus 0.5 percent.

Seniors could buy higher-cost insurance if they wanted, covering the difference on their own. Or they could buy a lower-cost plan, and pocket the resulting savings.

The "GDP plus 0.5 percent" formula would be a slower growth rate than Medicare has seen in the past, but some health-care experts say it's not unthinkable to use that target and still ensure strong health benefits.

And others note this, too: Ryan pitched his plan as an "invitation" to bargain, not as a take-it-or-leave-it offer.

The idea "is fairly flexible," and has been embraced by leaders of both parties in the past, says Alain Enthoven of Stanford University, long a leading proponent of the concept. (He pushed such a reform as a consultant to the Carter administration.)

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