The Ryan-Rivlin Plan To Reform Medicare And Medicaid :: Political News and commentaries

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January 6, 2011

The Ryan-Rivlin Plan To Reform Medicare And Medicaid

Veronique de Rugy has a piece at The American magazine this morning that looks at the plan to reform Medicare and Medicaid proposed by bipartisan plan by House Budget Committee Chairman Paul Ryan (R-Wisconsin) and former Clinton administration budget director Alice Rivlin. The plan solves our debt crisis by reducing spending enough that interest on our debt does not end up consuming most of our budget in the future.

Veronique describes the plan as having two principal features, neither of which appear to be radical moves, and both of which deserve strong consideration:

[...] First, people who turn 65 in 2021 or later would not enroll in existing Medicare. Instead, they would receive vouchers to purchase healthcare in the private market (the voucher amount would equal the average amount of Medicare expenditure per enrollee, growing at the same rate of growth as gross domestic product (GDP) plus 1 percentage point). These vouchers would introduce a meaningful element into the healthcare system, one currently missing from our single-payer Medicare program: price competition. By introducing competition for consumers into the insurance market, the voucher system will pressure insurers to compete on cost while maintaining a high standard of care.

Second, the Rivlin-Ryan plan would establish Medicaid block grants for states. These grants would continue providing states with federal Medicaid, but determine funding evenly by the state's proportion of low-income residents, growing in future years at gross domestic product plus 1 percent (including adjustments for population growth). In exchange for slower growth in federal support for Medicaid, states would have a greater level of flexibility than under the current system. Overall, the plan would contain the growth of Medicare and Medicaid to the growth of GDP plus 1 percent.

Beyond Medicare and Medicaid, the plan would also reform malpractice law as well as repeal an ill-advised long-term care program (called the "CLASS Act") created in the recently passed healthcare law.

More here ...

As de Rugy goes on to note, at the very least, the plan is an improvement over the nation's current trajectory to disaster (my words, not hers). More importantly, it's evidence that some on the political center-left agree that Medicare and Medicaid's unsustainability is a reality we can no longer ignore.

In the way of an additional perspective ... John Goodman, president and CEO of the National Center for Policy Analysis, says it's a good proposal that deserves serious attention.

To guarantee its success, however, more needs to be done to (1) allow the private sector to control costs through economic incentives, competition and entrepreneurship and (2) allow young people to save for the growing share of expenses they will be expected to bear.

As for my own reservations about the plan, I ditto The Foundry's take ... that Ryan-Rivlin is far from ideal ... but a step in the right direction.

It is largely silent on ObamaCare, which would push the health system in precisely the wrong direction by extending open-ended entitlement promises to millions of new people. Households with incomes below four times the poverty line would see their premiums capped as a percentage of their income, regardless of the expense of their health plan coverage. Moreover, the new law leans heavily on price controls to cut costs, which only distort the marketplace and undermine the quality of American medicine. These damaging aspects of ObamaCare would substantially undermine the benefits that the Ryan-Rivlin approach would produce. The lesson is that there's no getting around the need to repeal ObamaCare in its entirety. If it remains in place, there will be little that can be done to stop a full government takeover. What's needed is a full replacement program, with fixes not only for Medicare and Medicaid but also for the tax treatment of health insurance so that workers too become cost-conscious consumers in a reformed marketplace.

In other words, Ryan-Rivlin is a workable beginning, but it's an exercise in futility unless much of Obamacare is repealed first.

Posted by Richard at January 6, 2011 10:30 AM

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