Tag: Paul Ryan

Controlling the Medicare Budget – Two Infeasible Proposals

Apr 20, 2011• 115

By ROGER COLLIER

How to slow Medicare’s escalating costs has been the big health care policy issue this month, with Republicans and Democrats offering competing proposals, each part of broader plans for reducing the federal deficit—projected to be $1.5 trillion this year, with the government borrowing 40 cents for every dollar it spends.

Unfortunately, neither the Medicare proposal of Representative Paul Ryan’s House Budget Committee, nor that offered in response by President Obama, can be considered realistic.

Both proposals do have some merits. Representative Ryan’s plan for switching Medicare to a quasi-voucher premium support program in which beneficiaries would pay part of the premium for their choice of health plan could make seniors more cost conscious and introduce more competition among insurers. President Obama’s proposed strengthening of the Independent Payment Advisory Board provision of the ACA by lowering the trigger point for IPAB action would force further efforts to reduce costs, while doing much to remove Medicare policy from lobbyist-vulnerable political considerations. Both, if implemented, would effectively guarantee that federal Medicare expenditures would drop dramatically from current projections.

Neither, however, has any chance of enactment. The Congressional Budget Office’s projection of the average 65-year-old paying more than two-thirds of the cost of Medicare coverage by 2030—and more than twice as much as under the present program—almost certainly dooms Representative Ryan’s proposal. (The CBO’s assumption of the continuation of the differential between traditional Medicare and insurers’ equivalent offerings can be questioned, but it’s the forecast of the unfortunate 65-year-old’s 68 percent share of the tab that will resonate for seniors, their lobbyists, and their political supporters.)Continue reading…

The 100% Estate Tax

Apr 18, 2011• 24

By MERRILL GOOZNER

There is a dangerous but beguiling econometric logic behind the idea that turning Medicare over to the insurance industry will lower health care costs. It’s an idea that could catch on if the general public became convinced that there is nothing we can do acting together as a society to lower the cost of care. Only the market can do it, the Republicans claim. Force seniors (or the poor or anyone, for that matter) to have more skin in the game, and they’ll use their clout as consumers to separate the wheat from chaff in modern medicine. Expensive, wasteful tests, procedures, and drugs will wither for lack of customers.

Democrats, in attacking the Republican plan that passed the House yesterday, relentlessly hammered away at the cost to future seniors of having “more skin in the game.” Two-thirds of the cost of care within a decade of Medicare privatization in 2023 will fall on them. But the 2030s must seem very far away to people in their 40s and 50s. Isn’t it likely that they won’t think about that far-off time, but instead grab on to the promise of future lower costs, which, let’s be frank, the Affordable Care Act (health care reform) may not be able to achieve.

So here’s the real argument young and middle-aged people need to hear, and the real reason why the “more skin in the game” argument can never work for seniors or other vulnerable populations, including them when they reach that age. Seniors and the poor account for over half of health care spending. Within those groups, 5 percent of the population accounts for 50 percent of health care costs; and 20 percent of the population accounts for about 80 percent. These costs come for the most part at times when economic incentives have no influence at all on medical decision-making: in medical crises; in treating chronic conditions; and, for most Medicare patients, in the last six months of life.

That’s why a voucher program for Medicare, which will shift an increasing share of those inevitable costs onto the elderly themselves, can fairly be categorized as a 100 percent estate tax or death tax. People under 55 need to know that if the plan crafted by Rep. Paul Ryan were passed, most of them will never have a cent to leave to their children. It will all go to the health care industry to support the American way of dying.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, Financial Times, The American Prospect and The Washington Post. You can read more pieces by Merrill at GoozNews, where this post first appeared.

Three Formulas

Apr 18, 2011• 51

By MERRILL GOOZNER

During the last election campaign, Tea Party-backed Republicans across the country rode to power on a tidal wave of advertising attacking health care reform as a cut in Medicare. It is. If efficiency programs like the accountable care organizations being formed across the country don’t hold down spending by about $500 billion over the next decade, an Independent Payments Advisory Board would make recommendations for holding growth in Medicare spending to the growth in the domestic economy (GDP) plus one percentage point.

In most years when the economy is humming along, that would be about 4 percent. Over the past decade, health care spending for seniors grew at about 6 to 7 percent — the same as health care spending for the rest of the population. So if the Medicare delivery system reforms don’t work, Congress will either have to adopt the IPAB’s recommendations or institute cuts of its own to ratchet down spending.

This week, President Obama upped the ante to meet his budget deficit reduction targets over the next decade. Medicare spending would be held to GDP plus 0.5 percent, another approximately $300 billion in cuts. About $50 billion would come from eliminating unnecessary errors and hospital re-admissions. The rest was unexplained.Continue reading…

To the Barricades!

Apr 11, 2011• 5

By DAVID DRANOVE

Last week, Republican Congressman Paul Ryan unveiled his plan to save Medicare and Medicaid. Supporters hailed the plan as revolutionary; critics decried the plan as revolutionary. For something so revolutionary, it sure is based on some old ideas.

In 1978, Stanford Business School professor (and my soon to be advisor) Alain Enthoven published an article in the New England Journal of Medicine in which he described his “Consumer Choice Health Plan.” Enthoven proposed tax-funded vouchers that all Americans could use to purchase health insurance. The amount of the voucher would be tied to income and individuals could use their own money to purchase a plan that cost more than their voucher. Enthoven even included some rules limiting the ability of insurers to cream skim healthier enrollees; new and improved versions of these rules are written into the insurance exchanges as part of the Affordable Care Act.

In 1986 I published a paper that described how states were trying to control Medicaid expenses by regulating the prices they paid to hospitals. I pointed out that states had surprisingly little interest in reining in hospital costs because the federal government paid for half or more of the Medicaid bills. The solution was apparent to any economist – convert the “percent of Medicaid spending” formula to a block grant, so that the states are 100% responsible for the costs of Medicaid expansions.Continue reading…