Economics, Health Care

Fact checking the fact checker on Paul Ryan’s Medicare reform plan

On Tuesday, President Obama attacked what he claimed is the Republican Medicare plan.  Jim Pethokoukis points out that Obama criticized a plan that no one has actually proposed.  Today, Glenn Kessler (the Washington Post’s “Fact Checker”) takes on Obama’s claim that Paul Ryan’s plan would not protect seniors from the rising cost of health care.  Kessler quotes me, and gets it partly right.

There really is no mystery about what the House Budget Committee documents say.  Under Ryan’s plan, every senior will be able to afford full Medicare benefits, whether through a private insurer or the traditional program.  In many parts of the country, traditional Medicare will be the low bidder.  Indeed, the point of the proposal is to give seniors a good deal through competition, not to drive out traditional Medicare and not to dictate what plan seniors must choose.

It is no coincidence that Ryan adopts the same spending target that Obama proposes in his latest budget:  GDP plus 0.5 percent.  The GDP plus 0.5 percent target is a budget gimmick used to generate savings that CBO can score, whether or not those savings are actually achieved in future years.  If seniors are harmed in any way under Ryan’s plan as a result of the spending target, they suffer the same harm under Obama’s.

The debate is over how Ryan would achieve budget savings, and again there is no mystery despite the White House’s best efforts to obfuscate the matter.  Contrary to the claim from an unnamed Administration official, the spending target would not be met simply by slapping a cap on the federal subsidy and leaving seniors with unaffordable premiums.  Congress would reduce program costs by cutting payments to providers, reducing program overhead, raising premiums to high-income beneficiaries—in other words, all the actions that Congress could take today if it had the will to rein in Medicare’s runaway spending.

In fact, enrollment in traditional Medicare is likely to be so great even a decade from now that any serious effort to reduce program costs would have to rely on such policies.  According to the Medicare trustees, about 55 million people will be enrolled in traditional Medicare in 2022.  Roughly $900 billion of the trillion dollars that Medicare will spend that year will be through the traditional program.

It is ludicrous to argue, as the White House does, that deficit reduction efforts under the Ryan plan would ignore opportunities to reduce Medicare’s operating costs and simply pass the high costs onto seniors.  Although Ryan’s plan does not spell out in great detail all of the mechanisms it would use to slow Medicare spending, it is clear that Congress would have all the policy tools needed to ensure affordable health care for our seniors.  But Congress would have to find the political guts to use them.  That has been our problem all along.

2 thoughts on “Fact checking the fact checker on Paul Ryan’s Medicare reform plan

  1. Medicare ‘operating cost” are the lowest of any private insurance company. Insurance payout cost is a different category of cost. It is unbelievable that anyone would consider reducing payout cost as a means of reducing overall Medicare cost. If this was a practical alternative millions of Americans would reduce their payments to the IRS, Electric,Gas,Water utilities, etc. The result would be they would be turned off of the service. So, if Medicare reduces payments to providers, many providers will just stop accepting Medicare. The solution is to get at the bottom level of the cost and do something about it. $10 Aspirins in a hospital. Outrageous prescription cost. Hospitals trying to recover the cost of $Million dollar MRI machines in a couple of years. Currently, my doctor bills medicare $125 for an office visit and get paid approx $98 for a 15 minute visit. That comes out to about $400 and hour which is right up there with Lawyer and Big 4 Consulting fees. While this seems fair consider the Doctors administrative cost and liability insurance cost it appears that the Hospitals have a blank check. I know multiple senior citizens that go in to the hospital for minor surgery such as a knee replacement and they are subjectived to every expensive test that is available. Daily cost for a hospital stay at $3000+ is just outragious.

  2. The first crucial component of any serious reform must be a “defined contribution” approach to the public financing of health care — the essential prerequisite for a functioning marketplace that imposes cost and quality discipline. For market forces to work, consumers must be cost-conscious.

    The second pillar of reform should be personal responsibility and continuous-coverage protection.

    The third pillar of reform must be a genuine partnership with the states.

    The fourth pillar of a real reform agenda would address the tax treatment of employer-sponsored plans, transforming today’s tax exclusion for employer-provided insurance into a standard tax credit that would extend to all Americans, regardless of employment status, which they could then use to purchase the private coverage of their choice.

    The fifth key component of a genuine health care reform plan must be an overhaul of Medicaid — policymakers should move lower-income people out of the limited sphere of Medicaid options and into the same private health insurance markets in which their fellow citizens purchase coverage.

    The sixth pillar of a replacement plan must be premium-support reform of Medicare.

    Finally, as a key criticism of ObamaCare is the danger it poses to federal finances, the seventh pillar of a serious health care reform plan must be the full offset of all new costs through spending cuts (http://bit.ly/Hy53BN).

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