Paul Ryan and the Republicans are upset. They are fighting mad that Democrats have framed his budget blueprint as the destruction of Medicare, and even more furious that the public is buying the argument. The problem, for Republicans, is that the basic points being hammered on by the Democrats are exactly correct; the Ryan Plan does destroy Medicare as we know it, it does raise costs of delivery to seniors after implementation, and it will result in millions of uninsured or underinsured seniors.
Here is the “but”; the core idea of the Ryan Plan would control costs within the federal budget. The keys to the previous statement are “core idea” and “federal budget”. If you believe a problem only exists if it is reflected in the federal budget, then fixed price vouchers, indexed to inflation, is a sound idea. But for a large majority of Americans, the basic idea of the Ryan Plan amounts to an individual mandate to sink or swim in our golden years. Maybe though, there is a compromise available. There is, just possibly, a solution that uses the Ryan Plan as its foundation.
The whole point of a public reform of the private health care market is to increase coverage rates and decrease delivered cost. As the bulk of the professional economics community has repeatedly stated, if the United States had per customer costs of health care equal to other advanced nations, we would be looking at long term budget surpluses instead of long term deficits. But long term deficits do represent an obstacle to every initiative now and in the future. We could use the vouchers of the Ryan Plan as the foundation of a plan that would force providers to become more efficient, cover all senior citizens, and ensure long term budget stability.
For your target shooting enjoyment, here is The Rational Middle Health Care Plan:
- Per the Ryan Plan, issue vouchers in lieu of direct federal coverage to seniors. Do not change the age of eligibility.
- Provide for an insurance company mandate; all firms should offer packages with the same current coverage amounts, procedures, and the same copays and pharmaceutical schedules. The baseline for out of pocket payments should be the average out of pocket expense as a share of median income for 2010.
- The federal government will be billed by the insurance companies directly for voucher reimbursements.
- Extend the same plan, based on the same basic assumptions, to current covered classes in SCHIP and Medicaid.
- Fully federalize the cost of SCHIP and Medicaid by raising the employee portion of the FICA tax to cover additional costs.
- Coverage, by insurance companies, of Medicaid/SCHP beneficiaries should not be mandated.
- Establish national Medicaid coverage at 100% of the poverty level; states may pay into the system to cover beneficiaries above the federal pay ceiling.
Instead of shifting the burden to senior citizens, this plan shifts the burden to large, well-capitalized firms who have the knowledge and wherewithal to fix the problem. As conservatives often point out, it is private industry that has the capacity for innovation and true problem-solving, and I believe they are the ones who will ultimately solve the problems of rampant cost acceleration. Faced with a well-defined schedule of government payments covering the next several decades, and a well-defined rate of cost acceleration over the same period of time, insurance companies would be able to work directly with providers and supporting industries to control costs.
The change in payroll tax represents a burden that falls squarely on the working class, which seems more than fair in order to provide more efficient coverage to that class. The changes to Medicaid and SCHIP also make good economic sense; the federal government can flexibly leverage economies of scale not available to state governments. States would see instant and long-lasting budget improvements, and be able to return focus to education and local commercial infrastructure.
Private insurance companies, along with the rest of the industry, have the capacity to change the cost paradigm in U.S. healthcare. The reality, however, is that they haven’t. We have seen 3 decades of inflation in the medical marketplace with little or no real effort on the part of the private sector to improve costs. Paul Ryan and other faithful adherents to the philosophy of Ayn Rand are free to preach on the innovative powers of the free market, but we the people have yet to see any data to suggest there is any truth to the rumors of Atlas Shrugged. Maybe shifting the cost structure to the private sector, without a diversion through the lives and life saving of our senior citizens, is just the ticket.
The Rational Middle is listening…