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Wisconsin's Paul Ryan has emerged as a major policy influence pushing for health care reform.

Oct 1, 2007, Vol. 13, No. 03 • By DUNCAN CURRIE
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Like many other House Republicans, Wisconsin's Paul Ryan felt deeply torn over the 2003 Medicare prescription drug bill. He was loath to endorse a massive new entitlement program, given the already parlous future of U.S. retirement spending. But Ryan also viewed Health Savings Accounts (HSAs), the bill's most notable free-market element, as a vital means toward establishing "a beachhead against socialized medicine." Indeed, he had sent a letter to House conferees urging them to include HSAs in the final legislation. With an HSA-only bill impractical--Senate Democrats would have staged a filibuster--Ryan accepted the tradeoff and voted to approve the Medicare Modernization Act.

"I was very mixed," he says today. "I made my decision as I came to the floor." He ultimately "felt an obligation to support it, given that they answered my demand for HSAs." Nearly four years later, Ryan stands by that decision, noting that the new "Medicare Advantage" subsidies encourage seniors to get their benefits from private insurers. He also lauds tax-free HSAs as "one of the best things" the Republican Congress achieved in the last decade. "It's put us on offense on health care for the first time in 20 years."

Elected in 1998, Ryan, 37, is one of a small number of GOP House members with a passionate interest in revamping the U.S. health care system. A self-described "Dick Armey conservative," he regrets that the party has lost its "fiscal brand" through profligate spending and corruption. Shortly after the 2006 election, Ryan vaulted over a dozen Republicans with more seniority to become the ranking member on the Budget Committee. Known for his wonkishness and collegiality, he insists that restoring a "limited-government philosophy" is essential to regaining power and complains that "this notion of 'big government conservatism' is what got us in trouble."

But Ryan also recognizes that Republicans must not be complacent about spiraling medical costs. In April 2005, when he introduced legislation to provide health care tax breaks for small businesses and the uninsured, Ryan said the "skyrocketing" cost of insurance was "the biggest domestic crisis facing most Americans today. It affects our jobs, our economy, and our families' way of life. We have to get a handle on this problem." His aim is to forge a credible, coherent Republican alternative to the Democrats' vision of increased government control.

He emphasizes the need for market-based reform. "About a dozen of us care about this issue greatly," Ryan says of his GOP House colleagues, citing in particular Louisiana's Jim McCrery, the ranking Republican on the Ways and Means Committee, and Arizona's John Shadegg, who formerly chaired the Republican Policy Committee. With Democrats pushing hard for "universal coverage" and broader regulation of private insurance, more and more Republicans are realizing that, as former Bush adviser Karl Rove stressed in the Wall Street Journal last week, "This is a debate Republicans cannot avoid."

They may face an uphill battle. In late February, a New York Times/CBS News poll asked which of four domestic policies "is most important for the president and Congress to concentrate on right now." Whereas 55 percent of respondents said "making health insurance available to all Americans," only 11 percent said "reducing taxes." (Nineteen percent said "strengthening immigration laws" and 13 percent said "promoting traditional values.") When asked to choose between the two parties, 62 percent said the Democrats were "more likely to improve the health care system." Only 19 percent said the Republicans.

In that same poll, 90 percent of Americans said the system either requires "fundamental changes" (54 percent) or needs to be completely rebuilt (36 percent). Roughly as many people (89 percent) were either "very" (52 percent) or "somewhat" (37 percent) concerned about future health care costs. Seventy percent also considered it a "very serious" problem that millions of their countrymen lack health insurance. Most discouraging for market-oriented conservatives like Ryan were the 64 percent who agreed that "the federal government should guarantee health insurance for all Americans."

The popularity of the new Medicare prescription drug plan is also telling. As the Washington Post reported in late November, "Polls indicate that more than 80 percent of enrollees are satisfied, even though nearly half chose plans with no coverage in the doughnut hole, a gap that opens when a senior's drug costs reach $2,250 and closes when out-of-pocket expenses reach $3,600." The entitlement program "has proven cheaper and more popular than anyone imagined."

But are insured Americans really eager for Washington's role in managing the broader health industry to expand? Conservatives may take some solace from an ABC News/Kaiser Family Foundation/USA Today survey conducted in September 2006, which found that 88 percent of those already insured were satisfied with their coverage, and 89 percent of the insured were "satisfied with the quality of care they receive." Yet even among the insured, 60 percent were also "at least somewhat worried about being able to afford the cost of their health insurance over the next few years."

Ryan believes the debate is entering its pivotal stage, with health care spending now chewing up around 16 percent of GDP and Democrats proposing a shift toward government-directed care. "My focus is on getting consumer-driven health care," he says. The current employer-based system insulates consumers against price volatility, but it also encourages them to rely on insurance for routine medical bills and to overuse employer-subsidized care, which drives up costs. By promoting this system, the tax code discriminates against those who buy their own private insurance. Ryan puts it bluntly: "The greatest source of health care inflation is the third-party payment system." It makes Americans more wary of switching jobs, lest they temporarily lose their insurance coverage (one of the middle-class anxieties that the Democrats campaigned on in 2006).

How should Republicans respond? Ryan touts two reforms in particular. The first one, prominently championed by Shadegg in the House and South Carolina Republican Jim DeMint in the Senate, would let Americans purchase their health insurance from out-of-state companies. Such competition could depress costs across the board. The other Ryan-backed reform would provide either tax credits or tax deductions for individuals and families who buy private health insurance themselves. President Bush embraced the tax-deduction formula in his 2007 State of the Union Address.

There's just one big problem: Neither of these reforms has traction in the current Democratic Congress. Any hope the Republicans had of ending the tax bias against people who buy their own health insurance died last November. The reforms outlined by Ryan will almost certainly require a GOP majority to pass and a Republican president to sign them into law. When one considers these reforms--supported by Rudy Giuliani and Mitt Romney--and then places them alongside the proposals of Hillary Clinton, Barack Obama, and John Edwards, it becomes even clearer that the 2008 election could be a seminal moment for American health care. As Ryan admits, the Democrats now "have a real chance at meeting their aspirations."

Duncan Currie is managing editor of the AMERICAN.