By Ezra Klein

The Washington Post

Dec. 6, 2012

In September, the Urban Institute published a paper with the rather dull title: “Why Premium Support? Restructure Medicare Advantage, Not Medicare.”

Most of the report is a sustained attack on premium support. The authors argue that adding private plans to Medicare hasn’t worked before and there’s little reason to believe it will work now. They worry that more private plans will scoop up healthy seniors and leave Medicare with the bad risks. They note that private insurers pay hospitals 40 percent more and doctors 25 percent more than traditional Medicare. They show that private plans in Medicare tend to spend about 11 percent of premiums on administrative costs, while Medicare spends two percent...

The Urban Institute study won’t have much credibility with backers of premium support because the authors so clearly oppose the idea. But Alice Rivlin, the former director of the Congressional Budget Office and co-author, with Paul Ryan, of one of the earlier and better-received premium-support proposals, is now suggesting the same thing. In the latest incarnation of the deficit-reduction plan she’s co-authored with former Sen. Pete Domenici, she proposes “using Medicare Advantage over time as the vehicle to bring in competition.”

Is this everything Republicans want? Of course not. But it rescues their most cherished Medicare idea from the ash heap of the 2012 election and gives liberals and conservatives alike a chance to see whether it will work under relatively controlled conditions. Meanwhile, Medicare will be implementing the Obamacare pay-for-quality reforms, giving us a chance to see whether those work, too. In a few years, we’ll know much more about which approach is proving more promising, and how to build on it.

That won’t be an easy sell to Democrats. But that’s what negotiations are for, and the Rivlin-Domenici plan has some ideas for what Republicans can trade away, too. It includes $1.6 trillion in tax increases — equal to what Obama is asking for. Infrastructure investment, which most Republicans don’t actually oppose, would be another sweetener, and would have the added benefit of helping the economy recover. And Rivlin emphasizes that alongside premium support, Medicare should be empowered to negotiate directly with pharmaceutical companies and device manufacturers. Democrats would like that quite a lot, too.

Read the full blog post here

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Economic Policy Project