Just In Case I Wasn't Clear In My Last Post About Ryan's Plan
My last post was specifically about the idea of turning Medicare into a voucher to buy private health insurance. I wasn’t endorsing the Ryan proposals for health care wholesale – I haven’t thought enough about the Medicaid block grant concept, I can’t see any justification for excluding everyone over 55 from any proposed reform, and I’m opposed to wholesale repeal of the health care legislation passed by the last Congress.
And I wasn’t saying anything about the other tax, spending and regulatory proposals in Ryan’s budget plan.
For the record, I think any serious tax overhaul needs to raise more, not less revenue than the code as it stands. The Ryan tax proposals fail that test, so I’m not taking them seriously. I certainly think it makes sense to cut some taxes – cutting the corporate rate dramatically while eliminating loopholes seems like a very good idea to me, as does cutting the payroll tax permanently. I also think it makes sense to raise some taxes – scale back costly income tax loopholes like the mortgage deduction and impose some kind of consumption tax, whether a VAT or a carbon tax or a combination of various pigovian taxes, whatever. I don’t see a lot of justification for further lowering the top income tax bracket. But the bottom line for me is that a tax overhaul proposal isn’t serious if it doesn’t raise more revenue than the current code, and then we can debate efficiency and distribution effects and so forth.
But on the spending side, there are only two serious debates to be having: one about Medicare, and one about defense. The debate about Medicare isn’t a pure spending debate, and neither is the debate about defense. We talk about Medicare in the context of a larger debate about how to drive better health outcomes for lower cost. We talk about defense in the context of a larger debate about America’s overall foreign policy. We could, in both cases, let budgetary necessity force policy choices upon us, but I do think we’d get better results if we actually talked about policy with the budgetary necessities in mind, and vice versa.
Thanks for the clarification. I’ve long been surprised at how little useful discussion I’ve seen of defense policy with budget in mind and I’m in those circles for a living. To some degree, that really got to the nature of the containment and nuclear weapon policy debates, but I think with the fall of the Soviet Union it just became easy to talk about budget as merely the output of policy and not a notable constraint. As you say, the eventual outcome of that approach is policy as an output of budget.
— Greg Sanders · Apr 6, 03:05 PM · #
“We talk about Medicare in the context of a larger debate about how to drive better health outcomes for lower cost.”
That’s exactly it, and that’s the primary reason why Ryan’s plan is fundamentally unserious.
We know from past CBO projections that the long-term cost problems with Medicare and Medicaid are from increasing health care costs.
Ryan doesn’t address increasing health care costs; he simply tells seniors of the future they’re on their own in paying them. The CBO analysis of his plan found that, when the Medicare phase-out begins in 2022, seniors will have to pay more of their income for health care.
If the plan were stable other than that, then it might make some sense; but in the next ten years, the Ryan plan adds to the deficit over and above the path that we’re on. Now, I’m not sure anyone can plan out beyond ten years in the future, but claiming “we’ll be frugal in a decade, at the expense of future seniors,” is unserious. As the CBO put it, “It is unclear whether and how future lawmakers would address the pressures resulting from the long-term scenarios or the proposal analyzed here.”
In the past, on the AMT, the doc fix, the donut hole, etc., we’ve seen Congress increase spending or reduce revenues rather than face the wrath of a mobilized constituency. A plan to reduce federal spending on health care, without a serious effort to lower costs, is simply never going to happen on the actual planet Earth.
— reflectionephemeral · Apr 6, 11:23 PM · #
Ryan doesn’t address increasing health care costs
This is an untrue statement.
— The Reticulator · Apr 7, 10:23 AM · #
Noah:
How can anyone who believes that any serious tax overhaul needs to raise more, not less revenue be really serious about the problem in Washington? More revenue just encourages the bastards. They can’t be trusted with more of our money. When are all you smart guys going to get that?
— jd · Apr 7, 11:40 AM · #
Could you give me some examples, Reticulator? Here’s an example of the reports I’ve seen so far, this from the AP:
But the budget office analysis said future retirees will pay considerably more for health care under Ryan’s approach. That’s because the Medicare benefits package would be more expensive to deliver through private insurance companies, which pay doctors and hospitals more than the government and have higher overhead costs.
By 2030, the government payment would cover only about one-third of the typical retiree’s total health care costs, the budget office said.
— reflectionephemeral · Apr 7, 12:54 PM · #
reflectionephemeral, you said Ryan’s plan doesn’t address the issue of increasing costs. But cost control is one of the major points of the plan, as I understand it so far. (I’ve just barely started learning about it.) Maybe not everyone agrees with how effective his plan would be. Maybe it’s terribly flawed. (I’m almost certain it will be, even if it’s good.) But anyone who says it doesn’t address the issue is not being serious.
— The Reticulator · Apr 7, 07:18 PM · #
Reticulator, I think I may have been too imprecise in what I wrote above.
The problem with Medicare and Medicaid’s long-term projections is the rising cost of health care. (CBO: “The bulk of that projected increase in health care spending reflects higher costs per beneficiary rather than an increase in the number of beneficiaries associated with an aging population”).
Simply curtailing government spending doesn’t address the increases in costs for everyone, which are the big problem with budget projections down the line.
As I understand it, that’s why the CBO says that the share of costs paid by individuals will rise— and that’s why this plan will never be implemented by real-life Congresses.
Now, I’d be glad to be mistaken about this— please let me know if I’m overlooking some aspects of his plan.
— reflectionephemeral · Apr 7, 08:13 PM · #
reflectionephemeral,
I think the key to cost control from a conservative/market/Republican perspective is to force consumers to pay for more of their health care. In other words, as Noah said in the previous post, too many consumers of health care don’t really have any good idea of what the services they use cost — if they are forced to begin analyzing those costs like they do when they buy a car or they pay for lawncare services, through the “magic” of thousands of individual decisions being made around the country, costs will begin to come down as consumers seek out bargains, efficiencies, etc.
Perhaps we (meaning those of us who think market reform will work) are wrong about all of this, but that is the general idea and why curtailing government spending and making individuals buy their own healthcare (instead of having that healthcare provided by the government or by an employer) is so important.
— Fake Herzog · Apr 8, 05:43 PM · #
reflectionephemeral,
Also, I’m not sure why you made the initial claim that Ryan’s proposal “adds to the deficit over and above the path that we’re on.” Most mainstream analyses argue otherwise — here is a delightful chart from John Taylor detailing the difference between Ryan’s proposal and the Administration’s proposal:
http://johnbtaylorsblog.blogspot.com/2011/04/simple-budget-choice-remove-or-lock-in.html
Noah,
Why are Medicare and defense the only matters for “serious debate”? Why not Social Security and Medicaid? For that matter, why not look at non-discretionary spending even though small in the bigger picture, it has been growing like crazy over the past however many years, so it can’t hurt to stop that growth (or even better reduce that spending — goodbye Department of Education and HUD anyone?)
— Fake Herzog · Apr 8, 05:55 PM · #
>>I can’t see any justification for excluding everyone over 55 from any proposed reform<<
That’s because you don’t have to be elected again.
— RIRedinPA · Apr 8, 06:40 PM · #
Here is an excellent summary of the issues at stake in the Ryan budget proposal, including a nice discussion of how conservatives think we should control healthcare costs, by Avik Roy of “NRO”:
http://www.nationalreview.com/articles/264216/nine-points-about-republican-budget-avik-roy
Read the whole thing and follow his links and you’ll be up to date on all the issues ;-)
— Fake Herzog · Apr 8, 06:54 PM · #
Thanks, fake herzog.
It’s the CBO who says that Ryan’s plan increases the deficit over the current path in the next decade. See David Frum’s post about it, for example. http://www.frumforum.com/a-budget-that-cant-budge
Thanks also for the link to the NRO article. Maybe I lost it somewhere in the middle there, as it’s split up across 5 pages, but I didn’t see him address the fact that Medicare and Medicaid have often had cost increases less than the rest of the health care system: http://www.cbpp.org/cms/index.cfm?fa=view&id=824
The bulk of the problems with the future projections of Medicare and Medicaid come from increasing costs (CBO: “The bulk of that projected increase in health care spending reflects higher costs per beneficiary rather than an increase in the number of beneficiaries associated with an aging population”), which are a US policy problem, not a Medicare and Medicaid problem. I could have missed it, but I didn’t see that larger issue addressed in that NRO article.
Simply cutting government spending doesn’t address the US-wide problem of rising health care costs. Given that the CBO projects that by 2030, the Ryan plan payments would cover only about one-third of the typical retiree’s total health care costs, it’s something that’s never going to happen.
(I haven’t gotten into the silliness in the plan, like projecting 2.1% unemployment and a housing construction boom— am just talking about the plan’s central Big Idea, which I don’t think is at all serious or reasonable).
— reflectionephemeral · Apr 8, 07:46 PM · #
reflectionephemeral,
I’m going to come back to you on rising health care costs, as I still think you are missing the point of Ryan’s reform proposals (and market-based reform proposals in general).
But regarding the question of “the CBO who says that Ryan’s plan increases the deficit over the current path in the next decade.” I went to David’s post and I went to Ryan’s page 57 and I think David is just confused. Here is the direct quote from Ryan’s plan, that goes along with the chart that caused Mr. Frum the confusion:
“This budget charts a sustainable path going forward, ultimately erasing the budget deficit completely. It brings the deficit below $1 trillion in FY2012, whereas the President’s budget produces a record fourth-straight trillion dollar budget next year.
Over the next decade, this budget results in $4.4 trillion of deficit reduction compared to President Obama’s budget. This surpasses the President’s low benchmark of sustainability by reaching primary balance
in 2015.”
Again, the report states this deficit reduction fact (concerning the difference between Ryan’s plan and Obama’s budget over the next decade) in multiple places, so I don’t know why David Frum was so confused. I may have to send him a note about this and get him to publish a retraction.
Thanks for the links!
— Fake Herzog · Apr 9, 12:59 AM · #
I think I see the cause of both of our confusion— the Ryan plan was comparing itself to the president’s budget, which is different from the current path. After all, no one’s enacted the president’s budget yet…
According to the CBO, “Under the so-called “extended baseline scenario” — a.k.a. projections based on current law — debt held by the public will grow to 67 percent of GDP by 2022. Under the GOP plan, public debt would reach 70 percent of GDP in the same window.” From: http://tpmdc.talkingpointsmemo.com/2011/04/cbo-gop-budget-would-increase-debt-then-stick-it-to-medicare-patients.php?ref=fpb
That’s from the TPM writeup. From the CBO: “ The proposal specifies apath for all other spending (excluding interest) that would cause such spending todecline sharply as a share of GDP—from 12 percent in 2010 to 6 percent in 2022 and3½ percent by 2050; the proposal does not specify the changes to government pro-grams that might be made in order to produce that path. Total spending under theproposal would be about 21 percent of GDP in 2030 and almost 15 percent in 2050.The proposal also specifies a path for revenues relative to GDP—rising from 15 per-cent in 2010 to 18½ percent in 2022 and 19 percent in 2030 and beyond.The resulting budget deficits under the proposal would be around 2 percent of GDPin the 2020s and would decline during the 2030s. The budget would be in surplus by 2040 and show growing surpluses in the following decade.”
I think we had both been talking past each other a bit until now. Thanks for keeping the discussion going.
— reflectionephemeral · Apr 9, 04:48 PM · #
As John Schwenkler was instructed a few years ago, there’s no reason to believe that health care is sensitive to price concerns, for a few reasons:
1) Nobody considers money more important than their life, and while we largely view the effort to save money or find a good deal as a virtue in something like buying a car, when it comes to health care, people view that exact same perspective as extremely irresponsible. Especially when it comes to making decisions for other people, like your own children – paying more, not less, is what is considered virtuous. Related, nobody bargains with the guy who has a gun to your head; when the options are “your money or your life”, people give over all their money. The market equilibrium price for live-saving care probably evens out at “all of your possessions and monetary wealth, plus permanent indentured servitude.” Health care is almost a perfect example of a vertical demand curve – you either don’t need it, in which case it has a value of zero to you; or you do need it, in which case it is cheap at any price.
2) Even if conservatives, who hate social engineering, were able to re-engineer society to place a positive reaction on health care deal-hunting, consumers still would lack the expertise to determine quality and value of health care. That’s what the evidence from the studies indicates – consumers can’t reliably distinguish between necessary and unnecessary care, they don’t have the expertise to rate the effectiveness of care (as opposed to the effectiveness of the doctor’s bedside manner, aka his salesmanship), and they continually overspend on care because, again, they would rather be safe than sorry.
3) If forcing consumers to shoulder more of their health care burdens would drive down prices, then the US, where consumers shoulder more of their own health care burdens than any other Western country, should pay less for care than the other Western countries. And among Americans, those who have no insurance (and therefore pay for all medical care out of pocket) should be paying the least for medical procedures.
But in fact the opposite of both of those things is what is true – Americans in aggregate pay the most for care of any Western nation, and Americans who are uninsured are charged as much as 50% more for the same procedures as Americans who are insured.
So, it’s clear that the benefits of bulk purchasing that result from health coverage pooling (via insurers or single-payer) drive health care expenditures down far more than insulating the consumer from the price drives them up. The answer to increasing health care prices is to move away from a free market as far as possible, not to move even closer towards it.
— Ch3t · Apr 11, 03:59 PM · #