THE THIRD RAIL – AT 10:27 A.M. ET:  Social Security is sometimes called the third rail of American politics.  Touch it and you die.  Well, part of that third rail, maybe on a siding at the end of the railroad yard, is Medicare.  Bottom line, Medicare is a popular program that actually works reasonably well.  And let's be blunt about it:  Even conservatives use it, and make it part of their financial plan. Touch it and you may not die, but you'll remember the jolt.

The costs of Medicare, though, are spinning out of control, and must be addressed.  I have some problem with the term "entitlement program" to describe it because we do pay Medicare premiums.  Like Social Security, it is an insurance program that is rapidly running out of money.

How we address Medicare is crucial to any reform.  The Dems probably won't do anything, acting as the hero to the elderly, and letting Republicans do the dirty work.  Medicare was established by the Democrats in the early sixties and was made part of the Social Security system, using an existing and functioning system.  That was a wise administrative decision, and is one of the reasons why the Medicare program functioned fairly well and was popular from the start.

Last week Congressman Paul Ryan of Wisconsin issued a Republican budget that addressed Medicare by proposing drastic changes in the system.  Ryan would change Medicare from a reimbursement-for-service system to a voucher program where each beneficiary would receive a voucher each year to buy medical insurance from private insurers.

I have enormous admiration for Ryan and his courage in even taking on the issue of Medicare reform.  However, I must dissent from his proposal.  Politically, it's just a non-starter.  Americans like Medicare in part because it's a simple system and has actually paid the bills over the years.  To ask elderly people to start looking around for private health insurance, using a voucher that most experts now say would not cover what Medicare covers, is just not going to get much support.  And remember, insurance companies, especially health-insurance companies, are not beloved institutions.  I haven't seen too many "I love Aetna" buttons recently.

What's interesting here is that Republicans, while giving Paul Ryan high marks for his effort, aren't exactly flocking to support the Medicare part of it.  This is one that has to go back to the drawing board.  It is impractical, and goes against the grain.  I think Republicans can do better in reining in Medicare costs without starting a war with beneficiaries.  It will be tough, but no program has any value unless it can pass Congress, and we're not there yet.

April 12, 2011