…it’s simply not the case that contracting out lets you do away with the unelected panel of experts that Obama needs to make his price controls work. The premium support model of Medicare has at its heart a panel of experts determining the value of each person’s voucher since absent demographic and health status adjustment the whole system will be ruined by adverse selection.
Here are some related points from Ezra Klein, including a discussion of Paul Ryan.
…since the Supreme Court upheld the Democrats’ 2010 health care law, Republicans, led by Mitt Romney, have reversed tactics and attacked the president and Democrats in Congress by saying that Medicare will be cut too much as part of that law. Republicans plan to hold another vote to repeal the law in the House next week, though any such measure would die in the Democratic-controlled Senate.
“Obamacare cuts Medicare — cuts Medicare — by approximately $500 billion,” Mr. Romney has told audiences.
I have been predicting this. There is more here. Paul Ryan offered this account:
Mr. Ryan, of Wisconsin, was unavailable for comment, but, pressed on the issue on ABC’s “This Week” on Sunday, he said: “Well, our budget keeps that money for Medicare to extend its solvency. What Obamacare does is it takes that money from Medicare to spend on Obamacare.”
Ezra Klein offers some points of clarification:
Perhaps the simplest way to understand what’s going on in Paul Ryan’s budget, and whether it’s plausible, is to look at page 13 of the Congressional Budget Office’s summary of the Ryan plan (pdf). That’s where the CBO lists Ryan’s assumptions about how future budgets would differ under his proposal and under an alternative, high-deficit scenario. That lets us see where, exactly, Ryan’s presumed savings are. And they’re not, for the most part, in Medicare.
In 2030, spending on Medicare is .75 percent of GDP lower than in the alternative fiscal scenario. In fact, Ryan and the Obama administration have proposed the same rate of growth for Medicare: GDP + 0.5 percent.
It’s Medicaid and other health spending, which includes the Affordable Care Act, where Ryan really brings down the hammer: That category falls by 1.25 percent of GDP. So Ryan’s cuts to health care for the poor are almost twice the size of his cuts to health care for the old.
And then there’s the “everything else” category, which includes defense spending, infrastructure, education and training, farm subsidies, income supports, veteran’s benefits, retraining, basic research, the federal workforce and much, much more. And this category of spending falls by 2.5 percent of GDP.
Putting normative issues aside, I am predicting that something like this is what will happen, and it won’t require major Republican victories. In short, those are the most vulnerable interest groups.
That is the new book by Thomas Byrne Edsall, here is my WaPo review. Overall I thought his treatment was not deep enough, and that too frequently he substituted caricature for insight. Here is one excerpt from my piece:
I wished for more discussion of the elderly. The two biggest government programs — Medicare and Social Security — are almost exclusively for them, with a significant chunk of Medicaid going to the elderly as well. By about 2030, America as a whole will have the age structure currently found in Florida. That means the elderly, who vote at above-average rates, are very likely to keep winning political battles. The real question about our fiscal future is not Republicans vs. Democrats but rather whether any coalition can limit benefits to older people. It is already unlikely that the Republicans will gut Medicare or Social Security or get very far in trying. The last major expansion of Medicare came under the Bush administration, and, despite the tough talk of Rep. Paul Ryan’s plan, the Republicans are unable to enact fundamental Medicare cost control because they are too dependent on the white elderly vote.
There is a Matt Yglesias review here. Here is a WSJ review.
1. Cause and effect, by Jonah Lehrer.
2. eBook of Paul Ryan vs. David Brooks debate.
3. European Union proposes to fund largest cultural program, ever.
4. Maria Popova, infovore, and here, and some of her favorite history books here.
5. Can central banks still raise rates when they wish?, important questions in this piece.
6. The year’s most striking scientific images, and quantum levitation video, recommended.
I’ve now read it and here are a few comments:
1. The macro projections are very weak, not worth the time of criticism (more here).
2. Ryan nails our dysfunctional, “who is really responsible for paying for Medicaid?” structure. That said, I’ve long preferred the federalization of Medicaid. Block grants to the states may be better than the status quo, however (the size of those grants is a logically distinct question). Within state budgets, police and education are often the alternative to Medicaid costs. Are we so sure that Medicaid produces the maximum benefit for the money? Low-quality moralizing about the poor is not an answer to this question.
3. That said, Medicaid should be one of the last parts of the health care budget to cut. More of our health care aid should be like Medicaid, which is relatively cheap and also targeted at those who really need the assistance. The correct Medicaid decisions depend on other budget choices, but ideally Medicaid is low on the list of recommended cuts, even if it may require some cuts.
4. With either the block grants or the Medicare vouchers, I would urge maximum transparency. Health care costs are increasing by about five percent a year. That means a fixed value voucher loses about half its real value, in terms of command over health care resources, within fourteen years. (It’s a bit more complicated than that, since not all health care costs are proportional price increases to currently available services.) If that is the decision we are going to make, let us understand it as such. I would add that Ryan’s opponents don’t avoid this kind of dilemma nearly as much as they think they do.
5. It would be nice to have a scientific estimate of how much fixed value vouchers would lower the rate of growth of health care costs. I’m not convinced the effect here is large, but I’d like to see it studied more closely.
6. Ryan’s budget repeals ACA and thus in the semi-short run it could considerably increase Medicare costs. There is no reason why Ryan’s plan shouldn’t keep the most fiscally responsible aspects of ACA. Ryan exempts the current elderly from any Medicare cuts at all, see David Leonhardt’s remarks.
7. Over a ten-year time horizon, the Ryan plan increases the debt rather than decreasing it. Take that as a sign of how hard fiscal reform is going to be.
8. As I’ve already blogged, the vouchers idea won’t help cut health care costs. Let’s create some multiple public options within Medicare, some of which would allow people to trade health care benefits for cash. Democrats are supposed to be “pro-choice,” right? Or is that only for abortion?
9. I’m all for cutting the corporate income tax, but 35 to 25 percent isn’t impressive. Let’s eliminate it altogether.
10. There’s not nearly enough on reforming the dysfunctional supply-side of our health care institutions. Nor does science or basic research receive much discussion.
11. The plan does some strange things, such as repeal Dodd-Frank resolution authority, which most people, even Dodd-Frank critics, think is a good idea. Ezra summarizes the entire list of budget changes.
12. The more the Democrats criticize this plan, the more it helps Ryan and the more it hurts the Democrats. It reframes sticker shock, and the entire debate, simply to argue about $6 trillion in budget cuts.
13. #12 is the bottom line here, since the plan is not intended to be enacted into law. Points #1-11 pale in comparison to #12-13.
Here is Reihan, and Megan, and Ezra on the CBO.
Let’s say it’s 2027 and I’ve just turned 65. I fill out a Medicare application on-line and opt for a plan with superior heart coverage (my father died of a heart attack), not too much knee coverage and physical therapy (my job doesn’t require heavy lifting), no cancer heroics (my mother turned them down and I wish to follow her example), and lots of long-term disability.
Is that so terrible an approach? Is it obviously worse than having the Medicare Advisory Board make all of those choices for me?
Over the next few days you will read a lot of “downgrade and dismiss” directed at Paul Ryan and his plan and indeed it is quite possible his proposal is not a workable one (I haven’t read it yet). But don’t fall for the downgrade and dismiss bait, keep on returning to the question of how much individual choice should be allowed into health care cost control. Why not divvy up the cost control work between the Board and some degree of individual choice across Medicare benefits? You don’t have to combine that choice with the cost-increasing aspects of Medicare Advantage-like plans.
Many ACA defenders simply do not want to enter into a debate where the framing is “we’re all for cost control, when it comes to Medicare benefit selection it’s a question of government board vs. individual choice.”
I can think of a few reasons why individual choice will sometimes fail as a method of cost control:
1. Individuals have serious misconceptions about the science, or the badness of a particular condition, even in light of government or other third-party advice. Or perhaps individuals simply do not understand the nature of all of the choices at hand.
2. Perhaps an individual will choose “no coverage for lung cancer,” but the government cannot precommit to the outcome of no coverage. Of course as cost control becomes more pressing, we’ll have to learn precommitment for at least some issues, one way or the other, so this cannot be a decisive objection. The entire premise behind the discussion is that we cannot cover all treatments through government subsidy.
3. Over time, perhaps a government Board can rebalance the mix of coverage better than an individual can. People age, possibly lose some mental faculties, science advances, costs change, and so on.
Those are good arguments. They are good arguments for a mixed system. They are not good arguments for ruling out all individual choice of benefits. They are not good arguments for ruling out a scenario like that outlined in the first paragraph of this blog post.
Here is Megan McArdle on the difference between boards and individual choice:
It seems quite likely to me that vouchers are going to be better at controlling health care cost growth than a central committee. Every committee decision that cuts off a potentially useful treatment (and I’m afraid it can’t all be back surgery and hormone replacement therapy) will trigger a lobbying explosion from affected groups. Each treatment is a decision with a small marginal cost to the taxpayer; it’s in aggregate that they become expensive. Which means that the congressional tendency is always going to be to override–and while there are supposed to be structural barriers against this in the bill, they aren’t very strong . . .
Whereas if you put the decision about what treatments to cover in the hands of the patient, the lobbying you face is to increase the overall value of the voucher. To be sure, this will have a larger (and therefore more powerful) group behind it. But it will also come with an enormous pricetag, making it much harder for our politicians to rationalize the decision.
There are lots of comments from Reihan here. Ezra associates the Ryan reforms with Medicare Advantage. Maybe so, and maybe that’s bad, but we return to how much individual choice should we allow into health care cost control, with or without the cost-increasing aspects of the Ryan plan.
We shouldn’t let “downgrade and dismiss” distract our attention from that fundamental question about individual choice.
You’ll be hearing lots about the Paul Ryan entitlement reform proposals, but here are a few more general points to keep in mind:
1. As health care develops, it becomes impossible for Medicare (or Medicaid) to cover every treatment.
2. One reform option has government experts rule which treatments are eligible for coverage, with varying degrees of Congressional input.
3. Another option is to let individuals choose in advance which treatments they will be covered for, and which not.
4. #3 can but need not be bundled with voucher and privatization ideas. Without privatization, the government offers people different Medicare packages and they choose one over the others. Government may also recommend a Medicare benefits package for an individual, without requiring that it be chosen.
5. Most plausible policy reforms involve some mix of expert restrictions (#2 )and individual choices (#3) and the real question is to figure out the right mix of the two approaches. When evaluating #2, do keep in mind the potential input of Congress, if only as a background threat.
6. Does individual choice (#3) make more sense for nursing homes and dental care (preferences really matter?), but maybe expert judgment (#2) makes more sense for cancer treatments (expertise really matters?)? I am not endorsing that comparison, it is simply an example to illustrate the issue at hand.
7. If #5 isn’t being addressed, you’re probably just getting polemics. Obligatory citation of David Hume, commit it to the flames, etc.
This is from a poll of self-identified conservative Republicans:
When we asked last month about their thoughts on the best way to reduce the deficit, here’s how they replied:
†¢ 56 percent said cut spending across the board
†¢ 27 percent said cut spending from all government budgets except the military
†¢ 10 percent said pass a balanced budget amendment
†¢ 3 percent said cut taxes
†¢ 3 percent said fix Social Security and Medicare so they don’t pay out more than they take in
That was pretty revealing. Social Security and Medicare will drive our long-term structural deficits and crush our economy along the way. But even though the issue is getting some play in the media, it doesn’t seem to be getting through to the grassroots.
There is more at the link. You might think that the desire for across the board spending cuts is picking up the fiscal conservatism, but the follow-up questions don't show a great desire to limit Social Security or Medicare. Only thirty-five percent of the recipients favor both raising the retirement age for benefits and also means-testing.
You may recall that fiscal conservative Paul Ryan didn't mention Social Security or Medicare in his response to Obama's State of the Union address.
Addendum: Here is a related poll.
I haven't followed the numerical specifics of his plan (see Krugman, McArdle, and Ezra), which will never be voted on, so at this point I'm more interested in the general problem motivating the reform. We all know that health care spending has to be restrained in some manner. There are (at least) two approaches:
1. Have the federal government take a more active role in shutting down or limiting some reimbursements, based on efficacy studies ("death panels").
2. Turn some or all of Medicare into a fixed voucher program and let individuals choose which set of restrictions they will accept from private suppliers ("grandma bangs on HMO door").
As I understand Ryan's approach, he is putting a great deal of emphasis on #2, whereas most Democrats favor #1.
Which mix of #1 and #2 is best is one question; which mix people will accept politically is another. A third issue is which mix is time consistent and a fourth is which prevents "rationed" people from simply popping up somewhere else in the public health system. I would start with those distinctions and see which policy direction people need to be nudged in, relative to the path we are on now. That probably means greater acceptance of both #1 and #2, to some extent.
I believe that #2 works fine for a lot of health care, especially the less controversial and less emotional areas of care, such as laser eye surgery. Neither #1 nor #2 work especially well, or are especially popular, for end of life issues.
Whatever problems the Ryan plan may have (should we dismiss all ideas from people with overly optimistic forecasts?), I take his contribution to be a nudge in the direction of #2, given the current political equilibrium. Overall I see this as a healthy nudge, even if you think that relying fully or even mainly on #2 is undesirable, infeasible, and time inconsistent.
EK: And since then, the Congress has stopped it from cutting doctor payments seven times since then. I went back through the record, and you voted for five of those delays.
PR: Oh, yeah! I think we should fix the thing. Don't get me wrong.
That has to do with the Medicare payments "fix," which Congress keeps postponing, often with Ryan's support. There is much more here. Cutting spending is hard!
Here are recent developments on cost containment in the health care bill.
Someone who at least tried [to cut spending] is Rep. Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, who recently unveiled a new edition of what he calls a "Road Map for America's Future." Its willingness to reform entitlement programs is laudable. But it keeps taxes at 19 percent of gross domestic product while raising (repeat: raising) federal spending from 21.6 percent of GDP in 2012 to more than 24 percent in the 2030s. It balances the budget, all right — in 2063.
Here is the article, interesting throughout, it mostly focuses on George Wallace.
Fred Sautet is unhappy with my examination of a VAT. He writes:
The main reason one should resist Tyler’s idea is political economy. The VAT is such an efficient machine that the temptation to use it to obtain more tax revenues is always there. History shows that VAT rates generally go up quickly but rarely go down. New Zealand initial 10% rate was raised to 12.5% in 1989. There are now talks that it will be raised to 15% to help with the current fiscal situation.
Fred has lots of dire words for the VAT but there's no comparative analysis indicating that spending cuts will prove viable. Fred also neglects to mention that after New Zealand adopted the VAT (or GST, 1986), the country moved from being one of the least free in the Western world to one of the most free, economically speaking. New Zealand is actually the best case scenario and if anything it is unrepresentative in the positive direction. I believe the economic liberation of New Zealand could not have happened, had the reformers had to institute massive spending cuts instead of the VAT. (By the way, I did live in NZ in the early 1990s.)
New Zealand also used its VAT to help get their national finances in order, an option which many MR commentators have suggested is impossible. Not every fiscal deal falls apart; many last for ten, twenty years or more so again it is a question of probabilities, relative to the "cut spending" path.
Under the fold, I'll whine about being misunderstood by trigger-happy critics…plus I'll tell you what I really think…
Ross Douthat surveys and evaluates the debate over Paul Ryan's "Medicare vouchers" plan. Here Ezra interviews Ryan.
I am very interested in voucher plans but here is one source of my unease. Let's say you are given a voucher for a health insurance plan and there is no legal requirement that the plan cover Parkinson's. Many people buy plans which do not cover Parkinson's. Some of those people get Parkinson's. Are we pre-committing to ignore the woes of those people? If so, how exactly do we do this?
I'm not ruling this alternative out (there are plenty of cases where we let people die), I just want to know what are the surrounding institutional structures, what happens if these people show up at emergency rooms, and also whether this wouldn't, eventually, give rise to a new "second tier" of lower-quality public sector institutions to handle cases not covered by insurance.
That is indeed one possible reform: a UK-like system for those who gamble and lose, with higher quality care for those who buy the more comprehensive or the more balanced policies. (Maybe lots of people will buy gold-plated care for heart disease and nursing homes but go uncovered for neurological disorders, just to state one possibility.) You'll notice, however, a tension. The better the second-tier public-owned institutions, the more people will gamble with low or unbalanced levels of coverage. The UK-like system might take over large parts of health care, with a private insurance-based system for some subset of maladies only.
That's not the end of the world but perhaps it should be evaluated as such. You might already be thinking that parts of the nursing home and mental health sectors operate this way under the status quo.
There's also a longer-run question, namely whether the seniors would prefer to capture those resources in the form of social security benefits — cash — and take their chances with the publicly owned institutions to a greater degree. Maybe yes, maybe no, but those are the issues I think about when it comes to this kind of voucher plan.
At the other end of the spectrum, the law can mandate that the voucher-funded insurance plans cover lots and lots of conditions. Mandates don't stay modest, etc. In that case, is there really competition between the private insurance plans? What's the advantage of having private participation here if the insurance companies are regulated like public utilities and forced into a common price/quality mode?
It seems to me that the first set of alternatives are the relevant comparison.
One proposal for health care reform is to stipulate a total (fixed) budget for social security and Medicare together and then create a commission — controlled by Congressmen from Florida — to allocate the funds as is seen fit. I wonder what the resulting equilibrium would look like. Is that a politically acceptable way to institute a de facto voucher program?
