The American Square


Congressman Paul Ryan’s proposal to transform Medicare into a voucher that can be used to buy a health plan in the private market has scared a lot of seniors. Democratic politicians are arguing that Ryan’s proposal will “end Medicare as we know it” – leading to much higher out-of-pocket costs for beneficiaries. Republicans are arguing that it’s essential to get health care costs under control, thereby saving the program for future generations.

Who’s right? The fact is that both sides are telling only half the story. We need to stop frightening the public and start talking sense.

Democrats are right that under Ryan’s specific plan, which allows for only very modest growth in Medicare spending, seniors would end up paying a LOT more – more than twice as much by 2030, according to the CBO. But they are wrong on several other counts. To begin with, no one would be affected immediately since the plan does not affect anyone over the age of 55. But, in addition and more importantly, slower growth of Medicare spending with some kind of cap on that growth is essential to save the system. The President’s own budget framework and last year’s Affordable Care Act recognize this same principle.

The key questions to ask yourself are the following: first, how does a cap on spending growth affect consumers and providers? If nothing is done to make the delivery of health care more efficient then a cap can only shift costs to consumers or reduce the incomes of providers. Second, what might make the delivery of health care more efficient? If you believe that consumer choice and competition among providers will accomplish this goal, you should support Ryan’s basic approach. If you instead believe that most sick people, especially those with serious conditions, don’t shop for care but instead follow their doctor’s recommendations, some skepticism about the effects of consumer choice is warranted. And if you believe that competition will not prevent insurance companies from skimming off a chunk of the voucher money in the form of administrative costs and profits, then still more skepticism is in order. You should not only vote “no” on the Ryan plan; you might even want to fight for the kind of single payer system being tried in Vermont.

The important point is that we need to improve the efficiency of the system. Almost everyone agrees that we are getting poor value for our health dollar. Medicare’s open-ended fee-for-service system does not solve the problem; it exacerbates it. Premium support is one way to put a lid on unsustainable growth rates. The President’s proposal is another way to accomplish the same objective. He would not only limit the growth of Medicare but give greater authority to an independent board to change the way in which the delivery system is organized and health care costs are reimbursed. His plan is far from perfect but, in my view, better than either the status quo or Ryancare.