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The Ryan Health Care Proposal, Part II

In a speech at the Hoover Institution today, Representative Paul Ryan (R-WI) argued again that his proposal to reform Medicare, and now his tax credit proposal for replacing the Democratic health care law for those under-age 65, would guarantee to citizens “options like the ones members of Congress enjoy.”

His proposals would not give people the guarantees members of Congress, and all other federal employees for that matter, now enjoy.

This is not a small point.

Previously on this blog, I have argued that many of the defined contribution reform proposals, Ryan’s included, should be faulted for putting all of the future risk of health care costs on beneficiaries.

Ryan’s Medicare plan would create a premium support system for seniors. The premium support amount would increase each year by the rate of basic inflation, even though health care costs have historically increased much faster. Seniors would then take this premium support payment to the market and buy their own private health insurance policy. Another recent Medicare reform proposal by the health care industry would increase a similar health care premium support payment each year by the rate of increase in the gross domestic product (GDP) +1%.

In both cases, neither insurers nor health care providers would have any of the risk, and therefore responsibility, for keeping costs under control. The entire burden for the adequacy of these premium support payments would be with the beneficiary. If health care costs rose faster than these premium supports, tied to these indexes that have always trailed health care inflation, too bad for the beneficiary. Any excess cost is borne by the individual.

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