Ryan Plan


Kaiser’s Faux ‘Study’ of Premium Support

I have a column today at National Review Online on the flaws of the latest “studies” of the Ryan-Wyden Medicare plan.

The problem is, under Ryan-Wyden, no current seniors would be placed into a premium-support program. They would all be exempt, as would everyone age 55 and older but not yet on Medicare. So this hypothetical premium jump for current Medicare beneficiaries has no connection to reality.

Moreover, under Ryan-Wyden, future enrollees into the program — those who have not yet enrolled in any Medicare option — would be guaranteed at least two options that would cost no more than what current Medicare would require. So, under Ryan-Wyden, no senior — present or in the future — would ever have to pay more than they do today for Medicare. Period.

You can read the rest of the article here.

posted by James C. Capretta | 10:43 am
Tags: Ryan plan, Medicare
File As: Health Care

Paul Ryan's Medicare Plan Harnesses Consumer Power in Healthcare

Last Friday I contributed to a debate on the Ryan Medicare plan at the U.S. News & World Report “Debate Club.”

There are two basic choices for slowing the pace of rising costs in Medicare. The first option—the one embraced by the Obama administration—is to rely on the federal government to impose price controls and otherwise try to micromanage how healthcare is delivered to patients. This approach has been tried for the past four decades in Medicare, and hasn't worked.

The alternative is to harness the power of consumer choice in Medicare. The proposal would be phased in gradually. Current beneficiaries and those age 55 and older would see no changes in the way the program works for them. Future entrants, however, would be entitled to a premium support payment which they would direct to the plan of their choice.

You can read the rest of my post here.

posted by James C. Capretta | 3:27 pm
Tags: Ryan plan, Medicare
File As: Health Care

On Political Expediency and Health Care Reform

In a new column for Kaiser Health News, I point out a strange turn that our debates over health care have taken:

Once upon a time, President Barack Obama and many others who championed his health care plan actually professed faith in the power of a functioning health care marketplace. That now seems like a distant memory, given the demonization campaign that the president and his allies have launched against House Budget Committee Chairman Paul Ryan's plan to inject consumer choice and competition into Medicare. But there's no doubt that while the health law was under consideration in Congress, the president and his team wanted to leave the impression with voters that the plan they were pushing would rely mainly on market signals, not heavy-handed government control....

Meanwhile, now that their plan is law, the tune has changed. The enthusiasm for premium credits, consumer choice of private health plans and decoupling of credits from health costs seems to have waned. Indeed, it's waned to such an extent that these are now not just bad ideas but ideas that would destroy America as we know it! ... Those who previously stressed that the new health law would have a strong component of consumer choice and competition are now saying that a functioning marketplace will never work.
 
You can read the whole thing here.

posted by James C. Capretta | 10:59 am
Tags: Obamacare, Ryan plan, Peter Orszag
File As: Health Care

The $6,400 Question

The ongoing delusion of the price-control solution

When President Obama decided to take the political low road and demonize House Budget Committee Chairman Paul Ryan’s Medicare reform plan in his budget speech last month, it wasn’t really surprising. President Obama demonstrated in the 2008 campaign that he is a world-class practitioner of shamelessly dishonest political attacks when he went after Senator John McCain for proposing a change in the tax treatment of health insurance, and then pushed for a change himself once he was elected. Given this track record, there was every reason to believe he would jump on the chance to demagogue on health care again if the opportunity presented itself. And boy has he. It’s now clear based on four weeks of a relentless barrage that his reelection effort will be based heavily on creating fear in the electorate, and specifically among seniors, about the supposed negative consequences of the Ryan Medicare plan. So much for an administration devoted to hope and change.

But what exactly is the substantive basis for the president’s attack on Ryan’s proposal? Here’s the key paragraph from the speech:

[The Ryan plan is] a vision that says America can’t afford to keep the promise we’ve made to care for our seniors. It says that 10 years from now, if you’re a 65-year-old who’s eligible for Medicare, you should have to pay nearly $6,400 more than you would today.

Where did the $6,400 figure come from?

Best as anyone can tell (the president didn’t cite a source), it seems to have been derived from the Congressional Budget Office’s April 5 analysis of the Ryan budget. On page 22 of that report, CBO (always so helpful!) provided its assessment of what it would cost an average 65-year-old to enroll in a private health plan compared to what it would cost that same average 65-year-old to stay in traditional Medicare. It’s an illuminating piece of work on the part of CBO, but perhaps not for the reasons CBO intended.

The mechanics appear to be as follows: CBO says the Ryan plan would provide an $8,000 “premium support credit” for average-health 65-year-olds in 2022, which would only cover 39 percent of the total cost of providing a standard Medicare package of services to such beneficiaries. That puts the total cost of the private plan at $20,500, of which the beneficiaries would be required to cover $12,500 out of their own pockets.

By contrast, CBO says the traditional Medicare program could provide the same standard package of services for just $14,800 in 2022 (in what’s called the “alternative fiscal scenario”). Under current law, the government would cover about $8,600 of the total cost, leaving a little under $6,200 for the beneficiaries to cover themselves. With rounding, the difference between what it would cost the average 65-year-old under the Ryan plan compared to what it would cost under current law is “nearly $6,400” in 2022, or so it would seem from CBO’s numbers.

Ironically, this analysis from CBO actually tells us much more about CBO than it does about what the Ryan plan will mean for seniors in 2022.

There are two key assumptions underlying the numbers that are highly implausible and reveal a systematic tilt toward government-run health care.

First, CBO says that in 2022 government-run Medicare could provide the standard package of health coverage for just 72 percent of what it would cost a private plan to do so. How could that possibly be? Simple: Price controls, and especially the deep cuts in Medicare’s fixed prices imposed under Obamacare. If one assumes that there are no consequences whatsoever to paying ever-lower rates of reimbursement for medical services, then, sure, government-run Medicare, and for that matter government-run health care more generally, would look cheaper on paper than private health insurance.

And, in fact, this is not a new development. Health care price controls have always looked good on CBO tables, which is a huge problem in the policymaking process. But they never look quite so good in the real world. Consider Medicaid. State governments have imposed extremely low rates for most medical services, and the program’s participants often have a difficult time securing access to needed care. Far too often, it’s insurance on paper and not in practice. Moreover, because the rates are so low, the quality of care provided to the Medicaid population is well below what most Americans would find acceptable.

CBO’s analysis makes none of these quality distinctions. Price-controlled Medicare, with payment rates as low as Medicaid’s today relative to private insurance, is assumed to provide the same quality care as private coverage. It’s absurd.

Incidentally, it should be noted that in Medicare Advantage, private-sector HMOs were able in 2010 to provide the standard package of Medicare services for less than what government-run Medicare costs (according to MedPAC data). And that’s in spite of the price controls imposed by government-run Medicare. The reason is that government-run Medicare is a massively inefficient operation. Yes, it pays very little per service, but the volume of services provided has been soaring on an annual basis for years and years.

The other crucial assumption is that competition in Medicare has no effect whatsoever on the efficiency or cost of the options offered to Medicare participants. The whole point of the Ryan plan is to build a functioning marketplace, in which plans have to compete for the business of cost-conscious consumers. Ryan rightly believes that this is the key to genuine “delivery-system reform,” by which those delivering the services to patients find new, better, and more efficient ways of providing needed services at less cost. But CBO’s assessment assumes nothing will change at all.

Those who have been pushing for a market-based solution for health care have long complained that CBO’s analyses inevitably favor a command-and-control approach. This latest analysis only confirms that point of view. Unfortunately, it’s a sad reality that genuine reform of the nation’s health entitlements and broader health system are likely to be enacted in spite of analyses from CBO, not because of them.

posted by James C. Capretta | 10:13 am
Tags: Ryan Plan, CBO, Medicare
File As: Health Care

What Real Leadership Looks Like

House Budget Committee Chairman Paul Ryan has laid out a vision for twenty-first century governance that will become the GOP program for 2011, 2012 and beyond.

It is unquestionably the boldest budget plan ever offered (including Reagan’s first budget), focused first and foremost on bringing federal spending commitments into line with the revenue generated from a pro-growth tax system. It reforms entitlement programs, starting with Medicare and Medicaid of course, but not ending there. Farm payments, welfare programs, and corporate subsidies all are reformed and refocused to reduce costs to taxpayers and work as they should. Outdated programs are thrown out. The bureaucracy is cut down to size. No corner of the budget is spared from scrutiny, including defense. The challenge of unlimited government, and runaway spending, deficits, and debt is immense — but the Ryan plan more than meets it.

A lot more can and will be said about the plan’s details in coming days, including by me. But for today, it’s important to focus on what this plan means in the big picture.

For starters, it completely recasts the struggle between the political parties. Everyone knows that what the president and his allies really want to do is raise taxes. They might agree to some tinkering around the margins on entitlements for show. But in their heart of hearts they believe the solution is higher rates of taxation.

The problem is they don’t have the guts to say so in public. They know that’s the surest way to permanent minority status. And so they are hoping for a more indirect route to their goal, using guile to lure gullible Republicans (see here) into agreeing to their approach without ever having to sell it to a tax-averse electorate.

The Ryan plan blows this kind of plotting by Democrats to smithereens. There’s no tax increase in the Ryan plan, and there’s no debt crisis. What’s required is far-reaching entitlement reform and serious spending discipline. By staking out that position, Ryan and his comrades have improved their leverage immensely. There’s no need to agree to tax hikes to solve the budget problem. What’s needed is for Democrats to get serious about spending reform, as Ryan has.

Moreover, with a Republican plan on the table, the media will surely start to ask Democrats, “Hey, where’s your plan?” This will force them to either come clean with their tax-hike vision, or become the party that pushed the country toward a debt-induced economic crisis. Either way, with more clarity about where the parties actually stand, Republicans can win the public fight.

At the heart of the spending problem, of course, is health care, and at the heart of the health-care cost problem is Medicare. The Obamacare “solution” is heavy-handed regulation and government-imposed cost controls. That approach never works, and only erodes the quality of the system. What’s needed is a functioning marketplace, with government oversight and cost-conscious consumers directing the allocation of resources. And that’s exactly what the Ryan plan would deliver.

The country faces serious and daunting challenges in the coming months and years. We need serious political leaders who are ready and capable of rising to the challenge. No one has demonstrated that capacity more than Paul Ryan.

[Cross-posted on the Corner.]

posted by James C. Capretta | 11:39 am
Tags: Ryan Plan, Paul Ryan, Medicare, Obamacare, debt
File As: Health Care