Jacob Weisberg of Slate thinks Paul Ryan’s new budget/tax reform plan/reshaping-of-the-American-social-contract is swell.
The Wisconsin Republican’s genuinely radical plan goes where Ronald Reagan and Newt Gingrich never did by terminating the entitlement status of Medicare and Medicaid. (It doesn’t touch the third major entitlement, Social Security, though Ryan has elsewhere argued for extending its life by gradually raising the retirement age to 70.) Ryan changes Medicare into a voucher, which would be used to purchase private health insurance. He turns Medicaid into a block grant for states to spend as they choose. Though his budget committee isn’t responsible for taxes, Ryan includes the boldest tax reform proposal since the 1980s, proposing to lower top individual and corporate rates to 25 percent and end deductions. While he’s at it, Ryan caps domestic spending, repeals Obamacare, slashes farm subsidies, and more.
First, let me be nice. Everybody agrees that farm subsidies are a waste of money and distort the agricultural market (and, indirectly, our nutritional balance) into the bargain. So even though my wife and I have a dream (I am not kidding) of someday owning a small farm where we raise goats for fiber and meat, I’m more than willing to see the mohair subsidies go. I also understand the argument for lowering the overall income tax rate while ending deductions — basically, companies and the wealthy who now using accounting tricks to avoid taxation would have fewer places to hide their money, so you’d end up with more revenue, more fairly shared. If there’s an increase in the capital gains tax as well, I’m open to some version of this.
But Ryan’s plan for Medicare sounds simply disastrous. Weisberg again:
Seniors would enter the health care world the rest of us live in, with co-payments, deductibles and managed care…. [S]tarting with a value of $15,000 per year, per senior—the amount government now spends on Medicare—Ryan’s vouchers should provide excellent coverage. His change would amount to a minor amendment to the social contract, not a fundamental revision of it.
I’m guessing it’s been a while since Weisberg has tried to buy individual health insurance on the open market, especially as an old person. $1250/mo would indeed buy excellent health coverage for a young healthy person. (You know — “excellent” in the sense that any individual coverage is “excellent,” which is to say fine until something serious happens.) But look again at the bolded bits above — Ryan wants to repeal “Obamacare,” aka the Affordable Care Act, aka the thing that is supposed to prevent insurance companies from doing stuff like denying you coverage for a pre-existing condition or cutting off coverage when you get sick. So Ryan wants to take the only people in America (aside from soldiers and a few other odd cases) whose medical payment provider doesn’t have a profit motive to deny coverage — who are also, incidentally, the people most likely to need expensive medical care — and put them out into the private market while, simultaneously, revoking the very consumer protections that might, possibly, make such a scheme remotely workable.
Well, it certainly would save money. When you turn responsibility for a public program over to private companies, and then give the private companies license not to carry out the basic functions of that program, it stands to reason they could do it on the cheap.
Other people’s thoughts:
Paul Krugman says even the tax reform doesn’t work — it would reduce revenue by $4 trillion over the next decade and actually increase the deficit.
And here’s Krugman on the Medicare plan:
[W]e already know, from experience with the Medicare Advantage program, that a voucher system would have higher, not lower, costs than our current system. The only way the Ryan plan could save money would be by making those vouchers too small to pay for adequate coverage. Wealthy older Americans would be able to supplement their vouchers, and get the care they need; everyone else would be out in the cold.
Meanwhile even the pro-market Economist thinks Ryan’s plan is a train wreck:
[I]ndividuals do not have negotiating power when they go up against health-insurance companies. You and I don’t know what the risks or costs of different illnesses and treatments are, and we don’t have the time or expertise to evaluate the legal fine print of insurance agreements with the care and attention devoted to them by the insurance companies who write them.
The idea of making market forces work to bring down health-care and health-insurance costs is plausible. What’s not plausible is the idea that average individuals are the best-placed people to be carrying out those negotiations. It’s entirely possible to set up markets where powerful, well-informed organisations represent individuals in negotiations with insurers and providers in order to bring prices down, without putting those individuals at risk of losing their coverage or of having to go untreated. That’s how the Affordable Care Act envisions saving money on Medicare, without running the risk that the elderly will lose their health-insurance coverage. Mr Ryan’s proposal is to save money by capping the amount the government will spend on insurance, and letting individual seniors fight the rest out on their own.