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The Globe and Mail

For better or worse, Ryan picks risky Medicare fight in U.S. election

Republican vice-presidential nominee Rep. Paul Ryan waves as he takes the stage to accept the nomination at the Republican National Convention in Tampa, Fla., on Aug. 29, 2012.

Mike Segar/REUTERS

Can Mitt Romney and Paul Ryan ride the third rail of U.S. politics to victory?

Republican vice-presidential nominee Paul Ryan's Wednesday night acceptance speech at the GOP convention pushed further to the fore his proposed reforms to Medicare -- the federal health insurance program for seniors. It could be the issue that makes or breaks Republican nominee Mr. Romney's electoral fortunes.

If Americans generally acknowledge their country has colossal fiscal challenges, a majority of them are not convinced that capping federal health-care spending on future generations of seniors is the best or fairest way to go about solving them.

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By confronting the issue head-on in his convention speech, in which he mounted a strident counterattack against President Barack Obama's own health-care plans, Mr. Ryan has invited voters to consider the Medicare factor more directly when they go to the polls.

"The greatest threat to Medicare is Obamacare, and we're going to stop it," Mr. Ryan charged, accusing Mr. Obama of stripping $716-billion out of Medicare over the next decade to pay for the subsidies that would go to uninsured Americans under 65 under his health-care law.

"An obligation we have to our parents and grandparents is being sacrificed all to pay for a new entitlement we didn't even ask for," he added. "Medicare is a promise, and we will honour it. A Romney-Ryan administration will protect and strengthen Medicare for my mom's generation, for my generation and for my kids and yours."

Mr. Ryan insisted Republicans want this Medicare debate and will win it. The truth is, many in the GOP, including House of Representatives Speaker John Boehner, do not want this debate at all. They know that taking on so-called entitlement reform is a risky gamble. With the exception of welfare reform, which brought Newt Gingrich and Bill Clinton together in 1996, it is one that past U.S. politicians have almost never won.

Beyond the avalanche of dollar figures that are being thrown about – none of which are worth more than the broad assumptions on which they are based – voters must ultimately decide whom they trust more to "save" Medicare. As of right now, it's Mr. Obama.

While Mr. Romney has embraced tenets of the Ryan plan, he has insisted it is not the official platform of the Romney-Ryan campaign. But until he offers more specifics about what he intends to do, Mr. Romney is effectively wedded to Mr. Ryan's proposals.

In a nutshell, the Ryan plan (which he has modified somewhat since joining the ticket) would provide Americans who turn 65 in 2022 and beyond with a fixed annual subsidy to buy private health-insurance or "purchase" the government plan. The subsidy would grow at an annual rate equal to the growth in gross domestic product plus 0.5 per cent.

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Anyone who turns 65 before 2022, as well as current seniors, would not be affected.

The Ryan plan would provide more certainty about government health-care spending. But it could also lead to more out-of-pocket expenses for future seniors if insurance premiums increase faster than the subsidy. Based on a Congressional Budget Office review of an earlier iteration of the Ryan plan, the Obama campaign suggests that it would leave future seniors on the hook to the tune of more than $6,000 (U.S) a year.

Under Mr. Ryan's plan, however, the annual subsidy would be based on income. While wealthier seniors would likely pay more out-of-pocket for health care, lower-income seniors might not. Mr. Ryan also argues that competition will keep costs down, as seniors shop around for insurance to get the best deal.

There are no guarantees in life, however, regardless of what politicians promise. Even Mr. Obama's vow that the $716-billion his health-care law would cut from Medicare would not affect patient benefits is a dubious one. While hospitals and doctors would bear the direct brunt of the cuts, through reductions in the fees they get for taking Medicare patients, the latter are almost certain to feel the impact at the end of the line.

Mr. Obama's health law also provides for the creation of an Independent Payment Advisory Board that could mandate measures (which could include benefit cuts) to ensure that Medicare costs to not rise faster than the GDP plus 1 per cent after 2018. Republicans charge that this will put health-care decisions in the hands of bureaucrats.

Mr. Ryan's initial Medicare reform proposal included the $716-billion cut envisioned under Mr. Obama's law. He had reversed course earlier this year. His boss, Mr. Romney, has vowed to restore that money to Medicare and repeal Mr. Obama's health-care law. He has not explained how he can do so without running higher deficits.

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The Obama campaign argues that it is not "cutting" Medicare, only reducing the rate of growth in Medicare spending. But the two are effectively the same thing.

If you spend $100 a year on apples today and project to spend $200 on 10 years, then decide you can only afford to spend $180, that is a $20 cut no matter how you slice it. You can call it a reduction in the growth of spending to 80 per cent from 100 per cent, but you can only do that by cutting back in some way.

Mr. Romney and Mr. Ryan say they are counting on the market to control costs, betting on competition in private health insurance. Mr. Obama envisions a more direct government hand in curbing health-care costs through a board of experts.

In the end, voters will have to make a leap of faith in November.

Before then, they will likely hear more about Medicare than in any previous election campaign. They will hear that it is going bankrupt and that one party will render it insolvent faster than the other. That is mostly semantics. While a Medicare "trust fund" exits, the program is effectively funded through general government revenues. It can only go "bankrupt" if the U.S. Treasury does.

All of this brings to mind former Prime Minister Kim Campbell's infamous quip from her disastrous 1993 campaign: "Elections are the worst time to talk about the future of our social programs."

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