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Analysis: Medicare premium support idea rising from ashes?

By David Morgan

WASHINGTON (Reuters) - Just months after President Barack Obama's re-election ended Republican hopes of controlling U.S. healthcare policy, one of the most controversial Republican proposals for Medicare is showing signs of rising from the political ashes.

Premium support, a policy idea that would greatly expand the role of private insurers in providing Medicare coverage for hospital and doctor services, was considered dead soon after Republican Mitt Romney's November loss to Obama, when polls showed registered voters rejecting it by 2-to-1 margins.

But premium support is gaining fresh momentum among congressional Republicans as a way to control Medicare spending as the debate rages over entitlement reform and the deficit, say analysts, lobbyists and congressional aides.

"It's an idea that becomes more politically seaworthy with every passing day, because there are no other legitimate alternatives that can simultaneously control costs in a rational fashion and broaden access to quality care," said Robert Moffitt of the conservative Heritage Foundation.

U.S. Rep. Paul Ryan, Romney's former running mate and the Republican most identified with premium support, is expected to embrace the policy for a third consecutive year in the budget he will soon release as chairman of the House Budget Committee.

A spokesman for the Wisconsin congressman declined to discuss the budget. But others with knowledge of closed-door discussions said the party's caucus would not back down after retaining support among elderly voters in 2012, despite Democratic attacks on the Republicans' Medicare position.

"They feel like they won the premium-support battle last year. So they're not at all shy about taking that on again," said a lobbyist with strong Republican ties.

Democrats are likely to reject the idea again. Many doubt the premium-support model can control spending, and charge that it would instead privatize the $590 billion-a-year Medicare program that serves 50 million elderly and disabled Americans.

With Congress now looking set to accept $1.2 trillion in automatic "sequester" spending cuts as deficit reduction, including a 2 percent across-the-board cut for Medicare, some congressional aides say the entitlement debate over Medicare, Social Security and Medicaid could be delayed for months.

"The sequester doesn't solve the deficit problem. But if it went through, for some time, there'd be no incentive to bend over backwards on entitlements," said a Senate Democratic aide.

DEAR PRUDENCE

Lobbyists say Republicans could still push for entitlement reform in March, when Democrats will need their cooperation to keep the federal government open, or during the summer when debt limit debate may resurface. Much hangs on the contents of the budget proposals that emerge from Obama, Ryan and the Senate Budget Committee within the next month or two.

Republican aides say premium support could gain ground in the cut and thrust of future negotiations, given word that Democrats plan to take a hard line against raising the Medicare eligibility age to 67 from 65 - another Republican policy goal that appears to have been thwarted by pressure from influential beneficiary groups, including AARP.

But Democratic aides counter that there will be no major changes to Medicare without Republican support for new tax revenue, an idea Republicans roundly reject.

Ryan himself sounds less interested in short-term deals than in awaiting the next Republican swing of the political pendulum.

"I'll advance reforms to protect and strengthen Medicare and Medicaid, to reform healthcare," Ryan said in a speech to the National Review Institute on January 26 in which he recommended a path of political prudence for conservatives.

"Guess what? The Democrats are unlikely to accept our proposals. I know that may come as a big surprise to you. They refuse to consider real reform that's needed to get the country on the right track. But we will lay the groundwork for future endeavors. So when reform is possible, we will be ready."

A potential way to move the premium-support model forward emerged in the Senate last week, analysts say, when Senator Orrin Hatch proposed consolidating Medicare's Part A hospital and Part B physician benefits into a single program that would allow private insurers to bid against traditional Medicare and reward seniors for choosing cheaper coverage.

"By allowing private health plans to compete with traditional fee-for-service Medicare, we can provide seniors with their guaranteed Medicare benefit while, at the same time, reducing costs and improving the quality of care," Hatch, a Utah Republican, said on the floor of the Senate.

"Hatch is trying one more time to get the point across that most people agree with - that you're going to cover Medicare A and B without any question," said Joseph Antos of the conservative American Enterprise Institute. "This is something Ryan certainly meant but it didn't come out that way."

In fact, analysts and business lobbyists said Hatch could offer a way forward for Republican rhetoric by focusing his remarks on competition and consumer choice, and drawing parallels between his proposal and Medicare Part D, the popular prescription drug benefit that also employs competitive bidding to set costs.

(Reporting by David Morgan; editing by Ros Krasny and Matthew Lewis)

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