Paul Ryan


Deficit-Cutting Mythology

For months, one of the primary talking points pushed by the president and his allies in Congress is that their health-care plan would reduce the federal budget deficit substantially, especially during the second decade of the program’s implementation.

This claim has always rested on completely implausible assumptions, gimmicks, and sleight of hand, all of which has already been well exposed by Congressman Paul Ryan and others.

Still, some myths persist and require repeated debunking.

For instance, Ezra Klein and others say the health-care bill shouldn’t be assessed the $371 billion in ten-year costs associated with the so-called “doc fix” because everyone knows the money is going to be spent anyway. Under current law, Medicare physician fees are being cut 21 percent from last year’s level, which neither party supports. Of course, there are more and less expensive ways to reform the Medicare physician fee schedule; there is some discretion there. But the real point is that the Democrats want to spend the money on physician fees without an offset, on a permanent basis. That is new. That’s not how the Bush administration and Congress approached the problem in the past. In previous years, Congress struggled to find the offsets to pay for year-by-year fixes, and not always successfully. But because they could never agree on acceptable offsets for a longer-term plan, they never attempted to pass one. They weren’t going to simply add all of the costs of higher physician fees to the annual federal budget deficit in perpetuity.

But that’s exactly what the Obama administration and its congressional allies want to do. They are increasing the cost of Medicare (through the doc fix) at the same time that they are cutting Medicare (reducing the payment-rate increases and cutting Medicare Advantage), but since they are just adding the cost of the doc fix to the budget deficit, they can claim all the Medicare cuts as savings scraped together to pay for the massive entitlement expansion included in the health bill. If they succeed with this approach, the effect will be to dramatically increase the nation’s budget deficits and debt. Indeed, the increase in deficit spending from higher Medicare physician fees is more than three times the claimed deficit reduction from the entire health bill over the next decade.

Beyond ten years, Democratic claims of substantial deficit reduction from the health bill have rested entirely on two provisions.

First, there’s the “Cadillac tax.” In the Senate-passed bill, the tax takes effect in 2014, and the threshold used to determine what constitutes “high-cost” would rise annually at a rate well below expected medical inflation. Consequently, as the years passed, more and more Americans would find themselves in plans considered “high-cost.” In time, virtually the entire middle class would get hit by the tax.

But, as we now know, the president and his Democratic allies never really had the stomach to impose this tax themselves. Under union pressure, they have promised to delay it until at least 2018, well beyond the point when the president will have left office. But the White House and congressional leaders still want to claim credit for all of the revenue that would occur beyond 2019 if by some chance a future president and a future Congress are more willing than they are to impose this tax.

The other key provision for claims of long-term deficit cutting is the permanent annual reduction in the payment-rate increase for hospitals and other facilities from the Medicare program. Under current law, hospitals get an increase each year in what they are paid for certain services based on rising input costs. The Democrats are planning to cut the inflation increase every year by half a percentage point. Over time, the compounding effect of an annual cut of this size would be very large. But the chief actuary of the program has warned repeatedly that it is unrealistic. Despite all of the claims of “delivery system reform” and painless weeding out of inefficient care, this arbitrary cut is business-as-usual. There’s no effort to calibrate payments based on performance or how well patients are treated. Its across-the-board cuts for everybody. And the chief actuary says, if implemented, one in five facilities would be pushed into serious financial distress.

The hypocrisy is stunning. Even as the Democrats want to wave a magic wand and pass a $371 billion “doc fix” to undo a previously-enacted arbitrary cut in payment rates, they now want to impose another one and use the supposed savings to grease the way for the largest entitlement expansion in a generation.

All of this scheming and maneuvering is catching up with them. The Washington Post reports today that CBO now says the latest version of the Democratic plan will no longer cut the deficit as the Democrats have claimed. That’s not surprising. To buy votes, they are upping the subsidies in the exchanges, expanding the Medicare prescription-drug benefit, delaying the Cadillac tax, and buying off countless members with other assorted and unseen deals (where are the C-SPAN cameras when you really need them?). Little wonder that even their phony deficit-reduction claims have now evaporated.

But the game is not over. Even now, they are going back to CBO with another bag full of tricks. They will never actually impose any sort of real budget discipline, of course. That would cost them votes. But no gimmick is too shameless for them; they will do anything if allows them to claim that enactment of another runaway entitlement program will actually improve our long-term budget outlook.

Fortunately, the public is not buying it. The American people see through the smokescreen. They know full well that Congress wants to put in place another unfinanced and expensive entitlement program, even as the federal government is piling up debt at a record pace. Which is why they are telling their elected representatives in every way they can to stop the madness already — and start over.

posted by James C. Capretta | 2:52 pm
Tags: Ezra Klein, Paul Ryan, doc fix, Medicare, Medicare Advantage, payment-rate increases, Cadillac tax, CBO
File As: Health Care

A Roadmap to Better Health Care

Thoughts on Paul Ryan’s Plans for Reform

Over at National Review Online, I take a look at Congressman Paul Ryan's "Roadmap" for entitlement and tax reform. The piece focuses on the reforms which are crucial to building a functioning marketplace in the health sector. An excerpt:

Elected Democrats and their allies have also taken note of Ryan’s proposal. Their main interest seems to be, as usual, in scaring seniors about supposed Republican “privatization” plots. In particular, liberals are focusing their anti-“Roadmap” fire on the proposal to convert the Medicare entitlement for those currently under age 55 into a system of fixed contributions toward the purchase of insurance.

Ryan’s opponents are right to highlight this reform. It is a dramatic shift from current law. But they’re wrong to argue that it would do nothing to control health-care costs. These critics claim that Ryan’s plan would simply shift the burden and risk onto individuals, because the government’s financial support for health-insurance enrollment would no longer keep pace with premiums. But that’s the wrong way to look at it. Our goal shouldn’t be to keep pace with premiums, but to bring premiums under control by eliminating the widespread inefficiency that exists in the health-care sector today. That’s the only way to slow the growth of health-care costs without harming the quality of care.

Forget one-off ideas for trimming this or that. What is needed is a continuous, long-term, dynamic process that will lead those who deliver services to want to provide better care at less cost. What can bring that about? Ryan’s emphatic answer is that a functioning marketplace can, and an essential feature of such a marketplace is cost-conscious consumers. Under current law, when costs rise, the federal government pays a sizable portion of the extra costs, thus undermining the incentive to find better and cheaper ways to go about things.

Ryan’s reforms would provide substantial federal support to encourage broad-based insurance coverage and enrollment, but the support would not be open-ended as it is today. A person who buys economical health care would get to keep all of the savings. Conversely, a person who selects expensive health care would have to pay more out of his own pocket. That’s the way the new Medicare drug benefit works, and costs have come in 40 percent below original expectations. To root out inefficiency, improve productivity, and provide powerful incentives for cost-cutting innovation, the entire health-care sector must be transformed into a vibrant, competitive marketplace. And that’s exactly what the “Roadmap” would deliver over time.

The full article is available here.

posted by James C. Capretta | 4:37 pm
Tags: Paul Ryan, Roadmap
File As: Health Care

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