2012 Medicare Debate is All About the Baby Boomers

Older people would get a fixed payment they could use for private health insurance or traditional Medicare. Proponents call it "premium support." To foes, it's a voucher.

Under both of Ryan's versions, people now 55 or older would not have to make any changes. GOP presidential candidates Mitt Romney and Newt Gingrich praise his latest plan.

How would it work? Would it save taxpayers money? Would it shift costs to retirees as Ryan's earlier plan did? Would Congress later phase out traditional Medicare? Those and other questions must still be answered. 

"I'm not sure anybody has come up with a formula on this that makes people comfortable," said health economist Marilyn Moon, who formerly served as a trustee helping to oversee Medicare finances.

White House spokesman Jay Carney says the Wyden-Ryan plan "would end Medicare as we know it for millions of seniors," causing the traditional program to "wither on the vine."

But what administration officials don't say is that Obama's health care law already puts in place one of Ryan's main goals by limiting future increases inMedicare spending.

Ryan would do it with a fixed payment for health insurance, adjusted to allow some growth. In theory that compels consumers and medical providers to be more cost-conscious. Obama does it with a powerful board that can force Medicare cuts to service providers if costs rise beyond certain levels and Congress fails to act.

Like several elements of Obama's health care overhaul, the Independent Payment Advisory Board is in limbo for now, but it is on the books. If the board survives Republican repeal attempts, it could become one of the government's most important domestic agencies.

The White House wants to keep the existing structure of Medicare while "twisting the dials" to control spending, said a current Medicare trustee, economist Robert Reischauer of the Urban Institute think tank.

Ryan's latest approach is arguably an evolution of the current Medicare Advantage private insurance program, not a radical change, Reischauer said. That's particularly so if traditional Medicare remains an option.

"In the hot and heavy political debate we are in, participants are exaggerating the difference between the proposals," he said.

During failed budget negotiations with Republicans last summer, Obama indicated a willingness to make more major changes to Medicare, including gradually raising the age of eligibility to 67, increasing premiums for many beneficiaries, revamping co-payments and deductibles in ways that would raise costs for retirees, and cutting payments to drugmakers and other providers.

"I was surprised by how much the president was willing to offer in terms of Medicare changes without a more thorough vetting and discussion," said Moon. Obama says he will veto any plan to cut Medicare benefits without raising taxes on the wealthy.

Democrats are still hoping to use Ryan's privatization plans as a political weapon against Republicans in 2012, but the Medicare debate could cut both ways. For the 76 million baby boomers signing up over the next couple of decades, it will pay to be watching.