Time to put government hands on Medicare

Paul Ryan’s proposal is a stealthy bid to fix our entitlement culture

Two weeks ago, Representative Paul Ryan (R-Wis.), the chairman of the House Budget Committee, issued a CBO-scored budget proposal that is being called the “Path to Prosperity.” The budget, a first of its kind — a unique, comprehensive fix to our debt problem — has caught many in the political establishment flat-footed. This includes President Obama (whose own budget plan looks prodigal in comparison) as well as many Republican leaders who have thought it politically wise to advocate for spending cuts without enumerating what, specifically, should be cut.

In broad strokes, Ryan’s plan cuts $6.2 trillion in spending over the next ten years relative to Obama’s proposal and brings the public debt down to 10 percent of GDP by 2050. Ryan borrows much from the Bowles-Simpson deficit commission, but since Ryan is a single Republican — not a bipartisan committee — he has the freedom to go further, both in the level of deficit reduction that he aims for and the degree of detail in his plan.

As a budget, Ryan’s plan deserves plaudits for its cuts to non-military discretionary spending and tax reform. The highlights of these cuts are long-overdue reductions to farm subsidies, an end to both the employer-sponsored healthcare subsidy and the mortgage interest deduction, and a much-needed reform of our civil service.

Conversely, the plan deserves brickbats for the two major spending areas that Ryan leaves untouched — military expenditures and Social Security. On military spending, Ryan offers only the cuts that have already been proposed by Defense Secretary Robert Gate. Perhaps Ryan feels out of his element in trying to rein in military expenditures — but if so, he should overcome his reticence. We could save ourselves a good deal of money if we stopped building weapons systems using China as the design-basis threat and instead shifted resources to developing capabilities we might actually use. On Social Security, Ryan bizarrely offers no changes at all; he would do better to apply his usual reform-mindedness and advocate something gutsy, like raising the retirement age to 70.

However, treating Ryan’s plan as merely a budget proposal would be missing the point — Ryan has issued a bold call for healthcare reform and used the budget proposal simply as his medium. And it is here, in Ryan’s plan for Medicaid and Medicare, that his ideas are truly revolutionary.

For Medicaid, the government health insurance program for the poor, Ryan proposes a reform influenced by Clinton’s successful welfare reforms of the 1990s. Namely, he advocates converting Medicaid into a block grant program, wherein state governments are given a fixed amount of money each year and charged to cut costs on their own.

For Medicare, the government health insurance program for the elderly, Ryan proposes changing the current all-you-can-eat system to a voucher program, which gives the elderly subsidies with which to purchase their own private plans. To cut costs, the voucher’s value will be pegged to the normal inflation rate, not the medical inflation rate.

Lastly (and unsurprisingly), Ryan proposes scrapping most of ObamaCare. The insurance mandate, the subsidies, the committees to fiddle with costs — all of it would disappear.

As an ardent supporter of Obama’s healthcare reforms, I take issue with this last point — ObamaCare may need some tweaking, but to throw it out wholesale would neither reduce government nor make it better. However, Ryan’s proposals for Medicaid and Medicare are not just laudable — they rewrite the decrepit social contract of the 1960s and offer the best possible means of putting our fiscal house in order.

Much as when Clinton proposed reform, critics say that the changes would be cruel and create widespread suffering — they were proven wrong then, and if Ryan’s plan is adopted, they will likely be proven wrong again. It is true that Ryan’s plan would greatly reduce the amount of resources offered to the poor and elderly for their healthcare. But this is not the same as saying that the healthcare outcomes of the poor and elderly would be changed.

By every indication, U.S. medical spending exists on what we call the “flat of the curve.” Each marginal dollar that we spend produces little benefit in terms of health. The best study on the matter is a multimillion dollar experiment from the nonprofit RAND corporation. RAND distributed subjects randomly into groups and offered each group a health insurance program of varying deductibles and co-payments. They meticulously recorded the health of the subjects over time using as many quantifiable dimensions of health as they could identify, including weight and blood pressure. Their finding was that healthcare spending among those who were given the less generous plans was indeed lower than their luckier peers. But across the groups, the medical outcomes were constant — for all their extra consumption of services, those with the all-you-can-eat insurance programs were no better off than their stingier counterparts.

For many countries — particularly those which are fiscally sound — the relationship between government and citizens that Ryan proposes is not new. Rather than offer a wasteful buffet of services, government can empower individuals to make their own decisions and show the good judgment that bureaucrats cannot hope to emulate.

Ryan’s proposal is an embodiment of the conservative ideal of government welfare — namely that the U.S. safety net should not be a smorgasbord of handouts, but instead an economical system that encourages individuals to take only what they need and not more. It should not be viewed merely as an accountant’s blueprint for bringing our nation back into the black, but as an overhaul of government’s role in our society. And until Democrats put together their own vision for a revised social contract, Ryan’s plan will remain the sole coherent ideological vision of our future.

Lucas about 13 years ago

I also applaud Ryan for suggesting a plan that would actually do something to reduce the deficit instead of just cutting this Democrats like (i.e. NPR and Planned Parenthood). However, his plan is rather inequitable, as the voucherization of Medicare (which amounts to a huge cut) would hurt the poorest, while his plan includes huge tax CUTS for the wealthy.

And how is Obama's plan prodigal? It cuts the same amount, more or less, and is more balanced between spending cuts and tax increases.

Anonymous about 13 years ago

Ha ha ha. Yost is still a Republican shill, hiding behind a cloak of moderation. When the rubber hits the road, he will always favor the strong over the weak, the rich over the poor, confrontation over diplomacy, and some sort of overarching "coherent ideology" instead of targeted pragmatism.

How about the following "do nothing" budget approach?


Anonymous about 13 years ago

You seem to have a different definition of "coherent" than most people.

2.8 unemployment? Almost $3M in tax cuts that will magically increase revenue? Paging Mr. Laffer...

Vouchers for everyone! Add some magic pixie dust and voila! A balanced (and courageous) budget proposal!